“My goal in all of this is not to artificially inflate, but rather to realistically portray energy savings in green buildings,” says Roger. “Not just for our house, but for all those who really want to build or remodel a greener, more energy-efficient home. We can quibble over the market value of things such as sustainable materials, recycled content, and other LEED items, although I believe these have some market value. I also believe that the energy aspect of green buildings must be objective and quantifiable to be considered.”
Fortunately, for Roger (and the rest of us), the real estate industry is moving—albeit slowly—toward recognizing the monetary value of energy efficiency and other green-building features.
“It makes sense that sustainable buildings should have more value,” says Alan Simmons in An Introduction to Green Homes (see Access). “They are built better, are better stewards of the environment, consume less energy, and save money on energy costs. They will probably have longer economic lives and provide healthier places for people to live, as well as social benefits, in the form of less soil and water pollution and fewer carbon emissions.”
Yet, understanding, appreciating, and valuing energy-efficient homes are far from routine in the world of real estate. In many places, demand for green homes is still low, so there are not many qualified green appraisers. Of the AI’s 23,000 members, a database query on green appraisers yields only 67 members in 26 states—less than 0.3%—who claim or promote their green appraisal experience. The most are in California, but not as many as population or lifestyles in the state would suggest. Only 41 AI members have completed the AI’s Green/Sustainability Residential Professional Development program.
Homes are usually appraised by using the sales comparison approach. If there aren’t many (or any) green homes in your area, your appraiser won’t get good comparables (“comps”). Further compounding the problem is that appraisers often work from multiple listing service (MLS) data, which is collected and maintained in local (usually county) databases—and most of these still do not collect information on green features.
The Green Resource Council, a project of the National Association of Realtors, seeks to “green” the MLS by including green building information in their databases. Besides counting how many bedrooms and such, the MLS would also show if a house has a solar-electric system or carries a green certification. As this data set increases, appraisers will be able to better assess the value of green features.
For new construction, appraisers typically rely on the “cost” approach (see “The Art of Appraisals” sidebar). The company Marshall & Swift, which provides commercial and residential real estate industries with cost data, is now differentiating green building costs from traditional costs. Unfortunately, not all appraisers use the M&S data, as they must pay for it.
“Green building just got going five years ago and then the housing market crashed,” says Simmons. “It is still going, but more slowly.
“It has generally been reported that the cost to build a green home usually only adds 1% to 5% to the cost of conventional construction,” says Simmons. For folks interested in building a high-performance home, that’s a cost worth paying, but most of us don’t have the deep pockets to pay for it outright—we have to be able to finance it. A savings of $50 per month could translate into an additional $12,000 to $15,000 of buying power,” says Simmons.