Rev Your Green-Lending Engine v Y u G e n-Le n En ne
Knowing sustainable principles will help you help clients avoid lazy appraisals
As more consumers show interest in green-built, energy-efficient homes, many homebuilders and
developers are changing their building
practices to meet increased demand.
What’s often missing from the process, however, is education for mortgage brokers who wish to offer their
clients green-loan options, as well
as education in building science and
new valuation techniques for home
appraisers who value green homes.
As a result, many mortgage brokers
are missing a burgeoning opportunity
to grow their businesses. By familiarizing themselves with sustainable-building principles and green-finance
issues, as well as with appraisal issues
that may exist, brokers can help their
clients find financing and tap into the
wave of growth behind green building.
Although builders expect building
green homes to give them an edge as
the market evolves, appraisal road-
blocks can dampen supply and limit
Sustainable building materials sometimes are more expensive. If it costs
a builder $15,000 to include certain
green features, then it will typically
expect to sell the home for at least
$15,000 more than a standard home.
This may not always be possible if the
appraiser is not aware of the green features’ value, however.
Building and selling homes typically
is a sequential process with loosely
connected segments of professionals.
First, a developer builds a home. Then,
often with the help of a real estate
agent, a buyer sees it and works with
a mortgage lender or broker to obtain
financing to purchase the home. The financing process includes the appraiser
valuing the home.
Although developers and real estate
agents often have educated themselves
about the tenets of green building as
homebuyers express increased interest
in living sustainably, the appraisal and
lending processes can be a chokepoint.
If an appraisal on a green home comes
in below value, the bank will not make
the loan. And if a bank will not lend
them money, then most buyers cannot
purchase the home.
Mortgage brokers can help shepherd
the process. Although brokers are separated from appraisers by appraisal-management companies (AMCs), there
can be back-and-forth interaction between the lender and appraiser or a
request for a green-certified appraiser.
As long as the discussion is not a statement of expected value, then the lender
could provide extra documentation of
the home’s value — e.g., comparable
sales or documented costs and benefits of the green features — to the appraiser prior to the inspection.
Brokers can ask lenders to relay the
following questions to the AMC to assist in receiving an accurate valuation:
• Has the appraiser taken a green-val-
• If not, does the appraiser have ex-
plicit green-building experience?
• How many green-certified homes
has the appraiser inspected?
Education is available for mortgage
brokers that can help them better serve
their clients and work with lenders to
get them on board with green-lending
options. Some training can help educate brokers on the nuances of green
building or help them tailor marketing
materials for green offerings.
If their market does not have green-
certified appraisers, brokers can help
bring the appraisal issue to the forefront
through state mortgage-professional as-
sociations to apply pressure to local ap-
praisers to seek certification. Education
courses also can update appraisers on
green-building techniques. If appraisers
recognize the value in various features,
then they can include it directly in their
Dakota Gale is program manager, sustainable finance, at Earth Advantage Institute,
a nonprofit green-building resource in
Portland, Ore. Before joining EAI, Gale operated a mortgage business for residential
loans. His experience includes designing
solar panels and semiconductor technology in California. He also worked as a
green-building engineer for PAE Consulting
Engineers, designing Leadership in Energy
and Environmental Design-certified green
buildings. He teaches a sustainability class
at Marylhurst University. Reach Gale at
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