Let’s say you’ve upgraded your home’s insulation, invested in extensive air sealing, and chosen the most energy-efficient heating, cooling, and ventilation system for your region’s climate. Your family has felt the benefits of living in a comfortable, energy-conserving home — and now it’s time to sell or refinance. An appraiser arrives to examine your home, and you cross your fingers that they understand the value of high-performing features.
Here’s the catch: “The appraiser won’t know whether they’re in a high-performing home just by looking at it,” says Woody Fincham, a professional appraiser who specializes in valuating such houses, “because the upgrades you’ve made are behind the walls, under the sinks, and in the attic.”
Because actual x-ray vision isn’t an option, the Appraisal Institute has developed the next best thing: the Green and Energy Efficient Appraisal Addendum. “The addendum makes it all visible,” Fincham explains. “It helps the appraiser understand exactly what’s there, and it also acts as a tool to help real estate agents and potential buyers see what makes your home more valuable, too.”
And when coupled with third-party-certification, this addendum can translate to real dollars and cents. Studies conducted by Pearl Certification demonstrate that when documented and certified, high-performing homes command on average a 5% premium over the market.
Understanding how the addendum benefits you starts with understanding the appraisal process. First, the lender hires the appraiser. In a sale, this is the potential homebuyer’s lender; in a refinance, it’s your lender. In both cases, the job is the same: to determine your home’s value.
The appraiser completes a document called the Uniform Residential Appraisal Report by visually inspecting your home and property, your neighborhood, and comparable nearby homes that have sold recently.
The appraiser also researches data on your local housing market, including specific types of homes and in-demand features. “If you’re one of very few homes in your area with a certain feature,” Fincham says, “the appraiser won’t have the data to quantify its value within that market. But with the addendum, they can qualitatively show the lender that your home is superior and assign it the higher end of a range of values.”
The Green and Energy Efficient Appraisal Addendum covers five key categories of high-performing features.
Third-Party Verifications
This section provides a birds-eye view of your home’s performance via green home asset certifications like Pearl Certification, energy scores like the RESNET HERS rating, and a list of verified energy-related improvements within the home.
Energy- and Water-Efficient Features
This section covers a variety of energy, water, and indoor environmental quality upgrades. It covers details about insulation, building envelope tightness, windows, appliances, water heaters, and HVAC systems, among other features. Plus, it includes a subsection about your utility costs.
Solar Panels
This section gathers information about ownership, panel and inverter specifications, and energy-storing batteries. It also allows the appraiser to see the potential for installing solar, even if you haven’t already done so. Lastly, if you own a solar thermal water heating system, this is where you would find that information.
Location
This section takes into account how feasible it is to walk or take public transportation from your property to local destinations. Plus, it describes your home’s orientation and landscaping.
Incentives
The final section captures any federal, state, or local incentives you have received for making high-performance upgrades to your home.
Fincham points out that the addendum itself doesn’t provide a valuation of individual features. Instead, it informs the appraiser’s analysis of market data and supports their overall valuation of your home.
Don’t worry — filling out this document will not be on your to-do list. “It’s very important to have a qualified professional fill out the addendum,” Fincham says. “I work with high-performance homes all the time, and I can’t fill it out completely! Don’t try to do this by yourself.”
Whoever is most familiar with your home’s high-performance features should complete the addendum for you. Maybe it’s your home’s builder, the contractor who has made your high-performance improvements, or a certification provider like Pearl. The professional you choose will be able to provide the level of detail appraisers need to more accurately appraise your home. Pearl is licensed by the Appraisal Institute to complete the addendum, and we fill it out for every home we certify and provide a copy to you as part of your certification report in the Green Door app.
Appraisals come fairly late in the home-selling process, but that doesn’t mean you should wait to fill out the addendum. To get the greatest benefit from it, fill it out at the start! That way, your real estate agent can use the information in your home’s listing and marketing materials to attract buyers who want a home that goes above and beyond. Remember, with a certification, an appraisal addendum, and the right marketing, you could be looking at a significant increase in your home’s resale value.
Once an offer has been made on your home, you or your agent should provide one copy of the completed addendum to the buyer’s lender at the time of loan application. This alerts the lender that your home requires an appraiser with specialized knowledge of high-performance homes. “This is a special type of property. Not all appraisers have competency in this area,” Fincham says. He encourages you to send the lender this list of professionals who have passed the Appraisal Institute’s “Valuation of Residential Sustainable Buildings” training course.
“It’s also a good practice to give another copy of the completed addendum directly to the appraiser when they come to inspect your home,” Fincham adds. “Don’t assume that the lender has already given them a copy.”
The same recommendation applies if you are refinancing your home: Provide a copy to your lender when you apply for a loan and give a copy directly to the appraiser. Then, make sure you don’t lose it! You’ll want the addendum when it’s time to sell.
Do you already have a high-performance home? You can request a Pearl Certification through our free Green Door app. Your certification package captures all your home’s high-performing assets and provides you with an appraiser letter and the completed Green and Energy Efficient Appraisal Addendum. This will help everyone involved — appraisers, real estate agents, potential buyers, and lenders — see the high-performing features that help make your home more comfortable, efficient, and healthy. And that means they’ll be able to see what makes your home valuable.
Just starting on your journey to a high-performance home? Green Door can help you improve, manage, and maintain your home’s performance. Green Door generates customized Home Investment Plans based on your priorities and your existing home assets, then gives you access to thousands of sustainable products and local, vetted contractors to help you complete your upgrade. Watch as your upgrades earn Pearl Points toward a Silver, Gold, or Platinum Certification. Then use Green Door to request your Pearl Certification with a Green and Energy Efficient Appraisal Addendum.
Pearl is transforming the housing market by scoring, verifying, and certifying the performance of homes across the country.
