Thursday, February 14, 2008

Financing, appraisal concerns for green homes...

I'm starting to feel sorry for myself :-(... nah, I know I shouldn't, but it's been tough because I am finding that this house and lot appraisal method is so frustrating because we are building green.

Why? You see, in order to get a construction loan for your house, you have to get your houseplans and lot appraised so that the lender can base the loan on the total appraised value. They basically compare your house square footage and the area where you're building and try to find comparable homes in your neighborhood. The problem is, there aren't too many green built homes to compare to, so they end up comparing your house to the shoddy stick builts and it's simply NOT FAIR because stick built is much cheaper to build so the price/sf is a lot lower!!!

I've been talking to appraisers around town and they are saying the same thing... it doesn't matter because we have to go by what is around you. So tell me, how are we going to get comparables around us when they make it so hard for people to build green in the first place? Add the fact that they don't appraise green features/building for a higher value, even though you're saving thousands a year in energy costs, you're not breathing dangerous vapors, as well as being the benevolent and eco-conscious hero of your neighborhood.

And so I ranted and vented and said, but we're building with SIPs, got geothermal and rainwater collection and all these other cool features but to no avail. I am so thinking of going political over this. If anyone has any insight on how I can go about lobbying for making it easier for green built homes, then I'm very open to suggestions and will put on my marching boots.

Here's our situation, and I'll be an open book (as if I haven't already exposed enough):

We need to appraise both our house and lot at about $740K so that we can get 100% financing for our construction costs which came to be approx $590K (80% of the appraised value). This allows us to put no money down because in essence we are using our equity (difference between appraisal value and costs) for the 20%. We are doing this as owner builders with U Build It. And if that's not hard enough, building green can be costly upfront, and so we require more of a loan than if we went conventionally stick built. Then add on the fact that the nation is under a housing decline at the moment....

We did find ONE appraiser who has specialized in green building in Austin, can you believe that? Here's his info (free PR for him):
Ward Appraisal Services

I guess when people build green, it's their 2nd or 3rd or more house, but of course, we are the pioneer-spirited ones who decided to build our very 1st home properly and green! Woohoo! :-D

The hope is that our land has appreciated enough to cover any large differences. Acreage lots around the Hill Country are getting expensive, so maybe that will be a good thing for us. It's almost becoming a mini California out here (pre 2006). They even built the Hill Country Galleria 8 miles from us, so there's a lot of development coming out this way.

Despite the above, I am trying to stay positive. Really truly, because we deserve this house and want to do it right!!! I am SO HOPING we get the appraisal we want. Wish us luck and as always I'll update with what I find out!

I should do a before and after picture of us when we start the building.... :-)


Paul said...

you might be surprised to see the appraisal. our plans did appraise so we had the 20% equity and did not have to put $ down for the construction loan. and that was w/o trying to get the bank's appraiser to understand our green plan. in fact, there was no mention at that stage that we would have solar and geothermal etc.

and when the bank did send an apraiser out to close the construction loan, he DID make a special note of all the high efficiency systems that would give the home a higher value over traditional construction.

Jan & Myleen said...

Paul, thanks for the light at the end of a long tunnel. I really hope we will get that appraisal at where we want it. Do you know which appraiser you used?


Matt and Laura Tills said...

I could have written this entry - our numbers were pretty similar, and we were counting on our land equity as well. alas, SIP built means NOTHING to the assessor...the only thing that matters is the square footage. after much frustration, we closed on our 30 yr fixed this monday...a relief. now if they'll just use that low assessment for our property taxes!


Jan & Myleen said...

Thanks Laura, I know I'm not alone. Luckily, I found an appraiser who is up on green building methods and has accounted for our green features! We got a pretty good appraisal, in fact. Now, we're just having to reduce our budget by a bit and find the right loan program. I will visit your blog. Congradulations on building your home!

Dany said...

We're in the middle of our construction loan building an off-grid home in VT. When we got financing, they told us that they can't assess the real value of "green" homes because plenty of people are building them, but no one's selling them. That's not our problem! And, the appraisal we received was reduced by the amount it would cost to bring power to our home. So they took the total value and MINUSED $40,000 (we're a half mile from the nearest pole). So yes, I could have written this post too ... and they won't let us get a fixed mortgage rate because of all this! We agreed only because it's fixed for the first three years of the mortgage part of the loan (that we're not into yet) and we figured we'll just refinanced once we get it done. I'm so glad I found this site, we don't feel so alone anymore!

Jan & Myleen said...

Dany, it's unfortunate to hear your story, but I am glad you stuck in, because it's not going to be easy for the first pioneers in green building! I really wish the government would give even more incentives to people like us, but there's always something making it even harder. Good luck with your construction! Please let me know if you have a blog up of your home too.

Jan & Myleen said...

We got a great appraisal! This was largely due to the fact that our appraiser specializes and appreciates green building so he hunted down similar green homes around our area. Make sure you interview your appraiser before you get him-her to do the appraisal! Make sure that (s)he knows how to evaluate green features and that (s)he can search for other homes with alternative building methods. This is important. I will post my appraisal once I get the last bid so you can see how it's done (or e-mail me and I'll send you our appraisal). I want to help as many people I know build green.