Valuing Home Performance: Guidance For Appraisers Last week I met with a group of real estate appraisers about valuing Energy Savings and Home Performance. I found: 1. They have a tough job right now. Many demands from many directions. 2. They want to do their job right, but lack the tools and documentation to back up the valuation of Home Performance G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
Legislators say, “Value Home Performance” ... But provide no measuring tools
For full text of the directive to value Energy Savings and Home Performance see: http://dl.dropbox.com/u/355755/ Appraisers%20required%20to %20value%20Energy.pdf G r e e n E a r t h E q u i t i e s . C o m
© 2009
Saving The Planet One House At A Time
Types Of Measuring Standards To Value Energy Efficiency 3 Methods of Valuing Energy Efficiency will be offered. All are based on Department of Energy DOE 2 Data And statistics accumulated over many years.
1. Full use of online DOE 2 modeling software 2. Extracts from the DOE 2 Tables Saving The Planet House 3. Summary Extracts and Sample Houses One At A Time G r e e n E a r t h E q u i t i e s . C o m
Š 2009
As Would Be Expected.... 1. The Easiest Methods of Valuation are the Least Accurate 2. The Most Accurate Methods take longer to learn and use. 3. But All methods are based on the super accurate DOE 2 information platform and will allow appraisers fulfill the requirement to value Energy Savings G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
Before We Dive In..... There are two even better and very easy ways to evaluate Energy Efficiency: But they are rarely avaialabe... 1. The Real Utility Bills compared to the Comparables. 2. A professionally done Energy Audit by a BPI certified auditor (Use these if available) G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
The DOE Website (for Consumers) http://hes.lbl.gov/ The government spent millions developing the information on this site and presenting it in a clear enough way that it would be useable by consumers. Like the “free” PG&E classes, you have already paid for this tool. I hope you find it as valuable as I do. G r e e n E a r t h E q u i t i e s . C o m
© 2009
Saving The Planet One House At A Time
Read About The Site
Enter Zip Code
G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
These 10 simple energy efficiency items cost about $4000 and save $600 per year which is a 16% return on homeowner investment (1997 costs & electric costs) Costs of Improvements have increased only 50% Saving Costs of Electricity has increased 150% or more The Planet One House Serious savings add serious Value. At A Time G r e e n E a r t h E q u i t i e s . C o m
Š 2009
These prices may seem low. They are only the “additive” cost above what a non Energy Star item would cost
Text These 10 small items save $600 per year for $4000 cost BUT ... These calculations are with old (cheaper) Electric Rates. Most homeowners pay at least double these rates. PG&E’s top tier (January, 2010) rate is Saving The Planet over 5 times the rate used here. One House G r e e n E a r t h E q u i t i e s . C o m
© 2009
At A Time
The first screen shows the average of all averages for the Zip Code. (no cooling?) Not too much value. But the Plug load (gadgets) in purple is significant. Saving The Planet Dont stop here. Now it’s time to customize. One House G r e e n E a r t h E q u i t i e s . C o m
Š 2009
At A Time
Note Savings Opportunity
After Adding Central AC (8 SEER) was existing G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
Blue Dot Indicates which categories have been modified. The others remain ZIP Code averages.
Click Calculate Record your session number to return & not lose your work G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
Continue “change” to Clarify Items that have been improved. First input the original item BEFORE the improvement.
G r e e n E a r t h E q u i t i e s . C o m
© 2009
Saving The Planet One House At A Time
Most screens have drop down boxes & fill in the blanks. G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
Here a best guess is all you can do on a foreclosed home or any home with no history available
Remember to Save Answers After Visiting Each Screen G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
This function doesn’t work for our purposes at this time.
Here you need to use your judgement if actual utility records are not available. The average electricity cost for PG&E is somewhere between 12 and 47 cents, depending on how far the user goes up into the more expensive pricing tiers. Save & Recalculate G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
Notice the change when real (better estimates) utility costs are entered G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
This is “BEFORE”
Here are the estimated costs after all relevant areas have been updated. Remember this first updating is to the pre-improvement condition. Or the condition of the comparable homes in the area.
Note the blue dots G r e e n E a r t h E q u i t i e s . C o m
© 2009
Saving The Planet One House At A Time
Next: Enter The Improvements Save a copy after your final adjustmant of the “Before” condition. Then re-visit each area and make the changes that you know have been made to the home. Save a copy “After” the repairs and compare the two energy costs. G r e e n E a r t h E q u i t i e s . C o m
© 2009
Saving The Planet One House At A Time
The “After” Results This is the important number on this form. The other numbers are comparing with premium upgrades not selected in this home (96% furnace etc)
G r e e n E a r t h E q u i t i e s . C o m
© 2009
Saving The Planet One House At A Time
Before - After = Savings Before After Savings
$3819 $1718 $2101 / yr
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Note: I feel comfortable with these “After Treatment” numbers as I have treated several homes in the same neighborhood with the same treatment package and gotten even better results than these numbers. (They bought no expensive tier kilowatts) See the numbers at: For Real Home Performance… Monitor The Bills (top blog post at Saving The Planet GreenEarthEquities.com) One House G r e e n E a r t h E q u i t i e s . C o m
© 2009
At A Time
We Have Real Savings: Now What? This has been a quick introduction to the DOE Home Energy Saver, online energy saving calculator. For complete documentation on the Home Energy Saver see: http://hes.lbl.gov/hes/makingithappen/mih.html For now I will leave it to appraisers who will know what to do with these savings numbers after they are generated. Following are some additional points about value and some excerpts from the above data that may be helpful. G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
ROI Is Not The Whole Story! Return On Investment isn’t even the main reason most people spend money improving their homes. Other Reasons that add value in the minds of Consumers, (Purchasers of Improvements and Purchasers of Homes) 1. Comfort 2. Security 3. Health 4. Lower Medical Bills 5. Less Days Absent 6. Pride of Ownership 7. Right For The Planet G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
Savings and Cost Data The following saving numbers are from the DOE 2 data on the 1200 sq ft sample home in Fresno, CA. Each item was changed individually from Before to After and the difference recorded. Loading Order of this process skews the individual savings slightly but not the totals for the whole package. Costs are real renovation costs from the same home in 2009. G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
Savings and Cost Data Item
Savings
Cost 100%
Air Tightness (Shell Seal) Doors & Windows Attic Insulation Thermostat Refrigerator Cooking Washer Dryer Ducts Air Conditioning Furnace Lighting Water Heating
77 252 123 140 261 36 84 105 745 260 236 50
650 3800 1800 150 1850 1650 1244 1800 new 6500 Incl in AC 1300 400
G r e e n E a r t h E q u i t i e s . C o m
Š 2009
Saving The Planet One House At A Time
Savings and Cost Notes 1. Costs listed are my actual renovation costs for the item in this 1200 sf complete renovation in 73727 Zip Code. 2. Costs in the Home Energy Saver are the additive costs. (the DIFFERENCE) between a “standard” item and the Energy Star equivalent. 3. Home Performance works best as a SYSTEM as each part works symbiotically with the others. 4. Piecemeal replacements rarely achieve 100% of the expected savings. G r e e n E a r t h E q u i t i e s . C o m
© 2009
Saving The Planet One House At A Time
Real Cost & Value, 2009
This package of improvements has been done consistently on 7 houses, all about the same size, in the same neighborhood over the last year. My “hard cost” is consistently $16,2500 (does not include Refrigerator, washer, or dryer.) All the houses have sold for well above the comps in the neighborhood and all have met appraisal because the appraisers have given value to these and other improvements. (CMA’s available on request) I hope this information is helpful. Email me if you have ideas to improve its value.
Dave Robinson
Dave@GreenEarthEquities.com G r e e n E a r t h E q u i t i e s . C o m
© 2009
Saving The Planet One House At A Time