Thursday, April 29, 2010

The green real estate: What is keeping it back?

Developers would like to see green property projects jump rapidly. While they are moving forward very fast, appraisals are not keeping in line with this fast growing industry. Take a house that would typically cost half a million dollars to assemble. You decide that you want the house to be more environmentally friendly, therefore you ask your architect to design the new property so it takes advantage of the sunshine and you put in high quality insulations and solar panels. Due to these green choices, this will add another $100,000 to the cost of the building.

Unfortunately this is not how your bank or mortgage appraiser values it. It doesn't do a lot of good to solely add value based on cost, but the question is, How much will the market pay on resale?' says David Snook, an appraiser and representative of the real property committee on education for the American Society of Appraisers.

Shall we finish with our example? Your bank or mortgage lender will only accept a $550,000 price. Therefore you would need to look for an additional $50,000 as a down payment. With a high-ratio mortgage 5% down payment, you will need $77,500 instead of $27,500. That is a large increase particularly if you are on a budget and every cent matters. This might force you to search for the cheapest green option, using older and cheaper technologies, or maybe you will forget about the whole green idea of the project altogether.

However, as a green MLS GTA agent I realize even though there is a rise in cost going green does make a difference Look at it this way, green real estate sell over 20% more rapidly with an 8.5% increase on price, according to Green Work Realty report. This information doesn't help you though if you are dealing with bank or mortgage business appraisers who don't have much if any experience with the green property technology.

There is not much that can be done about it right now . While there is no standardization for environmental and energy efficiency at this time, I think that they will soon be on their way. Green real estate is about cost as well as the all important environment. When looking at purchasing a motor car, one of the first things you look at is its fuel consumption, how many miles to the gallon does it do. Making sense of home energy consumption is the natural next step.

picture by Hammer51012