Home Innovation Insights

Exciting new data-sharing partnership aims to improve green home valuation.

Pivotal Advance in Green Building Valuation

October 14, 2016

Home Innovation Research Labs recently announced a data sharing agreement with my company, Pivotal Energy Solutions. The announcement may have seemed inconsequential at the time, but I’m convinced that what this agreement represents is a critical next step in the marketing of energy-efficient homes and has potential to impact your business in a BIG way. Here’s why…

We’ve all heard it before – the top three criteria homebuyers use when selecting a new home are: location, location, and location. That said, studies show that energy efficiency, indoor air quality, and overall comfort are increasing in importance to a growing number of buyers. That’s great news to those of you that have committed to building energy-efficient new homes or providing renovation or remodeling services focused on energy savings and indoor air quality. Whether your motivation is financial, moral, or some combination of both, the energy efficient building market continues to grow and so will your business.

But there’s a nagging problem associated with energy-efficient homes that I believe impedes the growth of the energy efficient building market – the value of “energy efficiency” often isn’t properly recognized or accounted for in the sale price of a home. Simply put, if a home does not sell for more, it will not appraise for more, and “comps” performed using the home will be impacted as well. Because of this, the value you are adding to a home as a builder or contractor committed to the “green” market isn’t correctly quantified, recognized, and rewarded. This, I believe, has the effect of disincentivizing new home builders looking to build energy-efficient homes, and homeowners looking to invest in energy saving upgrades to their homes.

How can we address this issue? First, continue the commitment to build and remodel homes to effective standards and programs with a high level of third-party certification such as NGBS Green, ENERGY STAR, LEED, and others. Second, following certification of program compliance, thoroughly document the energy efficiency, indoor air quality, and comfort features along with the energy efficiency or green building program(s) the home was certified under, the certifying body, and third-party verification that was performed. And finally, this documentation must be consolidated and made available to homebuyers and real estate professionals for the lifetime of the home so that it can be used to quantify the benefits of energy efficient construction and justify higher selling prices. This type of data enables the sales team to articulate the money-saving features inherent in the construction of the home to homebuyers, and allows appraisers to correlate (at least in part) the premium paid for a home to the energy efficiency, indoor air quality, and comfort features present in the home. Only when you document the energy saving and comfort features of these homes, consolidate this data, and make it available to real estate professionals and homebuyers will you realize appropriate return on your investment.

Much of the needed work has already been done. The NGBS Green team has spent considerable time and effort to design, administer, and verify compliance to that the National Green Building Standard to help new homebuyers and home owners save energy and money. The certification process and documentation inherent to NGBS Green provides the baseline documentation required for the real estate market. The data sharing agreement with Pivotal is the necessary next step – consolidation of the documentation and sharing of this data with real estate professionals and the general public.

That’s why our partnership with Home Innovation is so exciting to me. Adding data from the NGBS Green certification program to the data already being collected and consolidated in our Axis platform, further establishes Axis as a trusted source for validated information that can be used to quantify home valuation premiums. To date, real estate agents have been hesitant to provide information about a home’s energy efficiency without solid documentation. The documentation is often not available or has been lost, and upon selling the property the MLS does not identify the home as having energy efficiency or green features. When real estate professionals have ready access to a more comprehensive database detailing a home’s energy efficiency features, it results in better marketing and higher sales prices for energy-efficient homes. Higher sales prices of homes with energy efficient or green features will provide the data needed by appraisers to properly quantify valuation premiums for energy efficient homes. Recognition of these features will eventually drive demand for these homes, benefiting new home builders, contractors, and the general public as a whole, and creating a self-perpetuating market for energy-efficient homes.     
Only time will tell how fully the homebuying public will embrace energy-efficient homes – and how much they’ll pay for them. Our partnership with Home Innovation to share NGBS Green data moves us one step closer to enabling data driven analysis and informed decisions by home buyers and real estate professionals to properly assess the benefits of energy efficient homes. They say “knowledge is power.” For energy efficient homes, this saying is quite literally true: knowledge – in the form of data – translates into power savings!