Listing Brokers: Exert Control of Appraisal Assignment for your HPH Listings

Very excited to announce this resource for real estate agents to exert control on the appraisal assignment for your high-performance home listing. Like REALTORS, appraisers have requirements for knowledge and competence for their assignments. Let's face it, appraising or listing a LEED or Energy Star rated home - or a home with solar PV - requires additional knowledge and competence. This resource gives listing agents a tool to send a signal early in the appraisal process that your listing needs the right appraiser. click on the "new appraisal factsheet" link and download the tool (once downloaded you can add it to your letterhead for branding).

 bcapcodes.org/new-energy-efficiency-resource-for-realtors

Energy Efficiency and your Realtor

At the time of this writing, I just came from a hearing at the Massachusetts Statehouse in which Acting Commissioner of the MA DOER, Dan Burgess, called energy efficiency the “first fuel” in the commonwealth. His comment is indicative of the belief that energy-efficiency policy is one of the few solutions that lower stress not only on New England’s ratepayers, but also on the power grid as well as the environment.

Unlike other “fuels” energy efficiency does not have a furnace that burns, or even a utility meter and breaker panel box. Energy efficiency is invisible for most people; in fact, it is only present in its absence – as when your utility bills drop. For that reason it has been hard for the average residential real estate agent to effectively communicate energy efficiency benefits to clients.

Consumer demand for energy efficient homes is rising, however. A recent survey released by the Demand Institute stated that the largest “satisfaction gap” determined that the largest unmet housing concern in the U.S. was energy efficiency[1]. There is also no question that home buyers here in the Northeast, which has the unfortunate combination high utility costs coupled with homeowners that use large amounts of power to heat, light, and cool their home.

The central question is should a home seller that has invested in energy efficiency improvements be able to capitalize with increased equity at the point of sale? The answer is absolutely. The caveat is that you MUST find the real estate agent that knows the contributory value of the improvements as well as how to market them to potential buyers.

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[1] http://www.triplepundit.com/2015/01/poll-energy-efficiency-americans-no-1-housing-concern

Let's say they are right...

'Risky Business' Report Aims to Frame Climate Change as Economic Issue

The article was published in the Wall Street Journal on June 23, 2104 and written by Alicia Mundy. The article is certainly worth the read, but I find that the comments by WSJ readers disturbing in that most prefer not to debate the actual issues, but would rather make sarcastic comments about liberalism and Al Gore.

I am hopeful that the people denying climate change are correct. Not because I believe that their perspective is sound or thoughtfully presented, but because it is the best case scenario we face moving forward.

However, with a majority of scientists, mayors, and insurers now warning us that these issues are real and need appropriate attention, it may be best to look at a cost-benefit analysis of preparing for climate change mitigation and action to prevent further damage versus choosing to deny the possibility of climate change and ignoring the potential risk.

Let's say that those who deny climate change are absolutely 100% correct, and we still have chosen to take action on how we produce and use energy, as well as actions to make our cities more resilient. I was born in 1963 when there were a mere 3 billion people inhabiting the planet, today there are 7 billion rapidly moving towards 8. I believe it is reasonable to look at resource management of food, drinkable water, and energy to heat, light and cool the homes and businesses that we live and work in as a critical issue whether or not climate change is real. Making our cities more resilient, and making necessary investment in our infrastructure, is needed whether or not there is such a thing as climate change.

On the other hand, if climate change is, in fact, a conspiracy of the far left, and power prices may rise due to investment in alternative methods of producing power (there is already evidence, however, that investments in renewable energy is lowering prices in some U.S. markets, and even stabilizing grid resiliency). Taxes and tariffs on our electricity and natural gas bills will be added to provide funding to increase the energy efficiency of our built environment (in Massachusetts, where I live, there is ample evidence that shows for every dollar ratepayers are asked to pay the benefit is multiple dollars in return). Insurance premiums will rise, putting pressure on the real estate markets in coastal communities (unfortunately, all tax payers have been subsidizing property owners since 1968 and now the National Flood Insurance Program is $25B in debt).

Again, I am hopeful that history shows that worries about climate change were incorrectly prioritized. However, I think hoping for the best and preparing for the worst is the wise course of action at the present time.

The Real Estate Industry Has Huge Opportunity To Be Part of the Solution

TEDxSomerville Presentation March 30, 2014
All of the old assumptions about how power is produced and consumed are being questioned; how we consume energy in our homes is right at the top of the list. The real estate industry needs to break through its traditional comfort zones to support the movement towards more energy-efficient homes.

The Challenges of Green Home Valuation in Massachusetts

My newest report of the high-performance home sale market of 2013 will feature some surprising statistics regarding Massachusetts real estate sales professionals reporting of green-home features.

We are fortunate to have one of the top ten multiple listing services, the data base that agents use to detail home features, in Massachusetts. Many people don’t know that the Multiple Listing Service (MLS) is actually a network of approximately 900 independently owned organizations in the U.S. that vary widely in how home data features are recorded. The predominant MLS in Massachusetts is Multiple Listing Service Property Information Network (MLS PIN) located in Shrewsbury, Massachusetts. MLS PIN was one of the first MLSs to adopt specific green fields in their database in 2009.

MLS PIN’s green data fields include several fields for listing agents bringing a high-performance home to market. For a developer that has hired a real estate agent to bring their green home to market, it is important that the listing agent accurately enter all of the homes features accurately in the data base. Inaccurate representation of a home’s green features are problematic for a variety of reasons. Over stating the homes energy features is known as ‘green-washing’ a opens all of the parties in the transaction to potential litigation; under-reporting of the homes green features is marketing opportunity lost to a growing audience of home buyers searching the data base for energy efficient homes built with sustainable products.  Under-reporting of data also can make valuing the home accurately by real estate appraisers and underwriters a challenge.

In my upcoming report, I discovered a substantial amount of evidence that both under-reporting and over-reporting of a home’s green features was prevalent in Massachusetts real estate sales of 2013.

MLS PIN offers a listing agent an opportunity to note if a home has been green certified by independent third party certifying institutions. When a listing agent checks the ‘Yes’ box asking if the home or condominium has been green certified, a drop down menu allows the agent to check if the certifications is Energy Star Home Certified, LEED certified, NGBS certified, or Other (See Remarks).

I first discovered there might be a problem of under-reporting when I was searching form green condominiums for a buyer earlier in the year. When I searched for available green certified condos, I realized that there were units not appearing in the search although I knew that they were, in fact, green certified. I decided to investigate this issue more closely for my 2013 report.

I discovered that there was evidence that supports for every one green certified single-family home accurately recorded in Massachusetts in 2013, 1.5 was under-reported. For condominiums sales, evidence of accurate reporting by listing agents was even worse, for every one condo accurately recorded two were not.

There was also evidence that the MLS PIN data field ‘Solar Features’ was over used by listing agents. Evidence suggests that this field may have been inappropriately used 39% of the time in 2013, up from 28% that I reported in my 2012 study.

Given that the signs of a vigorous high-performance home market are taking hold in Massachusetts, real estate agent education about the accurate use of MLS PIN’s green data fields seems in order. Evidence suggests that real estate sales professionals need an immediate update on the high-performance home systems. Quite frankly, real estate agents and brokers should have a deep understanding of all aspects of a home that they are selling. Those agents that are not taking the responsibility to increase their awareness of features of a home’s energy efficiency are a challenge that must be faced in our industry.

Momentus 2013 for Residential Green Building Movement

The momentum created in 2013 towards a healthy residential green home market can be best summarized by four documents, 2 studies and a piece of  proposed bipartisan legislation. 

It is impossible to value green homes without data that accurately details home features designed to increase energy efficiency, sustainability, or healthy living. For property owners in the US, most home sales data is recorded through the Multiple Listing Service (MLS). There are over 900 independently owned MLSs collecting data fields on properties across the country. These independently owned MLSs are, quite literally, the brains of the residential and commercial real estate transaction. In the largest metro areas of the US, multiple listing services include data fields that reach for higher standards of home energy efficiency and sustainability. Version 1.2 of the Real Estate Transaction Standard Data Dictionary was published in November, 2013, and includes clear definitions of green fields for MLSs to implement.  The MLS Green Implementation Guide offers additional guidance to MLSs that have not taken the opportunity to upgrade green property data fields. It will also assist MLSs that wish to migrate to green data fields which have been documented in the Real Estate Transaction Standard Data Dictionary as part of an overall data dictionary compliance strategy. These documents will serve as guidance for specific and consistent green data sets for MLSs nationwide.

The Valuation of Green Buildings: Background and Core Competency was produced by the Appraisal Practices Board (APB) as a first exposure draft to stakeholders in July of 2013. It is the first document that clearly establishes best practices for appraisers to value green buildings in an ethical and competent manner. Although the document will not be finished until 2014, the first exposure draft was open for public comment in July of this year. One of the most intriguing notes referred to appraisers having to pay attention to the potential for a “brown discount” to establish the correct valuation of properties. Homes subject to a “brown discount” are homes in active green markets without green upgrades and subject to obsolescence.

Another document that further reinforces the need to accurately account for the green premium of high performance homes was Unlocking the Value of an Energy Efficient Home; A Blueprint to Make Energy Efficient Improvements Visible in the Real Estate Market by CNT Energy and the National Home Performance Council. This document created a blueprint for addressing the disconnect that exists between the energy efficiency program administrators, the real estate community, and the homebuyer and seller. A common issue among real estate agents is that selling a home with a granite countertop and new kitchen cabinets is easier than selling energy efficiency improvements. Energy efficiency improvements may be invisible to potential homebuyers; the essential question is how does an agent sell the invisible? Unlocking the Value of an Energy Efficient Home; A Blueprint to Make Energy Efficient Improvements Visible in the Real Estate Market seeks to find ways that energy efficiency programs can create stronger linkages in order for the real estate industry to be able to feature consistent, standardized data about energy efficiency features in existing homes that can be taken into account by buyers, appraisers, lenders, and others during the home sales transaction.

In Mid-March of 2013 a ground breaking study of energy efficient homes and was released by the University of North Carolina at Chapel Hill Center for Community Capital. In the study author Dr. Nikhil Kaza states that owners of energy efficient homes are 32% less likely to default on their mortgages and that "the mortgage-lending process does not include the financial benefits of energy efficient savings in its underwriting decisions."

In a year of great import for establishing the value of green homes, Exploring California PV Home Premiums was released on December 12^th. A new study from Lawrence Berkeley National Laboratory found that houses with rooftop solar panels sell for higher prices than comparable non-solar homes. California home buyers are willing to pay a premium for solar PV installed on resale residential properties.

Among the houses studied, that value of homes with solar PV systems had a premium of $5,900 for each kilowatt that an array can generate. Most home solar systems included in the study produced between 2 and 5 kilowatts of electricity. Older PV systems sold at less of a premium than new systems. 

In addition to the industry momentum towards accurate valuation of green homes, the SAVE ACT, a bill aimed at encouraging home energy efficiency improvements by establishing underwriting guidelines for mortgage lenders that factor in cost savings for homeowners, was reintroduced to Congress in 2013.
The Sensible Accounting to Value Energy Act of 2013 is sponsored by Sens. Michael Bennet, D-Colo., and Johnny Isakson, R-Ga. The bill has been referred to the Senate Banking Committee and has the support of many real estate industry trade organizations.  

These documents, studies and legislation are excellent markers of the national momentum towards ensuring that the high performance home market is accurately measured both in terms of the data fields that are available to buyers, real estate agents, and appraisers, as well as correct valuation of the green premium. That all of the documents were created or produced in the same year is clear evidence that 2013 was significant to the high performance home industry.