Updated: Dec 22, 2022
When I initially transitioned from my role as residential Realtor into the realm of residential energy and solar, one of the biggest questions that I had was, "How exactly does solar impact property value?" Understandably, this is also one of the biggest questions on the minds of many of the homeowners that I serve; and it's a valid one that highlights the general uncertainty throughout much of the housing market when it comes to the value energy-efficient - or energy-independent - homes.
Most of the suspicion around valuating green homes is simply the result of the market attempting to catch up to newer trends and technologies. Rooftop solar has become a glaring example of this widespread uncertainty surrounding "green" value, as it is a major home improvement project that is being rapidly adopted by homeowners in many markets. Homeowners with a solar energy system in place are more likely to fight for the extra value when it's time to sell than, say new insulation or low-E windows, so I'll use solar homes as a primary example here. Outside of California, most residential markets are relatively immature when it comes to residential rooftop solar - i.e right here in the "Sunshine State" less than 1% of all homes have solar despite being the 2nd fastest growing solar state in the country. Simply put, real estate professionals in most markets just haven't had enough experience dealing with homes that boast this energy-producing improvement, leading to this sense of uncertainty regarding it's impact on a home's value. However, with consumer trends driving a rapid change to how the next generation of homebuyers manage power in their homes, participants in the market need to catch up quickly or get left behind.
At this point, the question shouldn't be, "Do energy-efficient improvements increase property value?" From the Berkeley study, to the the information more recently put out by Zillow, to the many researchers and companies advocating for high values for green homes, the data clearly shows that solar and other high-performing energy improvements improve the value of real estate. The question should then be, "how much value and how do I get an appraiser to agree?"
Increased value varies on a home-by-home, project-by-project basis, so it's tough to give a blanket recommendation on the exact impact of certain improvements on certain properties. However, once that value is determined by the real estate representative for a given home, the next step - in most property transactions - is to justify this price to the appraiser. When it comes to marketing a property on the Multiple Listing Service, many real estate agents don't realize that appraisers use their listing to gather key information. This is a crucial point that is frequently missed, and an incomplete listing can negatively affect the outcome of the appraisal. Here are three simple ways to improve the visibility of these green improvements' value on the MLS:
1) Attachments: The "Green" Addendum
The Appraisal Institute offers a free tool called the Residential Green and Energy Efficient Addendum. This is the best way to document all energy-efficient features of a property in one place that is readily available for the appraiser. There are fields for documenting improvement specifications such as the R-Value of insulation or the energy production of a solar system, third party certifications such as Energy Star or LEED, the walkability rating of the neighborhood, etc. This form can be filled out by anyone with adequate knowledge of the property (i.e homeowner, listing agent, contractor, etc.), and is free to download on the Appraisal Institute's website or in the Real Estate Resources section of this site.
2) Descriptions: Stay Objective and Observable
Every real estate agent and online home shopper knows how crucial good property photos are when a home is listed for sale. Well, the description can be just as important, especially because some "green" benefits may be hard to physically see. For example, a picture of a rooftop solar system may not attract a buyer aesthetically, whereas a mention in the description of it's impact on the electric bill may be more representative of it's true value. The same can be said for new windows, fresh insulation, new Energy Star appliances, and the list goes on. Pictures can say a thousand words, but it's important to not sell a property short by missing out on an effective description, especially when the appraiser may come looking for key details.
An important fact to keep in mind is that energy habits between households differ, so what may be true for one owner may not be true for all future owners. For instance, any assertions about predicting exact utility costs may fail to factor in differences in household energy usage behaviors. To illustrate, picture the difference in energy needs between a middle-aged couple with no kids versus a growing family that also has the grandparents living with them. When detailing the benefits of a green home, avoid putting yourself at risk by keeping your descriptions observable and objective so that your facts remain true regardless of who the occupants are.
3) Form Fields: Tagging on the Multiple Listing Service
Some Regional Realtor Associations have integrations in their MLS systems that can better help categorize important information for a listing. A common example of this are the form fields for the Homeowners' Association/Community Details in which the observer can clearly see the name of the managing association and contact information, available amenities, and the fees/dues schedule, if applicable. As the demand for high-performing homes expands, more MLS platforms are introducing form fields for "green" features. Next time you go to list a property with energy-efficient features, be sure to utilize any form fields that may be useful for clearly displaying key facts like a HERS rating (RESNET) or a Home Energy Score (DOE).