This argument has seen many posts and manifestations over the last few weeks/months. I think what Eric is pointing out is that we collectively design one of a kind homes for our clients - true CUSTOM homes. When our clients have to sell those homes, they don't compete with other existing custom homes, but any other house on the market. The problem is that the current economic situation has caused the shell-shocked appraisers to not give these homes, whether certified green or not, any additional value. Our appraisal system here in Atlanta is a checklist of how big the home is (area), conditioned space, number of bedrooms and baths, etc. The use of brick, masonry fireplaces, granite countertops, Energy Star appliances, etc. are mere intangibles that receive a subjective value by appraiser, but limited to no more than $5K - $10K although the actual cost of the items far exceed that value. Green is defined by "gadgets" whether, appliances, low flow fixtures, high efficiency mechanical systems, etc.
I, too, have recently had a client hire me to design a LEED spec home for a very desirable neighborhood in Atlanta. The builder client set a sales price at $1.38M and received and accepted an offer of $1.25M - great, right?! They got 2 appraisals because the first came in around $1.1M and the second only determined a value of $1.2M. When questioning the appraiser of why this LEED certified home did not appraise higher, we learned that all spaces in the walk out "basement" did not count no matter that the "basement" did not meet the code definition of basement. We had permitted a three story house because the lowest level was only bout 35% under ground due to site topography. If any part of a living level is merely below grade at any point, it is considered a basement and thus not part of the appraisal equation. This is crazy as it perpetuates the creation of big box house - McMansions. Why doesn't the appraisal follow industry standard definitions and at least align with building codes on the definition of basement? Another lesson learned was there was no credit for being certifiably green. If this is the case, why build green?! This obviously needs to be corrected and is example of how outdated the appraisal system is. The interior of this home had three rooms with coffered ceilings and all stained windows, doors and trim, which you well know is more valuable than painted MDF or fingerjoint trim. No credit for all of that! No credit for aluminum clad windows with low-E glass and stained interior finish. You get the point, these appraisals need to be revised, the market has changed, yet we are being appraised by the same system used for decades. How many codes iterations have we gone through?
If building codes with all that they encompass can be reviewed and modified on a 3 year cycle, why can't appraisal metrics follow the same process? If we want to level the playing field so to speak to become more involved in the largest segment of the built environment, why not promote better appraisals and appraisal reform?
- Separate land and structure like tax assessors. Land value should take into account the location aspect; schools, crime rate, distance to business district, shopping, lake front, beach front, mountain view, etc. Let the land value and actual house value stand apart and be valued for what they are. This way, if the neighborhood should increase or decrease in desirability, the land value modulates, but the house value remains compared with its peers.
- Align house value based on building code as a minimum level of construction quality.
- Establish a criteria for performance based on a minimum like Energy Star with incremental increases in value for certifiable green programs, be it LEED for Homes, EarthCraft Home, the ICC Green Bldg. Standard, etc.
- Establish intangibles like historical, cultural icon, custom or luxury classifications (give credit for being architect-designed home in lieu of plan book), interior finish of home (architectural interior design credit), home automation if not linked to Green component above, and if house is not certifiably green, give some credit towards the green components, but not so much as it would be if certified.
If these adjustments were done for the evaluation, then the comparables that Eric has spent a great deal explaining would be restricted to a degree by the various criteria. One could not use a 3500 SF spec house as a comp for a 3000 SF certified green house. The land value could be compared with remainder of neighborhood, and the house could be compared directly with other homes in a larger radius as long as the criteria matched up. We would then start to compare apples to apples and get better appraisals.
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Cooper Pierce AIA
Principal
Jones Pierce Architects
Atlanta GA
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