Financing high-performance housing


United Features Syndicate

Research continues to show that while home buyers prefer environmentally friendly houses, they don’t want to pay extra for the features that turn the typical home into an efficient one.

One option, the so-called energy-efficient mortgage, has failed miserably at allowing buyers to finance the cost of energy-related improvements. Although the loans have been on the books for decades, few lenders offer them because they are just too cumbersome to originate.

Thus, buyers of today’s high-performance houses have had to either come up with thousands of dollars in cash to pay for the energy extras they crave — geothermal heat pumps, perhaps, or triple low-emissivity windows — or pass on them.

In short, they’ve been punished rather than rewarded for wanting to go green.

But now a Salt Lake City-based lender believes it has finally cracked the code when it comes to lending on energy-efficient houses.

The SecurityNational Mortgage Company, which has 77 branches across the country, has come up with a method for recognizing the value of energy improvements, such as solar panels and rainwater runoff collection systems. It is positioning itself as the nation’s premier green lender.

In partnership with Green Energy Money (GEM) of Austin, Texas, SecurityNational is set to launch a massive high-performance pilot program with a goal of funding 10,000 energy-efficient homes by the end of next year. The partners are currently seeking builders in California, Illinois, Arizona, Colorado and Maryland to participate in the effort.

The lender has funded some $20 million in sustainable construction since the last part of 2013, and has $200 million more in the pipeline, says Teresa Lopez, a 25-year mortgage business veteran who spearheads SecurityNational’s green lending program.

“We’re not interested in doing one deal here and there,” says Lopez. “We want to prove the marketability of our process and get all the systems and standards in place so we can go national. Our belief is that there is a lot of pent-up demand.”

Lopez says she has spent the last 15 years trying to figure out how buyers can show how the present and future value of what they will save every month in energy costs justifies the higher price they have to pay at closing.

Over that time, Lopez has made herself into a recognized authority in the often gray area of green financing. She has developed new financial mechanisms, loan products and valuation methods designed to meet the growing need for financing sustainable upgrades.

The “key to the kingdom,” as she calls it, is in the appraised value. Even today, when more and more builders are able to produce houses that cost little or nothing to operate — and sometimes generate excess energy that can be sold back to the utility — appraisers have been slow to identify the value that energy improvements add to a property’s overall worth, now and in the future.

Appraisals have always been “the biggest roadblock,” say Lopez and others in the green building movement. But GEM, a company Lopez built as part of her quest to find the Holy Grail of green financing, facilitates the process with an appraisal that recognizes and quantifies the value of features such as solar heating and water, geothermal heat, rainwater harvesting, energy-efficient building materials and electric vehicle stations.

According to Lopez, GEM’s proprietary green appraisal rating system standardizes the connection between the popular Home Energy Rating System (known as the HERS index) and 18 energy-rating systems and building codes. The result captures the monetized value that lenders require to back high-performance construction — or even remodels.

In layman’s terms, Lopez says that “GEM has developed a method for green appraisals that support the valuation process. Our process facilitates a green appraisal that maximizes the value of your investment. It makes it possible for appraisers to fully recognize the lower maintenance costs and reduced operating expenses of an energy-efficient home.”

Under the GEM system, builders will be able to submit measures and costs for green upgrades, absorb the capital outlays necessary to purchase and install the upgrades and then get their money back in higher prices that can be justified by a green appraisal.

For their part, appraisers will receive consistent, certified building audits that include the relationship of the upgrades to utility reduction, as well as building performance data and predicted energy costs. And homebuyers will find a more streamlined loan process.

“We hope our methodology will be quickly adopted and standardized nationally,” says Lopez. “Many appraisers just don’t know how to quantify or analyze high-performance building.”

Only time will tell whether GEM will achieve critical mass. The goal of 10,000 houses seems to be a long shot. But the company is busy training appraisers and developing an accredited continuing education curriculum for the profession.

Until change works its way through the system, here’s what you can do now to get an appraiser to recognize the value of your energy improvements:
• Data. Give the appraiser the supporting information he needs — cost and estimated energy savings — to justify a higher appraisal. List the energy improvements by make and model number, and if possible, provide a before-and-after scenario of projected savings for a 12-month period.
• Rating. Obtain a HERS rating for your home. There are other acceptable ratings systems — LEED, for example — but HERS is the nationally recognized method for inspecting and calculating a home’s energy performance.
• Credentials. Be sure the appraiser has the skills and experience to judge green construction. If the appraiser is not green-educated, says Lopez, you have the right to ask for another.
• Builder. Pick a builder who is trained and certified in high-performance building.

Lew Sichelman has been covering real estate for more than 30 years. He is a regular contributor to numerous shelter magazines and housing-industry publications. Readers can contact him at


Last modified: March 31, 2014
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