source:
  type: guide
  id: hud-4000-1-ii-d-special-energy-related-building-components
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — d. Special
    Energy-Related Building Components (01/06/2018)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — d. Special
    Energy-Related Building Components (01/06/2018).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-d-special-energy-related-building-components-full
  canonical_id: hud-4000-1-ii-d-special-energy-related-building-components-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II — d. Special
    Energy-Related Building Components (01/06/2018)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — d. Special
      Energy-Related Building Components (01/06/2018)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'd. Special Energy-Related Building Components (01/06/2018) i.
      Special Energy Components (A) Definition A Special Energy System refers to any
      addition, alteration, or improvement to an existing or new Structure that is
      designed to utilize wind, geothermal, or solar energy to produce energy to support
      the habitability of the Structure. (B) Standard Active, passive, and photovoltaic
      solar energy systems are permitted in this program. Solar collectors must be
      located where they will be free from natural or man-made obstructions to the
      sun. Special Energy Systems not part of the real estate must not be included
      in the appraised value. (C) Required Analysis and Reporting The Appraiser must
      analyze and report the local market acceptance of special energy- related building
      components and equipment, including solar energy components, high-energy efficiency
      housing features and components, geothermal systems, and wind powered components.
      ii. Other Energy-Related Building Components (A) Definition Other Energy Related
      Building Components refer to components in the Property designed to reduce energy
      requirements. (B) Required Analysis and Reporting The Appraiser must note which
      features are installed in a house and calculate how each component affects the
      value of the Property. iii. Measurement and Reporting of Contribution to Value
      (A) Definition Contributory Value refers to the change in the value of a Property
      as a whole, whether positive or negative, resulting from the addition or deletion
      of a property component. (B) Standard Measurement of the Contributory Value
      of the component is accomplished by the application of techniques based on one
      or more of the recognized three approaches to value: cost approach, income approach,
      and sales comparison approach. Each of these II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      D. Appraiser and Property Requirements for Title II Forward and Reverse Mortgages
      11. Programs and Products Handbook 4000.1 870 Last Revised: 11/26/2025 recognized
      methods and techniques requires the Appraiser to collect, verify, and analyze
      all information necessary for credible assignment results. (C) Required Analysis
      and Reporting The Appraiser must apply all appropriate methods and techniques
      necessary for credible assignment results. (D) Sales Comparison Based Extraction
      Method If there is sufficient data based on direct sales comparison to produce
      credible results, the Appraiser must calculate the adjustment and explain the
      methodology and analysis supporting the method and results in the appraisal
      report. The Appraiser must apply the extracted adjustment to the comparable
      sales and include the reasoning that supports the analyses, opinions, and conclusions
      in the report. If there is insufficient data to perform a matched pairs analysis
      the Appraiser must analyze and report one of the approaches below to calculate
      an appropriate adjustment. (E) Cost Approach Based Method The Appraiser must
      include the details of the item(s) being valued and measure the Contributory
      Value of the component(s) to the whole by calculating the cost of the item less
      accrued depreciation. The Appraiser must include consideration of physical depreciation,
      functional obsolescence (including superadequacies) and external obsolescence
      in the estimate of accrued depreciation and apply the resulting calculation
      of the Contributory Value to the comparable sales. (F) Income Approach Based
      Methods (1) Gross Rent Multiplier Method If the Property is located in a market
      where the Appraiser can calculate a GRM, and rental data for properties with
      similar special energy components is available, the Appraiser must extract an
      adjustment relevant to the rental value of the feature from the analysis of
      those similar rentals and apply the appropriate GRM factor to calculate an adjustment
      for the comparable sales. (2) Net Income/Savings Capitalization Method The Appraiser
      may use an income approach solution based on capitalization of savings attendant
      to the alternative energy source. The Appraiser may estimate the present value
      of the future benefit using the discounted cash flow technique or commercially
      available tools; however, the Appraiser must be competent to use them and provide
      an explanation of the analysis. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      D. Appraiser and Property Requirements for Title II Forward and Reverse Mortgages
      11. Programs and Products Handbook 4000.1 871 Last Revised: 11/26/2025 (G) Reconciliation
      of the Approaches The Appraiser may elect to utilize some of the tools and training
      available from professional organizations and energy-related firms. The Appraiser
      must provide a credible analysis and reconciliation explaining the methodology
      and support for the adjustment. As related to special building components, the
      Appraiser must provide an analysis of the information and conclusions supporting
      the application of adjustments. The Appraiser must reconcile all the methods
      utilized and resolve to a final opinion of the adjustment, analyzing both the
      quantity and quality of available data. iv. Property Assessed Clean Energy (A)
      Definition Property Assessed Clean Energy (PACE) refers to programs that may
      provide an alternative means of financing energy and other PACE-allowed improvements
      for residential Properties using financing provided by private enterprises in
      conjunction with state and local governments. Generally, the repayment of the
      PACE obligation is collected in the same manner as a special assessment tax;
      it is collected by the local government, rather than paid directly by the Borrower
      to the party providing the PACE financing. Generally, the PACE obligation is
      also secured in the same manner as a special assessment tax against the Property.
      In the event of a sale, including a foreclosure sale, of the Property with outstanding
      PACE financing, the obligation will continue with the Property causing the new
      homeowner to be responsible for the payments on the outstanding PACE amount.
      In cases of foreclosure, priority collection of delinquent payments for the
      PACE assessment may be waived or relinquished. (B) Required Analysis and Reporting
      The Appraiser must review the sales contract and property tax records for the
      Property to determine the amount of any outstanding PACE obligation: • if the
      Mortgagee notifies the Appraiser that the subject Property is subject to a PACE
      obligation; • when the Appraiser observes that the property taxes for the subject
      Property are higher than average for the neighborhood and type of dwelling;
      or • when the Appraiser observes energy-related building components or equipment
      or is aware of other PACE-allowed improvements during the inspection process.
      The Appraiser must report the outstanding amount of the PACE obligation for
      the subject Property. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT D. Appraiser
      and Property Requirements for Title II Forward and Reverse Mortgages 11. Programs
      and Products Handbook 4000.1 872 Last Revised: 11/26/2025 Where energy and other
      PACE-allowed improvements have been made to the Property through a PACE program,
      the Appraiser must analyze and report the impact on the value of the Property
      from the PACE-related improvements subject to the PACE assessments being extinguished.'
  judgment: false
