Financing the Energy Efficient Home – Saga Part 3

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How can you get your Green Home the credit it deserves?

The Appraisal Balancing Act

I had sooooo hoped this would be the final Part to this saga.  But that would appear not to be the case.  Let’s recap…

The Appraisal process, at best loose science and conjecture, at worst complete black arts, has always been cloaked in secrecy and rather subjective.  Toss in a Modernist home (more valuable per square foot – as buyers will pay more), and a LEED Platinum home that is almost Net Zero, NOT in a neighborhood and on acreage – oh and with nonstandard construction techniques and you have a “complex appraisal”.  Which I now understand this to mean that it 1) takes longer and 2) costs more.

Add the layer of the appraisal “clearinghouse” to improve the ethical dealings of banks, appraisers, mortgage brokers, builders and real estate agents and it seems to be very well designed to not hold anyone accountable for the accuracy of validity of the data in the appraisal.  (Can you tell I am less than thrilled here?)

While you can’t select a specific appraiser (again – that ethics thing), you can have certain requirements for an appraiser.  In our case, we felt it was imperative that the appraiser had SOME training and familiarity with “green” or sustainably built homes.  Once again – there’s no one certification or accreditation available from the professional association – but there is the 5 page Energy Efficient Addendum that can be used to augment the appraisal and help apply value to each energy efficiency feature.

We got our appraisal back after providing the appraiser a copy of our preliminary Energy Star report / HERS Index (33 without photovoltaic, and -7 with PV) and also our detailed preliminary LEED classification with all the detail from our LEED AP consultant.  All this information would allow the appraiser – remember the “green appraiser” – to fill out the 5 page addendum and accurately attribute value to the energy efficiency.

One page - valuation of your entire project.

One page – Should this be a valuation of your entire project?

If you are not familiar with the manner in which the appraiser goes about valuing a property – I’ll net it out.  The appraiser takes comparable properties (comps), and through a series of comparisons to your project / home / plan, normalizes the other homes to have them more closely match your home through a series of additions or subtractions.  For example – our house has a pool in the plan.  One of the comps did not.  So, the appraiser “added” $25k to the sales price of the comp to try to account for the missing pool – i.e. since a pool would raise the price and since we have one – this is the normalization.  Since it’s rare to have a 100% equivalent property sell within a year  – it’s important to pick the right comps.  And yes – some of the attributes that drive additions or subtractions are subjective, you hope that the overall process is sound.

Or not.

There is one line entitled “Energy Efficiency” in the one page that is really the meat of the final assessment (as far as we were concerned).   This is where we were expecting to have the appraiser utilize the 5 page addendum so that the amount they could attribute to our project (assuming they could not find a comp that was also Energy Star / Green / highly energy efficient, etc) would be reasonable.  We didn’t expect it would really cover the costs of the investment we are truly making.  After all – this investment will pay us back over the entire life of the home with, potentially, having zero or VERY LOW energy bills, and very little maintenance.  So – yes- we’re going to pay more because ultimately, we’re going to get more.  I am okay with that.  What I am NOT okay with is how the appraiser populated the energy efficiency line item.

  1. Comp 1 – new construction.  Labeled as “Good” in Energy Efficiency.  $0 added to the comp sales price.  Upon further investigation from the home’s MLS listing, there is no mention of ANY green or energy efficient feature.  There is nothing to indicate this home was built to any standard higher than the local / state building code.
  2. Comp 2 – 12 year old Modernist home.  Labeled “Average” in Energy Efficiency.  $75k added to comp sales price.  No updating was done to this home and I happen to know this home had monthly utility bills of well over $1000.
  3. Comp 3 – 5 year old single story Modernist home.  Labeled “Average” in Energy Efficiency.  $75K added to comp sales price.  This home also averaged utility bills in the $1000 per month range.

Flipping through the appraisal – the Energy Efficiency Addendum WAS included.  5 Pages. The appraiser filled out one question checked one box for LEED certification.  That’s it. Nothing on R values.  Nothing on my window u values, r values, triple paned, krypton filled lusciousness (grin).  Nothing on solar photovoltaic and the potential to EARN MONEY or have $0 energy bills.  Nothing in the State and Federal rebates for which the house will be eligible. Zip.  Zero. Zilch.  Again – even though this was provided in the LEED checklist and the LEED AP contact was made available.

So – what do you do?  I realize that appraisals are somewhat subjective – after all – you have to take “similar” comps and make educated guesses on how to adjust these disparities.  But – essentially what was done here is that the appraiser gave us no credit for anything – ANYTHING – that we have done that is over the crappy state building code.  Yes- the home is more energy efficient than one built 10 years ago – but it’s also a TON more efficient that a ‘base’ home built today.

Because of all the regulation – the bank cannot “contest” this.  I guess I have to.  And I also realize that this is going to be coming dangerously close to me telling someone that is a professional how to do his / her job.  But seriously – this is a person who has touted their education and familiarity with green homes, building techniques and valuating these features!  I am also sure that any changes to this appraisal will have to be accompanied by an explanation – and then ‘certified’ by the third party that acts as a clearinghouse AND quality control point to reduce industry corruption – so it may raise scrutiny.  (and it’s extra work – but – when you charge extra for a ‘complex appraisal’ – I expect you to actually DO SOMETHING)  However, I am going to present this as an ‘error’ and not something that I am essentially arguing a subjective “I don’t think you valued my project high enough” – but instead – focusing on specific things that simply don’t add up.

I’ll let you know how that works out.

We’re close – we’re really close – and I think we can make it work at the present value if we HAD TO – but it sure would be nice to be given SOME credit.  Perhaps rating out home “Excellent” compared to the new code built home that was rated “Good” in that same category, and then, filling out the addendum to justify both the “Excellent” rating and the increase valuation. Novel idea.  The appraiser did include a bunch of copy / paste words about increased market value of green homes, and green homes spending less days on the market (DOM) that standard homes, and then, of course, didn’t pay any attention to them.

And then – if we can get the appraisal saga done – according to the bank – we can close a loan in 2 weeks.  WHOO – freaking – HOO!

 

Financing the Energy Efficient Home – Saga Part 2

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How can you get your Green Home the credit it deserves?

How can you get Green Home credit?

So – what’s next?

After doing a bunch of internet research, and trying to learn as much as I can about the appraisal process by pouring over old appraisals, we’re trying again.

One site, Green Building Advisor, had a wealth of knowledge about this process with one blog, especially helpful – not only in the content, but also in the comments.  This guy seemed to be having the same issues I had.  More research, more info, more education.  Appraisers are generally reeling from the mortgage / banking mess as well, as banks try to look for a convenient scapegoat for “over valuing” homes.  Granted, there were some appraisers that may have been unethical, but the vast majority of them are only comparing homes to other sales – so once the avalanche over snowballing prices starts, they just need to keep up with the numbers.

Appraisers are all about “comps“.  Comparable properties that are close enough to your property that they can, through a series of additions and deductions for features and specifications, determine a “value“.  Realize that in new construction this is a complete crapshoot.  Add in a “green” home and you have entered into the world of a complex appraisal, and this requires someone with some specialized training.

The governing professional organization of appraisers is the Appraisal Institute.  And, because of the growing issue with “green” valuations, they have developed an addendum to the standard form that is amazingly thorough in outlining the features of a green home.  Everything from your thermal envelope, to blower door tests, to indoor air quality.  In order for an appraiser to fully utilize this form, they NEED to have specialized training.  Too many appraisers just crunch the numbers with little understanding of the real differences in systems and other features, instead putting “typical” in the area on the main 2 page comp sheet.  To be blunt, they need to be able to understand that HERS is not the opposite of his…

ai-residential-green-energy-effecient-addendum

Another vestige of the housing mess, is that banks can no longer have a direct relationship with the appraisals.  In order to remove cronyism and the ability to target a “certain” appraiser, banks now need to use clearinghouses that assign appraisers from a pool so that you never know who you will get and, supposedly, this adds integrity into the process. Couple this with the fact that the homeowner is likely kept as far away from this process as possible, when you are doing a house this cutting edge, you are relying on the mortgage person to convey this to the appraiser.

The good news is that you CAN require some training when you submit the request to the clearinghouse, you CAN insist that the 820.04 addendum be used, and you CAN approve the appraiser that the pool assigns.  I guess since you are writing the check, they give you SOME input.

SO – because of the help and the research on the Green Building Advisor site, we’re trying this again.  We’re providing our preliminary HERS rating, and our expected LEED Platinum status, as well as a ton of other documentation.  I am meeting with the appraiser at the property Tuesday (due to the fact you cannot just drive by and access the property).  Hopefully, having an educated appraiser will help us get to where we need to be and we can start this project in July still.

Stay tuned for Part 3 – I hope it’s labeled SUCCESS!

Financing the Energy Efficient Home – Saga Part 1

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appraisal_formWhere to begin?  We’ve been working on financing for almost 9 months.  I had hoped to be in a position to start construction early in 2013 and thought I had budgeted enough time and money to do this.

We’re not amateurs; we did a construction loan on our existing house and, without tooting my own horn that much – we’re pretty darn good credit risks if you believe all the score stuff.  😉  So what’s the deal?

A perfect storm of nonsense, that’s what.

  • Banks are exceedingly paranoid about lending their money at low rates.  Especially jumbo loans that might have to pass scrutiny and not get sold on the secondary market.
  • Large banks, despite being some of the most “creative” when it came to financing and building up the subprime mortgage market, are excessively difficult to work with.  And then have the nerve to talk to ME about how risk averse they are.  Seriously?  Does the word “robo-signing” mean anything to you?
  • Banks seem to do less and less “bank” stuff, and instead – prefer to make money playing with other peoples’ money.
  • Interest rates at historic lows means that banks have little interest in making 30 year mortgage commitments.
  • Credit unions rock – I love mine – but they stopped doing construction loans about the time I needed one….
  • Pair Modernist with Energy Efficient and the banks / appraisers don’t know what the heck to do with themselves.
  • And the new rules designed to prevent the fraud that occurred a few years ago have effectively crippled the ability for “normal” (and qualified!) folks to get a loan.

Early in the process we started with one bank and (mistakenly) abandoned them when we got a poor appraisal.  Instead of forging ahead and looking for options or other comps to work with this appraisal and get it to where we needed. we had another bank and went to them.

mortgage-appraiser

Me – dealing with banks.

In our defense, the 2nd bank was promoting themselves as having an interest in community lending, and specifically, putting together a Modernist home loan program because their research indicated that Modernist homes – well designed and well loved – simply didn’t go to foreclosure.  As I have mentioned previously, Triangle Modernist Houses is a force for Modernism in the area and were also trying to forge relationships with banks to help preserve our at risk homes in the area and have a modern-friendly bank that understood that while “simple” in design, usually a Modernist home is more costly than that of a home built for square footage.

After a process that I likened to a financial colonoscopy, we were approved.  However, when the commitment letter arrived, it contained terms that were so impossible, we simply could not go forward.  This was very disappointing in that we had spent so much time, and pretty much had had positive feedback all through the process.

Live and learn.  So – we’re back and bank number one – and we DID learn something from the last experience – we are understanding the appraisal process and what we can and can’t do, who is and isn’t qualified, and how we can position ourselves for success.

Next post will discuss financing the energy efficient part.  Another challenge.  Heaven forbid you do anything “different”…

 

The Thermal Envelope

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If you can’t tell – I’m the ‘She’ in the About Us page.  I am not the technical engineer.  I have a good solid understanding of mechanics and more technical things based on my career, experience and the fact that I can be a little bit of a gearhead with the cars.  However, I am also a sales / marketing person at heart and I am a firm believer in “Do not let Perfect be the enemy of Good”.  I am an 85% is FINE – get it done person.  So – I blog.  I write.  I am the extrovert.  I am the one usually spinning out of control and scurrying around.

I share this because you will see some posts from the ‘He’ here shortly and just in case you couldn’t tell – I wanted to let you know you’d see several authors.  Also – if you want more of the nitty gritty technical stuff – it’s coming.  Trust me.

At a higher level – I may be focused more on aesthetics than performance, but I do appreciate a high performance ANYTHING.  I also appreciate that our current house was overbuilt and outperforms all the other houses in the neighborhood.  We’ve already been familiar with geothermal heat pumps, alternative types of insulation, better sealed envelopes and windows with argon filled sealed spaces and low e coatings.

After we selected the wall system – it became apparent that we were onto something – one product – several functions.  It begged some thought and discussion about how to carry this “theme” to other areas.  Hubby had said early on as an “architect test” that he wanted a house with no 2×4’s and no sheetrock, and it appeared we could get that for the walls by using concrete sandwich panels.  Also, with steel, concrete and glass being our mantra, we had a lot of flexibility on materials.

Roofing traditionally is metal or membrane or shingles.  Since we had rejected the flat roof purely out of functional paranoia, a single sloped roof was in order.  However, I was 100% in love with the flat roof “look” and it fit so nicely into my mind’s eye of the mid century look I was trying to get.  Enter the insulated roof panel.  Initially developed for refrigerated buildings, we could easily now get R-50 in a LONG panel that was totally thermally isolated and that gave us the inner and outer surfaces, as well as some great insulation.  Several companies provide this type of panel, but we found a local installer and a fairly local manufacturer.  Metl-Span had just what we needed and Metal Roofing Corporation is an amazing partner and dove in helping us fully utilize the benefits of the product for both our roof, as well as the extensive shading structures we have to manage the summer sun.

red roof

The roof helps with LEED (insulation factor, airtight, no thermal paths, and solar reflectivity – not to mentions “local” material within a few hundred miles.) and provided the look and feel we were going for.  The inside of the roof will sit on our open bar joists (for a loft like look) and provide the finished ceiling.

Next – we’ll see how International Precast was able to help us connect the roof to the wall insulation as the cooler building (ha! pun!) continues.

We’re building a cooler.

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A cooler what, you ask?  No, a cooler.

The reason a cooler works so well at maintaining the temperature of the things inside it, is that it fully insulates the contents from the ambient temperature.  For the most part (except for the opening lid) there is no thermal path that connects and conducts outside temp to inside temp.  Therefore, your beers stay icy cold!

coolerWhile we might not want to be icy cold, certainly the thermal envelope of any building is the single most important part of the building process, and minimizing the thermal paths, from outside to inside is paramount (as is sealing it up, but more on that later).

Conventional construction – whether 2×4’s or 2×6’s or even 2×8’s have wooden thermal paths every 16 to 24 inches or so.  Therefore, you can stuff some high R value insulation in those spaces, but your still fighting those paths.  Folks have gotten around that but essentially building a house within a house and offsetting the studs, but that seemed, to us, to be a little complicated.  So – what will we use for a wall system?  What can minimize these thermal paths, and is durable and cost effective?  SIP panels?  These are a really good product to minimize the thermal paths, but still very conventional and you still have to put something on the inside of them for walls, and then something else for your exterior finish.

We’d heard about some concrete panels with insulation – essentially the Superior Walls method, but that still wasn’t the answer.  Finally – we found the concrete sandwich panel.  3 inches of concrete, 4 inches of insulation, and then 3 more inches of concrete.  What this did, was allowed the panels to provide our exterior finish (remember – we like the minimalist aesthetic), our insulation, and our interior wall – which we can paint, adorn, or leave in all its grey glory.

Interestingly, this “all in one” material started us down a path for a couple of themes, including one material providing finished inside / insulation / finished outside and also working to minimize the subcontractor on the project to try to contain costs.

So – we now have the walls for our cooler – and we’ll talk about how the insulation could be continuous around the house…..

What do we want?

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questionsSimple question, right?  But the answer isn’t the simple.  We knew we wanted an energy efficient home, but “how” energy efficient?  We knew we wanted a Modernist home, but how Modern?

We knew we wanted one level.  Having lived in our current home that is essentially 3 levels – and really only using one – it’s apparent that the other floors are somewhat wasted.  And – since we have dogs – old dogs and blind dogs – accessibility is important.  Having elderly dogs and vision impaired dogs help you learn about things like “aging in place” and accessible (or universal) design.

I am probably more into the aesthetics and the design process than my husband.  He’s definitely into the performance and the materials.  Not to say that he’s not quite particular about design, because he is – he just sees more beauty in a functional design and I might be swayed by anything ‘shiny’…

In working with tonic design, we knew they had recently done a LEED Silver home.  What’s cool about that is that it is the was the first Modernist LEED home in NC.  With basic tenets of modern architecture being lots of light / windows / volumes, it becomes an additional challenge to make these types of homes energy efficient.  It’s pretty easy to make a box with tiny windows LEED Gold or so, but not so easy when you want to use materials like glass, steel and concrete – historically pretty horrible insulators.

As we worked through the design process, we focused on the house and the shop and how we could build efficiently, and how we could make sure that the buildings related to each other correctly and to the site correctly.  The “shop” portion of the project is important to us, so it needed to be fully integrated into the plans.  It was not going to be an ‘outbuilding’ or anything that spoke a different language than the house.

The result is ShopHouse.  A study in glass, concrete and steel that also ends up being LEED Platinum.  Getting that to happen is going to require the right materials and the right team.

Is there a Match.com for Architects / Clients?

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words about projects

words about projects

Who is going to design this new house?  Then, who’s going to build it?  How will they view our project?  How involved can we be?  Can this person take our list of must haves and translate that into something REALLY COOL?

In the last post, I noted that we’d done several TMH tours and had started to get a good “feel” for the local architecture scene.  TMH is an amazing resource for all things Modern.  Between the tours, the website that has amazingly comprehensive listings for homes for sale and the local architects’ resumes (both past and present) – we started here.

Hubby and I sat in the couch and had our notepads and dueling laptops, and we went through the listing of Triangle architects one by one, writing our lists with ‘definites’, and ‘maybes’.  After we completed that exercise – we compared notes.  Anyone that made both our ‘definites’ made the short list.  Where we both had ‘maybes’, we discussed, and same thing when we had an architect that made only one ‘definite’ list.

Because this is a personal matchmaking decision, I won’t name names – but I do think its important to share what we did and why we ended up where we did.  We had 4 architects / firms that we wanted to engage and speak with in greater depth.  We had talked to several of them on site during a tour, but that’s not the time to discuss anything in any detail.

We spoke to 2 single architects that were not a design – build firm.  One fit with our energy efficiency objective, having worked on some very efficient homes with probably the most extreme area builder of ‘green’ (man, I hate that word) homes, and another fit our need for aging in place and truly understood our goal to make the house ‘dog friendly’.  Ultimately, we decided that it was imperative to us to have a design – build firm.  We’ve both refereed finger pointing sessions at work as to which team was at fault for some failure and we didn’t want to do that in our house.

That left us with two good design – build firms.  There was some initial concern that, while there was not a single tonic design home that we didn’t like, were they “too far out there” and too much an artist and not enough scientist (or engineer, or builder) to execute what we knew would be a very technical project.  We appreciated their design process that allowed a feasibility study to be done at a VERY reasonable cost and would likely help us understand if we could make this all work.  But, with the other firm, after viewing a more modern home of theirs, we thought perhaps they were “just right” – so we started there.

We went through an extensive schematic design process with Firm #1.  It was very enjoyable as we went through 4 different designs and spoke to each one of them about what appealed to us, and what did not.   One of the more bizarre items that we threw out there was that we wanted a house with “no sheetrock and no 2×4’s”.  While it sounds odd, it was really meant more to challenge the teams to think differently and not necessarily an edict.  Ultimately, we learned a LOT through the initial design process with the first team.  We learned that I wasn’t going to win the battle and get a flat roof, and that we really did want single floor living, and that we were going to be pushing the envelope on both design and energy efficiency.

Technically, we could have gone forward with the design we had – it worked, it was certainly aesthetically pleasing, and I am sure would have been a great, custom, liveable house.  But – it wasn’t as “boundary pushing” as we were looking for.  It was conventionally constructed and contained many of the dreaded sheets of sheetrock and tons of 2×4’s…  Because tonic design had the Feasibility Study option – we felt we owed it to ourselves to see if there was a better fit out there before making such a major commitment.

After a meeting or 2 with Vinny, Katherine and Maggie, it was apparent that this team not only would rise to the occasion – they would thoroughly enjoy the challenge and loved the idea of no sheetrock and no 2×4’s.  The design process was so tactile and creative (think building blocks, clear lucite chunks, clay, paper, scissors and tape) it allowed a level of engagement and involvement by us, the client, that it truly felt like “our” house already.  There was a sense of adventure when we started on the LEED Platinum route, and when we started asking about concrete sandwich panels, and all sorts of other nontraditional materials – it was met with a true sense of engagement and the collaborative effort we were looking for.  We knew this was the place and that the house would be exceptional.

Next up – performance, cost and form following function.  (or, as it’s sometimes known – the engineer vs the marketing chick….)

And so it begins….

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Why build?  Why now?  What to build?  Where to build?  Can’t we just buy something?  Are we nuts?  Will our marriage survive this?

All valid questions.  (And some with answers that remain to be seen….)  We’ve got some catching up to do here, since we pretty much have plans and are ‘this close’ to breaking ground.  So stay tuned for some daily posts – or perhaps a couple times a day to get current.

After 15 years in our current home – we decided that, although it’s a great house in a great neighborhood, it would be nice to:

  • have more space (acreage)
  • have true ‘one floor living’ to help with aging in place (we’re not old, but we’re not getting any younger – and besides – when you live with a couple of blind dogs, you find out pretty quickly how daunting stairs can be…)
  • be able to build a real cutting edge, energy efficient home, and
  • be able to build a true modernist home.

Our style has evolved and matured, and while this house is in no way traditional, it was as far as we could push the envelope at the time, and within the bounds of the neighborhood covenants.  We also know that, from staying current with trends and homeshows, it’s way easier to find modern fixtures and styles now, than it was when we built (1997).  It’s either the Mad Men effect, or the HGTV influence.  Either way – we’re thankful.  Also, the entire “green” initiative has grown by leaps and bounds.  When we built, getting a 14 SEER heat pump was “crazy” and our builder commented that he had seen units that large outside the Sears Tower….  Never mind the “low e – squared” windows, and recycled blue jean insulation batting.  Now – there is LEED, and PassivHaus, and Energy Star (oh my!) and a host of technological advances.

Dear Husband has stated that he’s not “green” to be “green”, he’s green because he’s cheap.  He’s not cheap, but he’s practical.  Energy costs have nowhere to go but up.  In the US, we’ve enjoyed artificially low energy costs for years – and you saw what happened when we had crazy price increases (and they never really came back down).  So – focusing on operating costs of a house is just smart business and hedges your expenses in the long run.  If you can lock into a 30 year mortgage, and focus on energy costs, maybe our retirement savings will last as long as we do…  ha ha….

So – after years of touring homes on the AIA Tours, and TMH (Triangle Modernist Houses) tours, and ALMOST pulling the trigger on 2 cool homes,

dp6 house_rear

(driving our neighbor / Realtor crazy) – we decided that if we’re going to do it – let’s do it once, do it right, and do it for us.

So next – we pick an architect.