Energy Efficient Mortgages (EEMs) are a new development in financing affecting homeowners purchasing new construction and upgrading existing homes. Banks are starting to recognize the additional value that energy efficient building techniques bring to long-term home value. With a licensed contractor doing the work and a 3rd party tester verifying the HERS Index rating of the home and providing a report showing estimated energy savings, a lender can either add the potential energy savings onto the homeowner’s income and/or add the energy upgrades to the value of the home (dollar for dollar) to improve the Loan-to-Value ratios.
For more information, contact your mortgage lender or contact a lender listed on the Energy Star site. This link says that EEMs currently are recognized by FHA lenders and those that sells their loans to Fannie Mae or Freddie Mac.
Another key element in getting energy efficient upgrades included in a home’s value, even without an EEM from the lender, is the recognition by appraisers of the increased value of the home through reduced operating costs, reduced maintenance costs, and increased quality of life in a properly commissioned home. I am not very familiar with how appraisers in Central Virginia currently value energy efficient building techniques. If you look at a Uniform Residential Appraisal Report, you will see in the Sales Comparison Approach a line called “Energy Efficient Items.” Many appraisers will just put “Standard” or “Average” for homes, even though there is not a clearly recognized standard. As more and more people have their homes scored with a HERS Index rating, the comps could become more relevant in this category. Because appraisers are data driven, it appears as though the HERS rating should be recognized by the appraisal industry, as it is in most green building performance certification programs. If you are going to have a home appraised, talk to your lender about EEMs and the appraisal process to see if you can have energy efficient features included in the value of the home.