The green property market is the way of the future, but what is keeping it back?
The green housing projects are rising speedily, but developers would like to see them mushroom faster. While environmentally friendly technologies are rapidly growing, there is one aspect which still has not fully kept pace with the emergence of green housing on the real estate market the issue of appraisals. Envision you are wanting to build a standard $500,000 property. On top of the cost for the standard build you have your architect design the property to utilize the full potential of the sun and you install solar panels as well as quality insulation. This will cost you some hefty money, so let’s say the final costing goes up to $600,000.
Unfortunately this is not how your bank or mortgage appraiser looks at it. David Snook is an appraiser and associate of the real property committee on education for the American Society of Appraisers and he does doesn’t think it’s about the cost of the property but more about resale value.
Shall we carry on with our illustration? Whilst the build cost an extra $100,000 the bank or mortgage company will only approve the value of the property has increased by $50,000 With a 20% down payment, you will need $160,000 in place of of $110,000. With a high-ratio mortgage 5% down payment, you will have to save $77,500 instead of $27,500. That is a large increase in particular if you are on a budget and every bit of savings matters. So with such a massive down payment you have to assess your priorities and these could be forgetting about going green, or making do with cheaper and possibly inferior technology.
Nevertheless, as a green MLS GTA professional I realize wanting to go for a green property does make a difference. Look at it this way, green real estate sell over 20% faster with an 8.5% increase on sale price, according to Green Work Realty report. Unfortunately, when you deal with an appraiser having little or no experience with green housing technologies (and that’s quite probable, especially if you are among the green pioneers in your area), your home’s value will most probably be underestimated.
Until appraisers gain the training, there is little that can be done. Nevertheless, I believe there will be strong initiatives soon to standardize indicators of environmental and energetic efficiency, which will certainly help appraisers (and future owners) to move forward. Green real estate is about money as well as the all important environment. Take buying a car – would you buy a motor vehicle without learning about how fuel efficient it is? Understanding property energy consumption is the natural next step.