New Guide Helps Appraisers Factor for Efficiency

May 8, 2012 | IMT

Washington, DC–May 8, 2012–Today, at the ACEEE Energy Efficiency Finance Forum in Boston, the Institute for Market Transformation (IMT) and the Appraisal Institute released the second edition of an appraiser's guide to factoring energy performance into real estate valuation.

The guide, Recognition of Energy Costs and Energy Performance in Real Property Valuation, can be downloaded for free along with a fact sheet summarizing the topics covered.

As demand for green and energy-efficient buildings rises, appraisers working today need to be well-informed about how energy efficiency impacts property value. Studies have found that buildings rated as energy efficient are strong financial performers: many have higher occupancy rates, command higher rents, and sell for more money than similar less-efficient properties.

But the value add has been hard to track and easy to overlook. Energy efficiency is invisible, and its benefits—such as lower utility bills and higher net operating income—often reveal themselves gradually over time. IMT and the Appraisal Institute’s report will help appraisers analyze and account for information about buildings’ energy performance.

“This report will help appraisers fully account for energy efficiency in their valuations,” said Cliff Majersik, Executive Director of IMT. “When the value of efficiency is captured more fully industry-wide, it will enhance the availability of financing for energy efficiency in buildings.”

“The Appraisal Institute is dedicated to helping appraisers and others find, understand, and use available information on energy performance in buildings,” said Appraisal Institute President Sara W. Stephens, MAI. “As green and energy efficient features play a larger role of the real estate industry, it’s increasingly important that appraisers know how to value those properties.”

The guide explains why energy matters for cash flow and net income, how energy performance is assessed, and how energy performance is “benchmarked,” or compared to that of other buildings. It describes the various qualifications and certifications of professionals who assess building energy performance, and presents case studies of two buildings that saw quantifiable gains in sale price or appraised value due to energy efficiency.

“IMT and the Appraisal Institute have produced an excellent, detailed analysis of issues confronting an appraiser when analyzing a high-performance property,” said James F. Finlay, MRICS, Vice President and Senior Commercial Appraisal Manager at Wells Fargo Bank. “It recognizes the importance of due diligence reporting and provides a solid overview of recent techniques—in all, a great resource for
appraisers and investors.”

The report is an update of the first edition, published in 2000. It will form the basis for forthcoming education resources from IMT aimed at appraisers and other real estate professionals.

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ABOUT IMT: The Institute for Market Transformation (IMT) is a Washington, DC-based nonprofit organization dedicated to promoting energy efficiency, green building, and environmental protection in the United States and abroad. Much of IMT’s work addresses market failures that inhibit investment in energy efficiency. For more information, visit imt.org.

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