‘Show Your Work’ Isn’t Just for Math Class Anymore

Filed in Business Management, Home Building by on April 23, 2015 1 Comment

green percentReminiscent of the math teachers who insisted that you “show your work,” a recent study commissioned by the Colorado Energy Office clearly demonstrates the need for detailed documentation of energy-efficiency measures and green features in all homes.

An Early Look at Energy Efficiency and Contributory Value examined sales of homes in the greater Denver metropolitan area between January 2012 and April 2014 to determine the impact that energy efficiency has on the home buying process.

Ultimately, the authors concluded, “There is a current lack of researchable and quantifiable data … Until the data is consistently available and easy to find, it is likely that the residential appraiser’s ability to develop a credible opinion of value will be limited.”

They also determined that the value of various levels of energy efficiency is market-specific. Specifically, they concluded, “It would be impossible – without understanding a property’s market area – to definitively say that one level of energy efficiency is intrinsically better across all markets and for different property types.”

Among the other observations/findings in the study:

  • The percentage of home sale listings citing “energy” increased in both local multiple listing services between 2006 and 2013, apparently indicating that such features are increasingly appealing to prospective buyers.
  • In a very limited survey the authors conducted of home owners who purchased Energy Star-qualified homes, 96% indicated that if they were purchasing a home in the future, they would like the home to have an energy-efficiency rating so that they could compare it to other homes.
  • According to the authors: “Appraisers need third-party certified and verified energy-efficiency documentation.” Determining a home’s energy efficiency is “beyond the normal scope of work,” knowledge and experience of an appraiser.
  • Although the survey was not intended to estimate property values based on the presence of energy-efficient elements, in most of the case studies, the presence of energy-efficiency features added measurably to the value of the home. Several of the homes featured in the case studies were certified to the ICC 700 National Green Building Standard.
  • It was difficult, and sometimes impossible, for the study’s authors to separate the value of energy efficiency measures from other green features.

As previously reported in NAHBNow, a study conducted by the Lawrence Berkeley National Laboratory in collaboration with several noted academic and appraisal research experts familiar with valuing photovoltaic (PV) energy systems found that buyers are increasingly willing to pay a premium for homes with PV energy systems.

NAHB actively supports efforts to educate appraisal and realty professionals about the intrinsic value of home performance, and how certifications like the ICC 700 National Green Building Standard can help non-building professionals and their customers identify high performance homes and appreciate their benefits.

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