I had the privilege of representing the Realtor community last week at a press conference promoting the SAVE Act, an important (and rare) bi-partisan bill co-sponsored by Sen. Michael Bennet, (D-Colorado) and Sen. Johnny Isakson (R-Georgia).
“SAVE” is an acronym for “Sensible Accounting to Value Energy.” The act is long overdue, and let’s hope it does not become a victim of the partisan gridlock in Congress. Besides its bi-partisan sponsorship in the Senate, it costs nothing, merely instructs underwriters to modify appraisal guidelines.
On the one hand the Act will improve the underwriting of mortgages by requiring energy costs to be considered alongside property taxes and insurance. It makes no sense that lenders don’t factor in the cost of operating a house when determining whether a borrower can afford it. After all, the average energy costs of American homes today is greater than the average cost of property taxes.
The flip side, which is dear to me as the owner of a solar-powered home, is that appraisers will be empowered to assign extra value to homes which consume less energy, whether through extra insulation or on-site power generation.
As I’ve written in the past, appraisers — and the underwriters who must accept their appraisals — are not allowed under current guidelines to give value to such efficiency unless there are comparable sales proving that homes with these features have sold for more than homes without them.
Personally, I have sold two listings which had photovoltaic (PV) systems resulting in near-zero electrical bills. Both sold for no more than homes which lacked such systems, because there were no comps to support extra value. The result of those sales merely reinforced the problem, since they created comps which proved such systems have no value! It’s a catch-22 situation which the SAVE Act and a “greener” MLS can address.
Sen. Isakson, himself a 30-year practitioner of residential real estate in Georgia, points out that in addition to improving underwriting guidelines (which could reduce foreclosures), the bill could actually create jobs by improving the return on investment for energy efficiency and renewable energy improvement made by homeowners. Currently, you can expect far less (or zero) return from such investments than, say, for redoing a kitchen or bathroom.