Energy Efficiency Sells Homes

What if your plans are uncertain? Is it still worthwhile to invest in green improvements? One reason to do so may be that such renovations may result in a higher sales price, a faster sale, or both when you decide to put your house on the market. While there are not a lot of data, in fact the studies that have been done are quite clear…more energy efficient homes sell for more and may also sell more quickly than the less efficient house down the street. Meanwhile, your remaining time in the house will be more enjoyable as you will have lower utility bills and a less drafty, more comfortable and even quieter place to live.

 

How does energy efficiency impact home sales prices? A 2010 study by the Earth Advantage Institute in Portland, Oregon found that new homes that were certified by a third party such as LEED (Leadership in Energy and Environmental Design) sold for 3-5 percent more than non-certified homes in Portland and 10 percent more in Seattle. Similarly a study based on MLS data for the Portland, Oregon/Vancouver, Washington metro area found that existing homes certified for energy efficiency sold for an average of 23 percent more than those which were non-certified. 

 

On the east coast, an Atlanta based study reported by the Green Resource Council compared sales of new homes with and without green certification. The certified green homes sold for 94.5 percent of list price compared to 90.9 percent for the non-certified homes.

 

On both east and west coasts, studies showed that homes with green certification also sold more quickly than conventional homes. For example, in Atlanta average days on market for certified homes was 108 days compared to 139 for the non-certified competition. In Portland, average time on the market was 18 days less for certified homes.

 

Is there enough demand for energy efficiency and other green amenities in our area to expect them to have an impact on local home sales? While we don’t have a lot of data, there is reason to believe that our community has a growing interest in this issue, which in time will definitely impact the real estate marketplace.

 

Greg Slater, a REALTOR® with Better Homes and Gardens Real Estate III, who represents Piedmont Realty and Construction, stated that “anecdotally, buyers are expressing more and more interest in energy efficiency.” Further, as people have become better educated about these issues he feels they are more likely to pay for energy efficient systems when purchasing a new home than they were a few years ago. However, he explained that while many new home builders are committed to incorporating green features, especially energy efficiency, there are not a lot of resale homes that have been remodeled with this in mind. Consequently, we lack good information about whether they would command a higher price at resale. 

 

Slater described one buyer he worked with who did not find what he wanted in a new home and asked to see resale homes with green features. Unfortunately, finding such homes is difficult, Slater said, since our MLS system is not set up to allow searches on green-related characteristics. To make this possible, he suggests we need increased awareness in our community not only by buyers and sellers but also by REALTORS® and appraisers regarding the market benefits of green features. 

 

Promoting education for real estate professionals is what Rosa Nicolosi, a REALTOR® with Sothebys International Realty, had in mind when she founded an organization called Green Change Agents. The group meets monthly at the Charlottesville Area Association of Realtors and is dedicated to educating real estate professionals about the benefits of selling healthier and more sustainable homes.

 

While concern for the environment may influence interest in green homes, the primary issue for most buyers is energy savings, according to Jim Duncan, a REALTOR® with Nest Realty. However, while energy efficiency may make a home more attractive to buyers, for it to influence value in the eyes of the mortgage lender it must also become part of the appraisal process. 

 

Duncan described a new addendum created by the Appraisal Institute that can help do just that.  The addendum lists green features that may add to the value of a home and can be attached to a standard appraisal report. REALTORS® , buyers, sellers or individuals in process of refinancing can download this attachment and request that it be part of the appraisal report submitted to their lender.  

 

Duncan estimates it may be a few years before there are enough buyers and sellers with sufficient concern about energy efficiency to have a real impact on the market. The availability of the addendum, however, will increase the visibility and value of green amenities for anyone actively looking to buy or sell a home.

 

Energy efficiency’s potential for affecting the marketplace is substantial. Roger Voisinet, a REALTOR® with RE/MAX Realty Specialists, has several green designations and a long standing interest in green building design. He recently paid the electric bill on a 2,500 square foot energy efficient spec house which averaged just $35/month. Voisinet visited the family who purchased this house on a cold day and noticed an open window. They were surprisingly unconcerned and referenced their very low monthly electric bill.

 

Obviously, after the new owners moved into this home their electric bill was more than $35 a month. Even at three to four times that amount, however, their bill is still far less than what many home owners now pay. If lenders take these kinds of savings into account when reviewing a loan, a buyer could be approved to purchase a much bigger house. From a seller’s perspective it ups the chance their home will sell since incorporating these savings into the loan decision increases the pool of people who can afford to purchase it. 

 

Increased interest in energy efficient housing can happen for a number of reasons. One of these is through better educated remodeling contractors. Tracy Meade is one of the owners of Meade Construction, LLC. At one time her family’s construction company was the second largest EarthCraft builder on the east coast. Today they specialize in remodeling, and because of their commitment to energy efficiency and their EarthCraft experience, Meade said they frequently are in a position to educate their customers on these issues. 

 

“Most of our customers don’t call about a green retrofit,” she said, “but inquire about siding, or an addition or some other improvement to their home. We talk to them about why they called in the first place,” she said, “but then we also explain how they will appreciate their upgrade more if they do it right energy wise.” 

 

Meade explained that not only do customers need education, but remodeling contractors do as well as many of them are not up to date on energy efficiency technology. She emphasized that it is also important for new home buyers to understand energy efficiency and ask lots of questions before they buy. Her company recently worked on a new townhome that was poorly insulated when the owner moved in. She was paying $400 a month in utility bills; a figure that was way outside of her budget. She couldn’t sell the townhome, but made it affordable by upgrading the insulation. 

 

This townhome buyer had an expensive lesson in asking the right questions before making such a big purchase. As more people become educated about these issues, the demand for well-insulated, energy efficient homes will increase.

 

Our Local Energy Alliance Program (LEAP) plays a critical role in educating consumers and real estate professionals. Executive Director, Cynthia Adams, emphasized the need for a more green friendly MLS system and described several ways LEAP is working towards creating it.

 

One of these is a conference involving lenders, appraisers and REALTORS® which will focus on why green building and retrofits increase the perceived value of real estate. Not only do they reduce operating costs, she said, but green homes are more durable and offer better air quality through improved ventilation. LEAP will also be instrumental in helping create a continuing education course to address energy efficiency issues and building science while educating REALTORS® on how to consult with clients about the relative costs and benefits of home improvements.

 

LEAP also offers a host of services for the general public, including home energy saving workshops and access to resources such as home energy audits and certified contractors. Recently they sponsored a contest for which the prize was a free energy efficiency makeover for four lucky home owners. Twelve hundred people responded reflecting our community’s strong interest in energy efficiency.

 

A year ago LEAP was chosen to help pilot a new Department of Energy program which will assign an energy efficiency score to a home similar to the MPG rating on cars. The score is based on a walk through assessment and does not involve diagnostic tests. The initial part of the project was completed early this year and the model will be adjusted accordingly before relaunching in November and December. LEAP is working with others to create a field in the MLS system for this score giving REALTORS® and buyers a heads up on the energy efficiency of a property listed for sale.

 

If you are thinking about energy upgrades for your house, Adams urges you to contact LEAP and move forward as soon as possible. At the moment there are state energy efficiency rebates which, she says, will not be available much longer. LEAP personnel can also fill you in on special low cost financing for energy improvements available through the UVA Credit Union called PowerSaver loans. In addition LEAP currently has grant money available which can buy down your interest rate on these loans to zero. Visit the LEAP website at www.leap-va.org for more information.