Tag Archives: green home financing

It’s alive!

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On January 31st, at 3 PM, we finally closed on a construction loan.

finally

3 different banks.  3 appraisals.  Hundreds of hours of documentation submissions, faxing, follow ups, conditional approvals, changing conditions, new players and levels of frustration that have increased my already enormous library of swear words.

I know our project is “different”.  It’s large and we’re asking for a pretty good chunk of change – money-wise.  However, 2 counterpoints to this concern:  we have VERY good credit and have never not fulfilled a financial obligation.  Ever.  Also, data published not too long ago says that jumbo loans and mortgages are MORE reliable than conforming loans.  It’s never been a discussion about “ability to pay” but more trying to fit a square peg into a round hole.

And yes – we’re “green”.  Big deal.  Despite claims from the appraiser to be able to attribute value to green features, she did not. The process to refute an appraisal is amazingly flawed.  And because the appraisers are so sheltered from interaction with banks (trust us, it’s for your protection – says the government) there’s no accountability.

Energy costs in the US are really low.  And ultimately, rising energy costs are the only things that will drive REAL value into the appraisal process.  As long as we have artificially low energy costs, there’s little incentive to build greener and even less incentive for banks to value green.

One thing that seems to be rather positive, is that more folks in the Western United States are building new buildings with their latest tech earnings.  However instead of creating an ostentatious palace on the side of a mountain in San Francisco, they are pouring money into DETAILS – and one big detail is tech / energy efficiency.  A LEED Platinum or a Passive House certification is a geek badge of honor and an outlet for a couple hundred dollars per square foot.

So- we are BACK.  tonic construction will be getting the permit.  We’re back working with International Precast.  I might get to go see my windows.  I bought yet ANOTHER Grohe F1 faucet on eBay.  I need to procure the remaining appliances and hoping I can finally find a deal on my Gaggenau induction cooktop.

Logically, this should be a “simple” house to build. (Note I did not say easy…)  We’ve tried to minimize the subcontractors, we’re not talking about a bunch of “fussy” finishes, and greeting dried in should be reasonably quick.  As always, the devil will be in the details, but we’ve assembled a damn good team – and we’re in it together.

Financing the Energy Efficient Home – Saga Part 4

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frustrationHonestly, I am at the end of my “playing nice” rope.  Appraisal saga continues.  As noted before – we had some issues in the comps – specifically the Energy Efficiency line item for comparison vs other new homes that do not appear to have any energy efficiency features AT ALL.

We’re 3 weeks into trying to determine the process to ask for a review of the appraisal and no one seems to know how to do this.  Seriously.

The Appraiser said she couldn’t speak to us, since the bank was ‘the customer’.  The bank then tries to speak with her (after a vacation, and another week of issues where the Appraiser can’t meet / teleconference) and then are told that any questions need to be addressed through the 3rd party quality control group and that direct contact is against their guidelines.

Is there any reason this little tidbit couldn’t have been shared 3 weeks ago?

I don’t mind “the process”.  I don’t mind that I have to use a 3rd party to ask questions and have them ensure that we’re not trying to unduly influence the appraiser and to make sure that any changes are in line with facts / data, etc.  In fact, I LIKE process.  I am usually a pretty orderly person.  What drives me absolutely batshit crazy is the total lack of urgency on anything.  ANYTHING.

We’ve now submitted our concerns and supporting documentation (including filling out the 5 pages addendum ourselves) and we’re waiting for a revision.  And as far as I know, no one makes a commitment on the time this will take to turn this work around, etc.  THAT is what drives me nuts.  This is not particularly complex.  It does not involve questioning the comps themselves, or even multiple line items – just ONE FACET of the entire appraisal.  The facet that we specifically required that the Appraiser have experience / certification with assessing value to green / energy efficiency features.

Thankfully the bank is processing our approval with the “value” being blank (hopefully at an “up to but not to exceed” number, so we can plug it in and close as soon as we’re done with this exercise.  Because – we’ve continued to fund the project out of pocket.  And that we paid the Austrian window and door company almost the entire balance of a pretty large sum.  (It kinda freaked me out – but hey – it’s only money, right?)

lucyI would like to get back to the “fun” stuff.  Some more design decisions, envisioning how we’re going to finish the rooms – bathrooms, kitchen, etc.  And I would REALLY like to see some dirt moving.  I think that once that happens, I will know it’s real.  And it will be easier to engage with the rest of the suppliers, ask for best and final pricing, and nail down some details.  It’s hard to maintain focus on the project until this financials are done and WORK starts.  I know Tonic is eager to start too – and are feeling a little bit like Charlie Brown and the football.

I can’t believe how amazingly painful this has been and how time consuming.  Not the real amount of “work”, but the amount of dead time between any activity.  Painfully slow.  Excruciatingly slow.  It’s amazing that anyone builds anything and handles the construction financing.  It’s also pretty easy to see why so many leave this to the large production builders who take care of all this and pump out maximum square footage / code built / neighborhoods of “pick plan A, B or C” houses.

Next Financing post will be the end of the saga (until I freak out over budgets…)  I promise.  But until then – I think I’ll get myself back in the groove and blog about how we got here and why we’re making the decisions we are – not technical like the other half – but more emotional.  (and unfiltered!)  Thanks for reading.

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!