By Peter Hubbe
RGBC member Craig Foley presented “Energy Efficiency, Valuation of High Performance Homes, & Market Transformation on Massachusetts Residential Real Estate, 2013”
Craig started off by reminding us of weather-related damage that has been more frequent and more severe in the last decade. In New England we have seen the tornados that hit Springfield and western Massachusetts communities, rain and wind damaging infrastructure throughout Vermont, and Super Storm Sandy hitting our neighbors to the south. Harsher weather and climate change are understood as going hand-in-hand by most scientists who model atmospheric activity.
Craig explained that there are three interests that can be often be competing with one another and represented them as the apexes of an ENERGY STRESS TRIANGLE.
Policy makers often find energy solutions that can relieve stress on two of the points, but increase stress on the third. Energy efficiency is one of the few things that relieves stress on the rate payer, energy grid, and the environment.
Energy Efficiency addresses all three!
Environment, Energy Grid, Rate Payer
There is hope – and there needs to be a lot of action to go with the hope. 40% of US energy consumption is in buildings.
Here is a look at how far Green Certified Homes have come in less than a decade:
How do we make this growth even more effective? We need all the parts of the tree…
At the “above the tree tops” level, 2013 made some significant progress. The NAR (National Association of Realtors) supported “Green MLS Implementation Guide” and the Appraisal Practices Board’s “Valuation of Green Buildings: Background and Core Competency” are just a few specific examples.
Article 11 NAR Code of Ethics
Realtors® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth.
Work is being done to get green-certified homes language in to Article 11
“Market conditions suggest that green homes will continue to grow in market share in the next five years. We expect a five-fold increase between 2011-2016 to comprise 29%-38% market share – potentially a $87-$114 billion opportunity. This strong growth of green suggests that builders who are not knowledgeable in green home building will be left behind.”
• McGraw Hill Construction, Bedford, MA “New and Remodeled Green Homes: Transforming the Residential Marketplace”
Green Certifications for Homes – Getting the product to the market with a Green MLS
Realtors working with a Green MLS are asked to input information below:
Unfortunately, many realtors do not yet understand green-energy terminology. They often misinterpret what is being asked for.
The Results: Under-reporting of green data
• Listing agents and brokers potentially under-reported 60% of Energy Star home sales in 2013.
• It is likely that 48% of LEED certified condominiums were under-reported in MLS PIN Massachusetts sales in 2013.
• For every one green certified sf homes sold in 2013, 1.5 did not use MLS PIN green certifications correctly
• The evidence suggests that listing agents may have under-reported green condominium sales by a ratio of nearly 2 to 1 in Massachusetts in 2013.
• For new construction condos, the ratio of under-reporting was 3.5 condo sales for every 1 whose listing agent correctly used MLS PIN’s data entry.
Why does accurate reporting matter?
Under reporting of green-certified homes slows progress towards market transformation:
- Buyers are looking for green-certified properties and can’t find them.
- Sellers marketing green-certified properties can’t distinguish them from the crowd.
- Appraisers valuing green-certified properties are not aware that a home has green features.
- Home sales are affected at the state, regional, and national levels
Change is in the air. Realtors and appraisers are being taught how to value green-certified homes. New rules are just now coming into effect that require expertise in green certified homes that effect realtors and appraisers.
The University of North Carolina reports that owners of ENERGY STAR Homes are 32% less likely to default on their mortgages than owners of similar homes that are not ENERGY STAR. FHA 203k rehabilitation loans have become available for energy efficiency upgrades to homes.
Energy Efficient Mortgage products are making a comeback.
The SAVE Act of 2013 is being re-worked on to be brought up for consideration in 2014. The SAVE Act, which offers a voluntary energy efficiency evaluation as part of the mortgage underwriting process, would help consumers and lenders better evaluate the true value of residences.