First, if the building trade is going to continue to build green/sustainable homes, a return on investment for green features is needed. If builders don’t receive value for the increased cost of building green, they will not continue to invest in sustainable structures.
Secondly, even if “green homes” are built, how do we determine the level of green building? Many homes advertised for sale in the multiple listing service (MLS) used by Realtors claim to be “green”; however there is no documentation.
These undocumented claims are known as “green washing” and provide no value. The only real way to establish green features is to have them verified by a third party that requires proof that green/sustainable practices and materials were used in construction of the home.
Without proof, appraisers have no way to value green claims. Additionally, it seems logical that a home with energy-efficient additions such as Energy Star appliances, special windows, high-efficiency heating/air-conditioning systems and renewable-energy sources such as solar and photo voltaic, should increase a home’s value. After all, they play a major role in reducing the cost of operating a home.
In some cases, these features, along with a tighter and better-built structure can reduce a home’s operating cost to almost zero. Unfortunately, until these upgrades are reflected in actual sold prices, little or no increased value will be provided in an appraisal.
Help is on the way, at least in Boulder and northeastern Colorado. Information and Real Estate Service LLC in September 2010 became the first MLS in Colorado to begin tracking green/sustainable features.
The organization’s residential input form for listing properties on the MLS now has a section for Energy/Green Fields, which permits Realtors to identify six major green features that have third-party verification.
Additionally, the new Energy/Green fields permit the homeowner or builder to complete a Green Features Addendum, which identifies a wide variety of green/sustainable features. These include most types of green construction methods; types of heating, cooling system and air-conditioning systems; water-efficient features; indoor air quality; sustainable materials used and specific energy features such as Energy Star appliances.
Having this data will enable appraisers to identify homes with significant green features and ultimately to provide value for green features when the sold price illustrates that buyers paid more for green attributes.
Proof that building green can be financially rewarding in addition to the environmental and health benefits has been verified by a study conducted in the Pacific Northwest. The Earth Advantage Institute conducted a market study in Portland and Seattle between 2002 and 2008 to determine if homes that were third-party certified as green sold for more than similar homes that were not certified.
In the Portland segment of the study, 432 homes were tracked, 92 of which were third-party certified. All were built between 2002 and 2008, and the majority sold in 2006 or 2007. The study revealed that the third party certified green homes sold 18 days faster and for 4.2 percent more than noncertified homes. Additionally, the achieved sales price per square foot was $27 higher for certified green homes.
In the Seattle study, 269 homes were studied, of which 62 were third-party certified as being green. All homes were built and sold during the same period as in the Portland study. Green certified homes in the Seattle study took five days longer to sell, but they sold for 9.6 percent more than noncertified homes, and they sold for $76 per square foot more.
What was learned from the Earth Advantage study is that homes certified by respected third-party groups achieved a higher sales price, because buyers see added value for sustainable materials, advanced building techniques and as energy savings. Buyers also appreciate having a healthier and less-toxic interior environment, lower operating costs, using less water and limiting their use of non-renewable petroleum-based products.
As more homes with identified green features sell for more money than comparable houses without sustainable benefits, appraisers will have the statistical data required to provide higher appraisal values for homes with “real green” features, thereby increasing the value.
For green/sustainable homes to receive their just due, builders, homeowners, appraisers and Realtors need to work to ensure that homes with green features are properly identified, verified and valued. When this was done in Seattle, there was immediate impact; listings sold for 14 percent more than non-green homes.
Valuation for truly green homes will become a reality. It will just take little time to build the database that appraisers need.
Dave Scott is an EcoBroker and broker associate with Colorado Landmark Realtors in Boulder. He can be reached at 303-443-5163.