How to Get a Premium for Your Energy-Efficient Home

Filed in Education by on January 29, 2016 3 Comments

While location, design and price are a home buyer’s main considerations, surveys show that buyers rank energy efficiency as one of the most desirable features – and importantly, one they are willing to pay more for.

“Eighty-five percent of properties sold is aging housing stock with high utility bills, obsolete technology and durability issues,” said Scott Robinson, president of the Appraisal Institute. “Seventy-one percent of buyers want energy-efficient homes and 58% of renters want an energy-efficient apartment,” he added. “Consumers expect it. They don’t want to do energy-efficient projects themselves.”

One of the problems with selling high-performance homes for builders, however, is that energy efficiency can be overlooked in the appraisal process.

Experts who spoke on the topic at a Jan. 20 educational seminar held during the International Builders’ Show in Las Vegas said that this happens for a variety of reasons including a lack of access to quality data, underwriting impediments and appraiser qualifications.

One step builders can take to make the process more favorable is finding a lender who is willing to hire specially-trained appraisers who are qualified to assess the value of energy features that are often hidden behind the drywall.

Fannie Mae, Freddie Mac and Federal Housing Administration guidelines require appraisers to consider the energy-efficient features of the home, and if the market supports an adjustment in the appraised value, one must be made. But an average appraiser won’t take this into account if they are not aware of it.

Builders can access a list of qualified appraisers who are specially trained on energy-efficient, high-performing homes at the Valuation of Sustainable Buildings Professional Development Program Registry.

Further, builders can help the buyer assure a competent appraiser is selected by doing these things:

  1. Complete and provide buyers with the Residential Green and Energy Efficient Addendum form.
  2. Provide a copy of a complete Home Energy Rating System (HERS) report (if available).
  3. Prepare the buyer to notify the lender that they require a competent appraiser for this special type of construction.

Broaching the question of how to price energy-efficient homes, Sandy Adomatis, CEO of Adomatis Appraisal Service in Punta Gorda, Fla., suggested that builders who want to sell these types of homes at a premium over their competitors must sell them for the price they know the homes are worth, but balance that with affordability.

“If you don’t sell more than a code-built house, you are indicating it has no sales premium – no additional market value,” she said.

And when it comes to marketing energy-efficient homes, smart advertising is key. Adomatis mentioned one very successful ad that got straight to the point by touching on the significant cost savings consumers find by choosing an energy-efficient home.

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While solar photovoltaic cells, high-efficiency appliances and lighting, security systems and smart technology are items that customers are willing to pay a premium for, it also helps to keep the packaging of these features as simple as possible.

One way to do this, Adomatis suggested, is by bundling them with other high-quality features like granite counters, stainless steel appliances and wood floors. The latter are the “bling that sells the eye candy,” she said.

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Comments (3)

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  1. john bitely says:

    I’m sorry clients will say they will pay more for energy efficient home but at the end of the day most consumers believe all new homes are the same. They also say they will pay more but very few pick energy up grades when budget is tight. If they have disposal money yes, but otherwise they will pick other items first.
    I believe in energy efficient homes and we have built many but it isn’t what makes or closes a sale.

  2. Nathan S. says:

    I have been waiting to see when the concern of buyers will become focus on what will it really cost me monthly to live in this house And should I be more concern with how this home will perform. Looks are deceiving and that’s what sell houses. But people should really become more concern with what you can’t see. Do we buy a car just on looks or performance?
    Do we marry someone just on looks or performance too? A home is where we live and performance of that home is very important not just appearance. We must continue to focus on energy efficiency. I believe in the long run we all benefit.

  3. Meagan says:

    I agree with what you stated Nathan. People should be aware of the month to month cost and how the home will perform. Thanks for sharing the article and thanks for sharing your comment Nathan!

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