Appraisal Institute New Residential Green and Energy Efficient Addendum

by AppraisersBlogs · Published October 21, 2011 · Updated December 12, 2023

On September 29th, the Appraisal Institute released a form intended to help analyze values of energy-efficient home features. It is the first of its kind intended for appraisers’ use.

The industry leader in green valuation, the Appraisal Institute issued the form as an optional addendum to Fannie Mae Form 1004, the appraisal industry’s most widely used form for mortgage lending purposes. Used by Fannie Mae, Freddie Mac and the Federal Housing Administration, Form 1004 is completed by appraisers to uphold safe and sound lending. Currently, the contributory value of a home’s green features is rarely part of the equation.

“This addendum is another example of how the Appraisal Institute is at the forefront of real estate valuation,” said Appraisal Institute President Joseph C. Magdziarz, MAI, SRA. “It will help the industry standardize the way residential energy-efficient features are analyzed and reported.”

The Appraisal Institute’s addendum allows appraisers to identify and describe a home’s green features, from solar panels to energy-saving appliances. Form 1004 devotes limited attention to energy efficient features, so green data usually doesn’t appear in the appraisal report, or it is included in a lengthy narrative that often is ignored.

Magdziarz pointed out that the Appraisal Institute’s form also will make it easier for appraisers to determine whether recent home sales should be used as comparable sales. Sales that are truly comparable are key components in determining a property’s value.

“We hope lenders, home builders, real estate agents and homeowners will take advantage of this new tool,” Magdziarz said. “Mortgage lenders who want to see energy features analyzed should request the green addendum to be included with Form 1004. We also encourage lenders to provide the green addendum to homeowners so they can fill it out and provide it to their appraiser. If a new home is being appraised, home builders can use the addendum to provide data to appraisers. Real estate agents also can use the data to help populate the MLS.”

Source ~ Appraisal Institute