In certain markets around the the country - including my home market here in Orlando, FL - it's rare to take a drive without passing by a brand new neighborhood. The national real estate market has been strong in recent years, so it's no surprise to see these home builders flock to some of the hottest areas in the country.
For the residential real estate agent, the perception of new home communities widely vary, and the feelings are mutual, as new home sales agents and managers may not always see benefit in relationships with agents. Some agents and brokerages receive and contribute significant value in their builder relationships, taking advantage of the inflow of typically highly qualified buyers and desirable listings as well as the myriad of extra commission incentives widely offered by builders. Some, also, may find success in driving their own buyers into the communities, also reaping the benefits of the occasional payout bonus and often-higher price points.
For many, however, the new construction segment may feel like an unfamiliar enigma. You may have tried paying a visit to a nearby community's sales model and were quickly turned away or felt unwelcome. Keep in mind, builders are conditioned to real estate agents asking them for business. The few that actually get business, have and demonstrate clearly a unique quality that is valuable to the builder and their mission of getting more homes sold.
There are many tried and true business strategies that can help you demonstrate unique value and increase your share of the new home sales in your market. Currently, there is a large focus on green and energy efficient homes among new home builders. A 2020 study by the National Association of Home Builders (NAHB) shows that 58% of single-family builders build green homes, with one third of these home builders reporting that at least 50% of the homes they build are built green. 21% are "dedicated green builders," with at least 90% of their projects being green homes (up from 18% in 2018).
While we are seeing a clear trend towards green construction in residential home building, many developers still have difficulties conveying the value of energy efficiency to buyers and appraisers. The Millennial generation has overtaken the home buyer market as the largest segment, and 70% of a sample of newly-built single family home buyers said that they would pay more for a home with green features. Yet still, 78% of single family home builders cite "Lack of Buyer Demand" as one of their top obstacles for selling green homes. When asked how often they see green improvements accurately valued in appraisals, 69% said either "infrequently" or "never."
As a well-informed real estate professional, this is a golden opportunity to demonstrate unique and significant value to a home builder in your area that may need help selling their green inventory. These tips may likely also help you with traditional sellers, as they often run into many of the same obstacles reported by the builders.
#1: Understand Green Terminology, Energy Ratings, and Certifications
Nothing else in this column matters if you skip the basics. Article Eleven of the REALTOR Code of Ethics states that Realtors have an obligation to not "provide professional services concerning a type of property or service that is outside their field of competence." If you have never marketed green features of a home before, or are unfamiliar with green or energy efficient home features as a whole, the time to learn is now. A 2018 NAR Report stated that 83% of agents and brokers notice solar panels in their market. And that's just rooftop solar panels - imagine all of the green upgrades inside the home that aren't readily noticeable.
The buyers you will serve tomorrow are increasingly seeing desirable value in energy efficient upgrades. Your buyers will require that you find them the green features they are looking for, and your sellers will need you to effectively market the energy efficiency of their homes to these same buyers. New home builders will also sense competency and confidence when you have conversations regarding energy efficiency - a huge selling point of their product - if you actively learn and practice your skills. As a start, look into resources such as the RESNET, NAR'S Library, US Green Building Council, and Energy.gov.
#2: Familiarize Yourself with Green Fields in Your MLS
Generally, this is one of the simplest mistakes made every day by real estate agents. Managing listings on the MLS is extremely tedious, especially if you are an agent that does it all yourself without the help of an administrative assistant. However, it cannot be stressed enough how important accurate information is, especially when it comes to reflecting the added value of energy efficient features in a home. The RETS Database is a great resource for agents, as it helps break down and identify all of the terminology used in the MLS.
Set aside some time to take a deep dive into your MLS portal and get familiar with the form fields for energy efficient features. You should, at the very least, know how to advertise third party certifications such as Energy Star or LEED, highlight a home's HERS score, and demonstrate any significant cost savings resulting from efficient features and appliances. Implement these skills on your own listings, and then examine builders' listings. If their listings lack compared to yours, and you can show promising statistics like lower days on market, then this could be a great opportunity to demonstrate your value.
If you discover that your MLS does not have any green fields, be an advocate with your local association. Being a leader and an educator can help further set yourself apart and bring unique value to your market.
#3: Know How to Advocate for Green Home Values
Estimating a home's value, demonstrating that value to a buyer, and having an appraiser confirm that value can always be a tricky process, especially in a case where there are few comparable sales to reference. This is frequently the case with new homes, and even more so when energy efficient features are factored into the mix. The key is understanding what information clearly demonstrates the home's value, highlighting those facts, and delivering concrete details to the appraiser that they can use when calculating home value.
There are countless energy efficient features that can be found in a home, and each home may be different. The best ways to demonstrate a home's added value are: third-party green ratings (LEED, Energy Star, etc.), a HERS Score, and the Green Appraisal Form. Luckily, the Appraisal Institute offers helpful resources, including the Green Appraisal Form. Pay special attention to this document, formally titled the Residential Green and Energy Efficient Addendum. Proper use of this form can help ensure that an appraisal accurately depicts the value of a home, taking into account all important energy efficient features.
#4: Bring "Green" Buyers to the Builders
What better way to present your value than by physically demonstrating your adeptness at marketing green homes to buyers? You are likely already running into buyers in your market that have asked about energy efficient home features. Make it a point to direct these buyers through new home communities as a way of showing them the energy efficiency potential of a home. Discuss the features and benefits of the various green characteristics with them, and show them first-hand what their options could be. Even if your client doesn't settle for a brand new home, this experience could act as a great reference point for the rest of your home search and the builders will inevitably pay notice to your expertise.
Specifically if your buyer isn't eagerly interested in a new home, recommend this visit to the new community as another step in your needs discovery analysis. It is important that you and your client are on the same page considering that you will be essentially shopping with their preferences; this means that you must ensure that you fully understand their preferences. New home communities typically offer an array of floor plans and customized design options, so it would be a smooth and easy process for you and your buyer to "window shop" together and discuss the specifics of what they desire in a home with in-person examples. These walkthroughs can also show builders that you have an "in" with buyers that are in their target segment, increasing their perceived value of you.
#5: Get GREEN: Become a Green Designee
The National Association of Realtors offers an all-in-one education and certification course focused on competency in green homes and energy efficiency. The course equips you with the basic knowledge of green real estate, designates you as an NAR-recognized GREEN Realtor, and gives you access to a library of marketing material and information regarding the topic. You can find out more about this program here.
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