Learning Curve

Does Your Realtor Know What Makes a House Green?

Certifications Don’t Ensure a Price Premium

Kenneth Harney

If you make extensive energy-conservation and other green improvements to your home, will they earn you a premium price for the entire house when you go to sell? 

For years, the easy answer has been, oh yeah, absolutely: Green is good, everybody knows that saving energy is a no-brainer, and buyers will pay more to get it. There’s research to back that up. A study of California sales found that green-certified homes sold for between 2.1 percent and 5.3 percent more than similar homes with minimal or no green features. A 2015 study of renovated homes in Washington D.C. concluded the average price premium was around 3.46 percent. A study last year in Texas found that green-certified homes sold for 8 percent more than comparable properties. 

Homebuilders have told researchers that two-thirds of their customers say they’re willing to pay higher prices for homes with significant green features, such as energy-efficient appliances, heavy-duty insulation, water conservation, healthy indoor air quality and others. 

So is that it? Going green always nets you more green – case closed? Not so fast. Two recent studies by appraisers with long experience valuing green homes suggest the answer is more nuanced. Some of the researchers’ findings in brief: Though generally it’s true that green improvements will earn you at least a little higher price, the size of the premium may depend on external factors you hadn’t thought about: 

  • Does the Realtor you picked to list your home know enough about green improvements to market them effectively? Is the agent competent to market what you’ve got to sell? 
  • Does the agent have any formal training in this area, evidenced by a green designation in her or his own listing presentation or advertising? 
  • Does the listing for your home in the local Multiple Listing Service (MLS) contain crucial information about your green improvements, such as a “green addendum” that details the special features that make it energy-efficient? 
  • Does the local MLS have “green fields” that allow listing brokers to fill in the blanks with appropriate detail so that other agents – the ones who are going to find your buyers – know what your house really offers in terms of green improvements? 
  • Do Realtors in the area know much or anything about rating systems such as HERS, LEED, ENERGY STAR or others? Do they know where to turn locally to obtain a rating? (HERS stands for Home Energy Rating System; LEED is a globally recognized rating system for residential and commercial green real estate; ENERGY STAR is a federally developed rating for appliances, building materials, entire houses and commercial property.) 

If none of these key factors is working for you, your green features may be impressive, but may not earn you much of a premium. Worst case, they might even get you nothing. 

Realtors Don’t Know What Makes a Home ‘Green’

Sandra Adomatis, a Florida-based real-estate appraiser and nationally known expert on valuing green improvements, headed the research teams for both of the new studies – one focusing on “paired-sale” transactions of homes in the San Francisco Bay area, the other in Virginia and Maryland. A paired-sale analysis examines price differences in transactions, comparing virtually identical homes, one of which has significant green features. In the California study, green-certified houses sold for an average 2.19 percent premium. In some Virginia locations, where the local certification company, Pearl Home Certification, had marketed its services to realty agents, the average price premium was 5 percent. But in areas where Pearl had not yet reached out to Realtors and provided information on how to market certified properties, some premiums dropped to 1 percent or lower. 

Adomatis, author of the Appraisal Institute’s manual “Green Valuation Tools” and developer of training courses on the subject, told me that in interviews, some agents who listed certified green properties in California admitted they “had no clue what they were selling.” A few even said, “I don’t know what makes a house green.” 

That’s a direct violation of the code of ethics of the National Association of Realtors, which prohibits members from marketing types of property that are “outside their field of competence” and training. The association offers members in-depth courses on green-home marketing and has urged MLS’s across the country to include “green fields” in their listings. 

Bottom line: If you want to reap the maximum return from your green improvements, make sure that your Realtor understands what they are and how best to sell them.

Ken Harney’s email address is harneycolumn@gmail.com.