Market Value of Energy Efficient Homes

Can I sell my “Green” energy Efficient Home for more??? – Absolutely, if done right.

Financial incentives, rising utility prices, and increased public awareness of the need for energy conservation have opened up the market for energy efficient homes.  Everyone would like an energy efficient home and now more than ever it is not only cost effective to live in one but also to sell one.  In this article I will describe financing energy efficient homes, adding energy upgrades, and the increased market value for energy efficient homes.

EEMs (Energy Efficient Mortgages)

An Energy Efficient Mortgage, or EEM, credits a home’s energy efficiency in the mortgage itself. Effectively, this increases the buyer’s purchasing power, by allowing the lender to increase the borrower’s income by a dollar amount equal to the estimated energy savings. For example, for a household earning $60,000/year, the EEMs added flexibility can allow for about $100 per month in higher mortgage payments related to energy efficiency upgrades.
EEMs typically refer to new homes, whereas EIMs (energy improvement mortgages) are used to purchase existing homes that will have energy upgrades added later.

Cost-Effective Upgrades

EEMs will only finance energy improvements that are “cost-effective.” The total cost of the upgrade, including any maintenance, must be less than the total value of the energy saved during the functioning life of the upgrade. In other words, if the upgrade isn’t lowering energy costs, then it isn’t covered by the EEM. Ideally, this should prevent contractors from doing sloppy, incomplete upgrades and trying to market the home as “green.” But unless someone actually checks their work, there is little accountability.

Quantifying the Value of Energy Upgrades

Many factors contribute to a home’s overall efficiency. Simply installing some new insulation, or a new furnace, for example, may not be a significant upgrade by itself, although some contractors/agents may advertise it as such. Without the influence of a contractor who understands whole-house energy efficiency, the furnace will likely be oversized, and paired with poorly designed duct work. Insulation is often installed incorrectly, and accomplishes very little, especially without properly air sealing before insulating.

To accurately quantify a home’s increased value,
1) Look at the change in annual energy costs from before the energy upgrade work to after
2) Bring in a home energy rating system (HERS) tester to independently test the home and assign it a HERS index score

Markets Responding to Demand for Efficiency

According to a study in the Appraisal Journal, real estate markets assign additional value to energy efficient homes at a ratio proportional to decreased energy costs. For every $1 reduction in annual energy costs, a home’s market value increases by somewhere between $10 and $25. For example, if a home’s annual energy costs decrease by $400, then on average, the market value of the home would increase by about $7,000.

If you want to see a great example of just how good energy efficiency can get, and how marketable it is when done in a practical way, check out this Net Zero Energy Home currently under construction by Eco Performance Builders in the Oakland Hills.

[dropshadowbox align=”none” effect=”lifted-both” width=”640px” height=”” background_color=”#ffffff” border_width=”1″ border_color=”#dddddd” ]For more information, call (925) 363-4498 or e-mail info@epbuilders.com to speak to a technician, or schedule an energy audit.[/dropshadowbox]