Appraising Green: Show me the Market Value
This paper explores the role that energy performance and green features should have in commercial building appraisals, why current appraisal practice often does not consider them, and potential interventions to ensure they are properly incorporated. Appraisals are used to determine the building value for mortgage lending purposes, but are also used for internal valuation purposes and in the due diligence step for acquisition. Energy related equipment and performance is relevant to appraisals of all buildings, not just "green" ones, as it could affect their value and risk positively or negatively. But regulatory and market changes over the past 40 years have led to increased commoditization of appraisals and greater standardization of appraisal documents. This, combined with an aging and more skeptical workforce, creates a difficult environment in which to introduce change. Yet opportunities to easily incorporate energy and green factors exist throughout the entire appraisal process, including while defining the scope of work, collecting and analyzing information about the property, applying well-established methodologies to determine value, and providing the final opinion of value. Critical next steps include: raising awareness of green and high-performance ("green /HP") features and the ability to incorporate them into the existing appraisal framework, generating demand for competent appraisers capable of valuing green/HP features, and increasing the availability of functional, relevant data.