No one likes a pop quiz, especially when trick questions are involved. But that’s exactly what’s happening to owners and buyers of high-performance homes. Consumers have been finding out the hard way that they have a right to a qualified high-performance home appraiser. But they learn this after a final report been filed and all the invoices have been billed and payments made.
Home performance contractors and programs have an opportunity to fix this problem at the source and to educate consumers how to navigate through a more fair appraisal process.
It’s hard to argue against the fact that our mortgage industry needed a lot of fixes after the recent financing crisis. But the home performance industry is slowly waking up to the shock that an unfortunate by-product of these improvements has been significant, unintended problems specifically for owners/buyers of high-performance homes.
In 2009, the Home Valuation Code of Conduct (HVCC) introduced more independence in the appraisal process. Gone are the days of picking an appraiser. Now most lenders use a clearninghouse approach to select an appraiser from a pool. This pool approach which allows appraisers to be more objective in documenting the value of a home also means it has become harder to match appraisers who have knowledge and experience to high-performance home assignments.
But since HVCC was introduced, one thing that has been clearly reinforced is that now more than ever, consumers have a right, and appraisers have a duty to be competent for any assignment they accept. HVCC has only strengthened attention on the minimum requirements appraisers must meet or exceed as defined in the Uniform Standards of Professional Appraisal Practice. This includes requirements to be ethical and competent and to be able to define and fulfill an established scope of work.
The real challenge is that the first time a homeowner or buyer figures they have a right to a competent appraiser, and that an unqualified one assessed their property is after the final report is done. At that point a consumer’s only option is to pay for the whole process again.
For more information on today’s valuation process and how it impacts high-performance homes, see the appendix to CNT Energy’s visible value blueprint.
The National Association of Home Builders (NAHB) found that some of their members figured out an interesting solution to the conundrum that the consumer doesn’t know they’ve had the wrong appraiser assigned until it’s too late. They recently published contract language that builders are starting to include in their sales contracts to trigger an attention on competency before the appraisal assignment begins.
Inspired by the NAHB example, the visible value blueprint recommends the following contract language:
“This Home is being built to nationally recognized standards above prevailing code with unique features, materials and high-efficient equipment. The Lender shall choose an Appraiser educated and knowledgeable in valuating this type of specialized Home, preferably an appraiser who holds a professional appraisal designation that requires advanced education on such issues as the valuation of sustainable buildings. The appraiser shall provide verification of this advanced education from a qualified educational provider to be permitted to conduct the appraisal for this project.”
While home performance contractors and programs typically work with homeowners who might be staying put, these clients might still need an appraisal for a refinance. Providing sample new construction contract language at the time home energy upgrade work is done could make the difference even on a refinance and trigger the right questions to ensure a competent appraiser is assigned. Contractors and programs have a huge opportunity to educate the consumer and fix appraisal assignments at the source to make sure a fair valuation is done by a competent expert.