We are often asked here at Pearl: “How can homeowners make sure that a Pearl Certification report will actually increase the value of their home?”
One of the most important tools for doing this is the Appraisal Institute’s Green and Energy Efficient Addendum – or, if that’s too much of a mouthful, the “AI Addendum” for short.
We include an AI Addendum in every Pearl Certification report we issue. At first glance, it may not be very exciting. It’s several pages of very small, dense type with no photos.
But don’t be fooled: it may look about as exciting as the footnotes to a legal contract, but it’s a very powerful tool!
The AI Addendum gives an appraiser the information they need to include some or all of the value of the home’s high-efficiency features in the appraisal. Appraisers aren’t typically experts in home performance. So when they do an appraisal, they don’t often focus in on the high-efficiency heat pump, the attic insulation, or other similar features. And even if they do, they may not understand all of a feature’s special benefits. The AI Addendum gives them this information in a form that’s easy for them to use.
If an appraiser has this information, he or she is required to use it! Guidance from Fannie Mae states that: “special energy-saving items must be recognized in the appraisal process and noted on the appraisal report form.”
It’s important to remember that when the appraiser receives the AI Addendum, they won’t automatically add in the full value of the improvement(s) you’ve made in the home. In other words, a homeowner may have paid $7,000 for a tankless water heater, but the appraiser may believe on the basis of his or her experience that it only adds $3,000 to the value of the home.
But here’s the important thing to remember. Without the AI Addendum, there’s a good chance that homeowner won’t see any additional value at all!
With the AI Addendum, the homeowner with various energy efficiency improvements should see some of that value of their improvements, just as Fannie Mae suggests. And the more AI Addendums in the market, the more likely those values are to increase over time.
Pearl has just launched this new webpage to help provide more information to appraisers.
And lastly, here’s a few Pearls of Wisdom we hope you can help spread far and wide:
First, homeowners need to hang on to the Pearl Certification Report and the AI Addendum, and when they sell, they need to give it to the real estate agent and the appraiser. And second, they need to tell the appraiser to go to Pearl’s new appraiser page to learn more.
Pearl Certification is transforming the housing market. We’re making a visible difference nationwide for homeowners and the businesses that serve them.
