Mortgage and renewable energy lending veteran Don Worthington explains how November's changes to appraisal forms will finally put a home's energy efficiency in front of appraisers and underwriters, and why builders should load sustainability data into the MLS now. He also shows how cutting utility bills unlocks buying power, with a $300 monthly bill worth roughly $60,000 in additional loan qualification.
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Don Worthington: Guy's grown up as a kid. I was actually good. Always ask the Philly questions. I how to understand where I was at. How did I get here? Most times because I was getting in trouble. So how did I get here? Where was I? Where it was? And what did I need to do to change? And I've taken that approach a little bit to learning.
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Don Worthington: And there's some interesting things here a little bit of background. My background is where renewable energy mortgage servicing right. Loan performance, energy efficiency where all sorts of things. And so with that, I had access to understanding not just how loans are done. How are they perform, but as a service system. There's a couple things are but to kind of talk about where we're at.
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Don Worthington: There's a couple fascinating things and things that I think you guys can take back and apply now to increase sales, because that's really kind of what we're here is how do we help the homeowner? How do we increase business? And there's some fascinating things that are happening. One I think is we look back on 2026, you're going to see, given time that this was a major, major year, because there's a major announcement that is happening here and that is in November of this year.
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Don Worthington: The appraisal forms are changing. And inside of that appraisal form, changing awareness, Eckhart told me his book talks about, biggest motivator for change is awareness. What is changing is inside of the first five pages of every appraisal is an opportunity for the appraiser to mark what is the energy efficiency of this house? Does it have a first rate?
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Don Worthington: Every appraiser is now going to have to quantify that. As a result, every underwriter, every loan office is going to start to understand first. We're starting to understand different valuations. It doesn't specifically have to be hers. But these appraisers are going to have to start to address this currently where we are currently an appraiser, unless you request a specific green energy appraisal.
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Don Worthington: It gets to be ignored, right? An appraisers job they manufacture widget. Widget they manufacture is it is is an appraisal. The more they can do, the faster they do them right. The more money that an appraiser isn't incentivized to go find and dig data to come up with. Why you are sustainable house and your energy efficient house is worth me.
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Don Worthington: My advice to all those in the room is to make sure that you guys are putting everything that you can in MLS about your houses, especially with the sustainability. You need that information to be at the appraisers fingertips and soon ice fingerprints so that they can go and look for it is thinking about not just your current self, but the sales in the future.
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Don Worthington: The more easily accessible that that data is, now we're going to be able to start to quantify that value per square foot. It will take time. It will not be a turn to page thing, but beginning of November, that awareness and that awareness of why did I love what Ron said about handing the keys over with equity? If you're not putting this information in here, that could be the difference between handing the keys over with equity or handing over without.
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Don Worthington: Now, as we said, the appraisal side because as a bank we have to quantify value. We have to justify it to the secondary markets. Why a home got x versus y. Why do we need this loan to value versus that one though? So from a value perspective that's one piece. The other piece of this is affordability. And what's happening with affordability is homeownership has been done.
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Don Worthington: Homebuying has been done the same way. We are so used to PGA right. That's what banks would pitch. You know what's what's the principle interest taxes and insurance. Well the problem is as the cost of power has climbed, as the cost of insurance has climbed, the cost of homeownership, housing budgets are getting eaten up by some of these secondary costs now.
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Don Worthington: So long they've been ignored. They were so small because the lender didn't ask for it. Right? I'm not going to bring it up. The average real estate agent. Hey, I got a possible sell here. I am not going to do anything to disrupt myself. Right. So for those reasons, the utilities expenses of house often get ignored. They don't get brought up to the homeowner.
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Don Worthington: And so with this increased rise in values over the last five years and affordability been squeezed as lenders were trying to squeeze every advantage we can out of the secondary markets to keep rates as progressive as we can. Meanwhile, we look to the left and to the right, and we see that the housing budgets of people getting chewed up and utility bills getting chewed up and increased insurance costs.
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Don Worthington: Sometimes, if you look at the hundred, payment is roughly on a $400,000 home. That's roughly a half percent interest rate that is getting eaten up. So it doesn't beat us up over this rate or that rate. And we're sitting here looking over there. So as we see homebuyer dynamics changing what we see right when we look at successful homeownership is total cost of housing, total cost of housing is about 5080 plus utilities.
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Don Worthington: Those builders who do a great job of expressing that and that value home buyers need a guy. You don't think to think about that. The average real estate agent isn't going to bring this up. So as a guide, can you take these homebuyers down a journey to think total cost of homeownership reduced pitchai plus utilities to show them that they can either afford more home or they can afford their current home for less, or they can add more important features to the house for literally the exact same monthly cost, a $300 utility bill, if you were to get rid of that at today's rate is just under 600 or $60,000 in buying power.
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Don Worthington: So if I got rid of utility bill, that borrower could borrow an additional $60,000 without changing their utilities payment. A lot of creative builders that we're working with are basically reducing their utility bills more than we're increasing their mortgage payment. That arbitrage is allowing homebuyers to qualify for more. Where were they? Right. Where are we at? Where are we going?
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Don Worthington: It is more affordable for many home buyers to manufacture power on site. If we talk about affordability, how do we attack utility payments? What is the buying power that is trapped in a utility bill? What is the cost of the equipment needed to get rid of that utility bill? To the question of should they should they not do that now with new lending products that are hitting the market home builders, or able to walk me back up a step rest, we want a home buyer is going to make a payment on time, right?
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Don Worthington: That's where their selfish. Or we help them fight the rising cost of homeownership, the more likely they are to repay their home on time for us. And so with Fannie, with Freddie, with FHA three, those guys specifically, there are loan programs out there that allow a home buyer to finance energy improvements. Things are going to reduce the utility bills right above the sales price and above the appraised value of the loan.
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Don Worthington: The reason that's important is builders, if choose to be able to offer this, you don't have to increase your sales price. You can keep your sales price the same and homebuyers can elect them. So there's a lot of new innovative products that are out there. But my overall takeaway is one get it on the MLS, get the data on the MLS.
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Don Worthington: That is the blue book of of where this data is out, where appraisers can go do that with the appraisal. Change the drive to understanding value per square foot. Right. Affordability is going to drive the people to look for that information, because it's going to be coming across the desk companies like her or company like hers. Right. These things are going to help quantify the data, to quantify how much value is there.
00:08:07:13 - 00:08:35:01
Don Worthington: And then to lastly, make sure you're taking advantage of that buying power. We look at the average home buyer right when they look at sustainability and renewable energy, they're looking for things that have a payoff in the shortest amount of time for that return on investment. And as you go after which improvements do I do? My advice is, or we've seen the most selves on those people to focus on the products or the equipment that reduce their utility bills.
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Don Worthington: Most combine that with a guide or sales force that can explain that to a buyer is where we see the biggest lift. Know home buyers and that fight of affordability with value and with that. So thank you.