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If you’re building a home that’s so energy-efficient that your utility bills will be minimal or nonexistent, your lender should take that into consideration when deciding how much you can afford to borrow, right? Not so fast. Net zero homes, also known as zero energy homes, offer financial and environmental advantages to buyers, but not all lenders and appraisers recognize the impact of higher levels of energy efficiency on a homeowner’s bottom line.

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What is a net zero home?

A net zero home produces as much energy as it uses, so it has zero net energy consumption. Net zero homes save on utility bills.

Building costs for net zero homes

Net zero homes, which produce as much energy as they use through the use of extra insulation, geothermal heating and cooling, solar panels and passive solar design, often cost more initially to build than standard new homes but save money on utility bills in the long run.

“A case study on one of our net zero homes estimated that the homeowners would save as much as $200,000 in energy costs over 25 years because of the high performance features,” says Kiere DeGrandchamp, founder and president of High Performance Homes in Gettysburg, Pennsylvania.

Most net zero homes today are custom-designed or semi-custom homes, although proponents of these homes are working on making them more affordable and more widely available.

The government of California has established a goal of having every new home in the state meet net zero standards by 2020. One element of that plan is to establish a systematic way for appraisers and lenders to value these net zero homes for financing purposes by 2017.

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Appraisals and net zero homes

One issue with net zero homes is that appraisers must compare apples to apples when determining home valuations and in many markets there are not many net zero homes, says Sandra Adomatis, principal with Adomatis Appraisal Services in Punta Gorda, Florida, and author of “Residential Green Valuation Tools.”

“Only a small number of appraisers have been trained in green building and even though appraisers are supposed to have a requisite knowledge of the property type they are appraising, no one is really watching over that,” Adomatis says. “It’s the duty of the lenders to find appraisers who are competent in green building and particularly about zero energy homes.”

Builders of energy-efficient homes usually supply appraisers with a list of the cost and benefits of green features and will educate appraisers about the homes so they understand the added value, says Michael Johnston, vice president and branch manager of Howard Bank in Timonium, Maryland.

Adomatis says that net zero homes are not always marketed in the multiple listing service (MLS) as energy-efficient homes, making them harder to find for appraisers.

“We did a study of high-performance homes in Washington, D.C., that we released last year that found that those homes were valued 2% to 5% higher than standard homes, but we were limited by the small number of homes that were actually listed as high performance homes,” Adomatis says.

A higher appraisal could help borrowers by reducing their loan-to-value ratio, which could mean a lower interest rate or even the elimination of private mortgage insurance, which is required on loans with a down payment of less than 20%.

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Loans for energy-efficient homes

Some community banks and individual lenders who are aware of the potential savings of net zero homes take that into consideration when looking at the debt-to-income ratio of borrowers. In addition, borrowers can ask whether an Energy Efficient Mortgage (EEM), available as conventional, FHA or VA loans, can be used to finance the home.

Most net zero homes are relatively costly custom homes with buyers who have little trouble qualifying for a loan.

“Energy-efficient mortgages are a highly underutilized loan program that allow lenders to adjust the debt-to-income ratio or raise a borrower’s income level to reflect that they will be paying lower utility bills,” says Laura Williamson, senior vice president of Digital Risk, an independent provider of risk management and valuations for the financial services market. “For example, Fannie Mae allows lenders to adjust the debt-to-income ratio by 2% for borrowers who might otherwise not qualify for the loan because of their income.”

While energy-efficient mortgages are often used to pay for improvements to existing homes, they are also available on new homes with energy-efficient components. The loans require a cost-benefit analysis including a report to prove that the savings on utility costs outweigh the initial expense of including energy-efficient features.

Most net zero homes are relatively costly custom homes, says Johnston, with buyers who have little trouble qualifying for a loan.

“As a community bank, we can take into consideration the lack of utility bills when we underwrite loans and let borrowers go to a higher debt-to-income ratio if necessary,” Johnston says, “but we mostly do that on loans for people who are building a new home before selling their current home and need to finance both for a little while.”

A coalition of builders, real estate professionals and environmental protection organizations support the Sensible Accounting to Value Energy ( SAVE ) Act, introduced in Congress in 2013, but not yet passed. The bill is meant to establish new underwriting guidelines to make it easier for lenders to account for savings associated with energy-efficient features so that buyers can been approved for a larger loan or a lower interest rate.

For now, buyers of net zero homes are advised to work with a lender experienced with financing these homes and to make sure the lender and appraiser are aware of their home’s features.

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