Your Chance to Be Proactive
The Potential Problem
Are you overlooking something that is impacting your local real estate market? As an appraiser or assessor you need to follow changing trends in the market. And investors, this could prove to be your competitive advantage from an investment perspective and if you can accurately calculate lower operating costs during the investment holding period.
Start by Developing a Plan
The answer to this question may be yes or no, but you probably need to be adequately monitoring the situation. For appraisers and assessors, your clients or local citizens, or even journalists, could soon be asking this question and you'll want to be ready for a response. Investors will want to know if property sellers and competitors are considering green building features, and if they can realistically expect to include the cost of recapturing such features in asking rents.
An updated version of "The Appraiser's Guide to Identifying Green Building Features in Homes" is available free of charge from The Real Estate Appraisal Research Foundation http://www.appraiserresearch.org/fileadmin/user_upload/green-guide/pdf/Green-Guide-2012-links.pdf.
Formulate the Details
While I haven't read the complete 98 page guide, by scanning it you can get an idea of where green building programs are most popular. Even a general perusal of the guide will give you an idea of the many green features that homes can have today. Most importantly you'll formulate ideas on how to monitor the local market. The table of contents, Appraisers' Glossary of Green Building Terms, and general layout make scanning easy.
Your own research could include:
1. Watching rental ads to see what green features are being mentioned (changes in asking rental rates can be one of the earliest signs of changes in a market)
2. Watching listings for sale for the inclusion of green building features
3. Reviewing multiple listing information about sales to see if green building features are included for sold properties
4. Watching for media coverage of green building activities, once you know some of the key terms and phrases
5. Enlisting the help of your social network -
- Ask property managers and owners if potential tenants are asking for green building features
- Ask property managers and owners if they have considered increasing rentals after retrofitting projects that include green building features
- Ask builders if potential buyers are asking for green building features
- Ask real estate professionals if potential buyers are asking for green building features
- Ask real estate professionals if sellers are installing green building features before they offer their property for sale
If local real estate professionals agree that typical buyers and sellers are taking these features into consideration, you should incorporate questions into your sale verification questionnaires to confirm this belief. Once confirmed comps need to be adjusted for differences in green building features between those of subject property.
Of course if you find that your local real estate market is being impacted by the demand for green building features, you will need to revise your property data collection methods to capture these features. As appraisers, the final question will be what contribution to value the various green building features have for your subject property.
As assessors, ultimately you'll need to consider how your valuation models will need to be revised to consider these green building characteristics in assessed valuations.
If you haven't already done so, please take a few precious moments to scan this new publication and plan a strategy for monitoring the potential impact of green buildings on your market area. Then put it into action by asking a few local real estate professionals what impact, if any, theses green building features area having on your local real estate market.