Out of Control Policy Blog

Green Homes Versus the Appraisers

Nation's Building News, the on-line publicatin of the National Associatino of Home Builders, has an interesting, if confused, article on Green Homes. On the one hand, builders of Green Homes say their homes are selling faster than conventional homes. Unfortunately, they don't present systemic evidence; just impressions based on personal builder experience.

On the other hand, they complain that appraisers aren't taking into consideration the benefits of these "green" features and are therefore undervaluing them.

This begs the question: Why aren't appraisers incorporating these green features into home values? The short answer is they lack "comps"--homes with similar features selling in the same market. So, they don't really know how consumers (the market) is really valuing Green Homes because there isn't enough market-based experience to make reliable estimates.

This frustrates Green home builders because, not surprisingly, they are convinced of the value of their product.

Their criticism of appraisers, however, seems misplaced. As more Green Homes make it on the market, their value will become more apparent, and they will be incorporated into sales prices.

Indeed, this is happening to some extent because, according to the article, consumers respond directly to tangible and measurable benefits (e.g., energy efficiency, better insulation) that have transparent impacts on the cost of owning and maintaining a home.

Until these benefits are better known, and valued in the market place, Green Home builders should recognize that their support for their product is still based on a substantial amount of faith, and theory, rather than real-world experience validated by consumers.

Samuel Staley is Research Fellow


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