I just received my county real estate assessment notice on my newly built, highly energy efficient, ICF home.  It does not appear that the high energy efficiency and other benefits of an ICF building were factors in determining the home's fair market value.  I'm not complaining, but wonder if that is also the experience of others who have built similar homes.  My township assessor's formula does include the gross square footage of the house which means that because of the thicker ICF walls (13" vs 5"),  I have less livable sq ft per tax dollar than my neighbors, but it amounts to less than 100 sf. 

I live in Illinois which has the 6th highest real estate taxes in the nation as a percentage of home value (after Texas, New Jersey, Nebraska, Wisconsin and New Hampshire.)  Taxing energy efficiency would only further discourage this type of construction in high R.E. taxing states.

I don't know how it is in your area, but here the 'assessed value' of a piece of property has nothing to do with its actual value.
Personally, I like having the assessed value be less than the real value. It means lower taxes for me.

I have been lurking here for quite a while, but never posted -- primarily because I typically lack the expertise to help people on these topics.  I'm actually looking for ideas for our new building, which my wife and I intend to start in 18-24 months.

That being said, I happen to work in the area of property tax, so I thought I'd take this as (probably) my one an only chance to offer some helpful thoughts.  It's small payment for the help I've gotten from perusing the board, but here goes:

Probably all county assessors utilize mass appraisal techniques to determine "fair market value" of residential real estate.  There's simply too many homes to do a full-blown individual appraisal for every one.  Generally, the assessors use mass appraisal programs that take into account home size, age, location, etc. and, using data from sales in the area, provide a "value" for the property.  While in most states this "value" is supposed to be a fair market value, it's not reasonably possible to be precise when valuing houses in this way.  There are just too many factors that cannot all be taken into account effectively.

That being said, I have never run across any mass appraisal system that takes into account energy efficiency in valuing a home, and that's good news for everyone on this board.  It is highly, highly unlikely that you will be taxed more because you chose to build a more energy efficient home.  Indeed, you home is likely to be undervalued for tax purposes, which means lower taxes for those of us who build with energy efficiency in mind.

in our area at permit,  the building dept assesses the value based on square footage, when the building is comlpete the tax assessor visits the property and does a visual exterior inspection and you get taxed

"Taxing energy efficiency would only further discourage this type of construction "
On the other hand, in new construction or energy retrofits, the bank will loan based on the appraisal, so when the appraiser doesn't consider the value of the energy features (or undervalues them) the loan is effectively too low. So the home may not be built or the energy retrofit may not be done. Appraisers need to update their methods so they can show the long term value of these features.

the only way you will get taxed more for your energy efficient home is if you ask to pay more!

Our new home was recently assessed. The assessor spent all of 5 minutes in our house. He basically told me that the #1 determining factor is "comparable sales". When they say comparable, they basically mean same age & same square footage. Two homes of the same age & size will assess virtually the same, even if one has higher end systems & finishes. The area where this can be bad is when you're trying to get a loan. Our home was built with what I think were higher quality materials - porcelain tile, lots of hardwood, painted trim, efficient windows, efficient building materials, etc. Of course that stuff raises the cost somewhat, but the bank doesn't care. It may require people to have higher down payments to stay within their LTV's..

I'm told by the appraiser that in my area nobody from the tax office even sees the house. They just take the square footage from your permit and base the assessment on that.

Posted By Jelly on 02 Nov 2010 09:50 AM
I'm told by the appraiser that in my area nobody from the tax office even sees the house. They just take the square footage from your permit and base the assessment on that.

For us, they did.  The plans were submitted when the permits were issued, so they had all of the square footage & stuff already.  When he walked through I think he was basically just looking to see if it was built to the plan - for example, we didn't finish our basement, and he wanted to go down & make sure it wasn't really finished..

jerkylips, you must live in an area where they place some value on accountability.

Bob

You need to understand cost vs value.  Even though it may cost more to build an energy efficient house it may not sell for more.  Build a spec house and see how it does.  The other thing is a lack of data. For one, most super energy efficient home are custom built.  The custom built home is cost data but not sales data. To be sales data and used as a comparable the home needs to be exposed to the market at a listing. Custom built homes do not meet that criteria.

Until these custom built homes resale there is no support that the market will pay more. Another problem is that there is a lack of data in MLS to show what homes have energy efficient features. MLS doesn't put it in because buyers are not asking for it. 

 I also see that there are so many varying ways to achieve efficiency how is a consumer to weigh the value of these features in an existing home.  Some people think all cellulose is the way to go others think only foam.  Its like the old days is it Beta or VHS.  It is going to take time to sort out what the buyers will pay for.  It is not the appraisers job to say hey this is a great energy saving house so I am going to add $50,000 to the value. 

Until you can clearly see that people are spending more on energy efficient homes you can not ask the appraiser to inflate the appraisal. We are talking about using other peoples money to buy a house. The people lending the money should feel confident that the collateral is worth it. 

The lending process has gotten out of hand. We have abandoned sound lending principals.  Maybe the buyers need to assume the risk and come up with larger down payments.  I was watching one of those shows on TV they had a young couple looking at $400,000+ homes with a $12,000  down payment, you are talking 3%.   They were wowed by the granite counters.  Watch the DIY channel and see what anyone is doing for energy efficiency. I almost want to scream at the TV when I see the crummy job the homeowner has done cramming fiberglass batts in the wall.

I think there is lack of data, to many variables as to what is energy efficien and lack of proven value (I did not say cost) to  ask any appraiser to put a value on energy efficiency in most markets.

I'd think the value could be demonstrated by showing the utility bills for a particular energy efficient home for sale and benchmark it to similar sized homes in the area. That should show some savings and increase value or at least get your home looked at first. I'd think the utility companies could make that info available.

People will become more aware when we have spiking energy prices once again soon. It will take education of consumers and/or some type of regulation to increase awaremess and value of energy efficient homes.

There are a few more shows coming out that focus on energy efficiency:

http://www.diynetwork.com/this-new-house/show/index.html

Property tax assessments and individual appraisals are different.

When financing your home the appraisal takes your property and brackets it will other similar homes with similar size and features. The appraiser adjusted the value of the comparables to the subject accounting for what the market values. Things like basemen finish bathrooms, garages, size etc.  Its a very micro approach and with the best data available, not perfect data.  This view starts with the property as a whole, land and improvements, and adjusts for differences between the subject and the comps.

 
Tax assessments are different. This is a macro view.  It starts from the ground up and values all the individual components and adds then together at the end. The assessor also uses the less accurate data. Whereas an appraiser will she the inside of a home and see it current condition, amenities and measures the home. The assessor works with what is in the records. Please put in basement finish or make additions that the assessor does not know about. The assessor may not have the correct size of the home. He has not been in it.  The data will not be as accurate as an appraisers.

Assessor my use the cost approach or computer modeling.  With the cost approach they may not price out the quality and features right and then they have to apply depreciation.

Some assessors use computer modeling. It breaks the property down to its components. They figure a garage is worth $x times its size, so much for a bath, $x house size, $x for foundation etc.  In the end they sum all the values.   There are to many variables for an assessor to be correct with a high degree of certainty.

Assessor models are more accurate from homes that have lots of nearby similar homes. The less similar the less accurate.

I would say assessor models probably do not have any fields for super insulated homes or other energy efficient features.  Thick walls are about the only way for you to get caught in their game.

If you have never looked at your property tax records you should.  From that you can see what there are including in the value and if the data on your property is correct.

I do understand cost vs value. When I moved to my town 40 years ago the most expensive homes were the "colonials" built in the late 1700's with lots of hand planed paneling, multiple fireplaces, wide pine floors, etc. Overthe years, primarily because of the energy efficient features of these home (pretty much nonexistent) I've watched as their sales prices has dropped compared to other homes in town to where nowadays they are comparable to a generic cheap, ten year old "colonial". As slenzen says, the time for energy efficent building will come, but it is certainly not here now. As an aside, I'm working on a superinsulation project on a 1790's colonial where the old stone foundation will be R30+, the walls R-35, the roof R45. The antique plaster will remain, along with all the handplaned paneling and floorboards and the 5 fireplaces are being repaired. Its an expensive job but it will increase the value of the house immensely not only because it is an antique, but because it will have the advantage amoung antiques of being comfortable as well as heatable. My goal is to built homes that will last and will have value to the owners for decades and potentially (as I have seen firsthand) centuries. You won't get that now by building with R-19 batts.