Energy Efficiency And Real Estate Value

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Studies continue to show that homes with green or energy efficient features can command a higher sales price. With the promise of lower utility costs and increased comfort, it’s no surprise that homeowners are willing to invest in an energy efficient environment. Although the potential benefits are clear, a recent Washington Post article points out that “…it’s often less than clear how such upgrades are valued in the real estate market by appraisers, lenders, or purchasers — or even how information about a home’s energy characteristics should be conveyed to real estate agents and potential homebuyers.” That is slowly changing…

woman relaxing at homeIn response to the growing demand for energy efficient homes, the real estate industry is incorporating green features and home performance ratings into the marketing of homes. The availability of this information will help homebuyers assess what a new home will actually cost to live in and help appraisers to standardize the process of assessing value for energy efficiency.

Integrating Home Performance into the Real Estate Transaction
In 2010, the National Association of Realtors released the Green MLS Tool Kit to help Multiple Listing Services (MLS) ensure fair value for sustainable, healthy and energy efficient homes.

The Appraisal Institute (AI), a professional association of real estate appraisers, is active in promoting green and energy efficiency valuation. Earlier this year, AI announced that it will partner with the Department of Energy to develop “sustainable approaches that make energy-related information – such as a home’s efficiency certification or its estimated energy usage – easily available through multiple listing services and other reports.”

 Certification and Documentation 
Green features and home improvements, including solar water heating, low flow toilets, air sealing, and upgraded windows, are appearing more frequently within searchable fields on MLS websites. There is also a growing trend within MLS to promote green home certifications.  In order to prevent “greenwashing,” some multiple listing services have added a feature that allows agents to upload green disclosure statements. Two of the most recognizable certifications are:

The Home Energy Rating Standard (HERS) Index was developed by the Residential Energy Services Network (RESNET). The HERS score is used by many certification programs and builders as a reliable measurement of a home’s performance. The rating is an estimate of a home’s energy efficiency. The lower the score, the higher a home’s energy efficiency.

An ENERGY STAR certified home must meet rigorous standards set forth by the US Environmental Protection Agency (EPA). In order to earn the label, a home goes through various inspections, testing and verifications to ensure that it will deliver quality, durability and comfort, along with 20-30% energy savings.

It seems there is only an upside to more awareness and the availability of more information. Buyers will have a better idea of ongoing costs, REALTORs will find it easier to match buyers to homes with green features they desire and appraisers will have enhanced resources to more accurately compare sales data. As you think about the energy efficient upgrades that have value for you, start a conversation with a loan advisor and review your home financing options.

By Amy Malloy