Sean Smith was the man in the middle. – a key figure with a foot in both worlds of business and “green.”
A high-end general contractor, he built two LEED-certified homes in the Washington Park neighborhood of Denver in 2009. At an educational session he hosted there, the U.S. Green Building Council approached him to serve on a committee. “If you’re doing big-picture things, I’m all over it,” he told them.
At a subsequent meeting at the Governor’s Energy Office (GEO), Smith realized he was one of the few businesspeople in a room full of well-intended greenies.
“There wasn’t one REALTOR. I was the only builder. There weren’t any bankers or appraisers. They were talking about moving the market at a macro scale,” he said. “The market they were talking about was not there in any way, shape or form.”
The problem Smith and his colleagues want to solve is validating the theory that green homes sell faster and for more money than conventional homes. It’s a real “chicken-or-egg” conundrum as appraisers, mortgage lenders and underwriters, REALTORS, builders and homeowners look to each other for numbers to prove the claim. If a market-based case can be made, it would grease the skids for moving the green-building industry into the mainstream.
An important yet imperfect study emerged in 2009 from the Pacific Northwest, specifically Portland and Seattle. The MLS (Multiple Listing Service) had collected sale data from certified green homes that proved the theory there. What implementers at the GEO realized is that grant money could be directed to Colorado’s 18 MLS’s to add “green field addenda” (GFAs) to start data collection here.
IRES, the MLS for Boulder and northern Colorado, was one of the first aboard. Lauren Hansen, IRES’ CEO, said she rolled her eyes when the GEO first knocked on her door about placing GFAs on IRES, but she quickly saw the value of the undertaking. Boulder’s building codes now require all new construction and remodels to be 30 percent more energy-efficient than conventional codes. And that’s just the starting point.
“It’s not just about listing and selling homes, but instead how can we gather the right kind of applicable data, meaningful data, so appraisers can start putting these houses side by side [next to code-built twins].”
The GEO approached Hansen in April 2010, and IRES moved with lightning speed, launching its GFA in August. She says she had IT support that a lot of smaller MLSs don’t have in-house. (The GEO MLS grants intended to offset that expense, even if the work has to be sent out-of-house.)
Another reason Hansen moved so fast is because the GEO offered her a data template to facilitate apples-to-apples comparisons. “This is not the area for you to be creative,” she says the GEO told her. “If you want to change up data collection, go for it. But be sure to have at least the same info that we do.”
The 800-pound gorilla, Metrolist serving metro Denver and almost half the REALTORS in the state, has been slower on the uptake, and its founding president resigned in October after 27 years there. Melissa Olson, Senior Manager for Marketing & Sales, says it hasn’t been a priority for Metrolist because REALTORS haven’t asked for it.
“In our market, there just hasn’t been a real call in the brokerage community for the green fields,” she says. She advises brokers who are interested to tack green data on as “additional information.” Olson does say, however, that a bona fide GFA will be available on the MLS toward the end of this year.
Smith notes another issue with widespread acceptance – no secondary market for energy-efficient mortgages. “Fannie and Freddie and HUD can come up with energy-efficiency mortgages all day long, all they want. Underwriters and lenders will add their own layer of criteria,” he says. “If we get the mortgage industry to really buy into an energy-efficient home with a HERS score of X (a “miles per gallon” comparison) with data from an MLS, appraisers can understand it, and they can get comps from an MLS because it’s all in there.”
He says one sticking point is that appraisers have lacked mechanisms to value green improvements. But this year, the Appraisal Institute passed its own GFA with, Hansen notes, fields similar to IRES’s and other MLS’s. Hansen says it’s a game changer because where appraisers go, lenders and underwriters can follow.
One more obstacle to a green MLS – and perhaps the biggest – is actually getting REALTORS to use it, and that’s a problem of education. Even Hansen in green-tinged Boulder says she doesn’t have the acceptance of the GFAs that she’d like to see.
She says acronyms like VOC paints, SIPs and ICFs (both insulative building foam) can be intimidating. “It’s like looking for a job. If I don’t know what the acronyms are, I probably shouldn’t apply.” Hansen keeps up the drumbeat in all her real estate CLU classes, not just green classes. And Olson says she’s had the same experience in Denver.
As the various components surrounding green-building valuation gel, Hansen says it’s only a matter of time before REALTORS start using them. “Once the brokers understand this could make my seller’s property more valuable and more attractive, it’ll be easy for them to jump on board.”
-Melissa Baldridge, GreenSpot
 Ann Griffin, “Certified Home Performance: Assessing the Market Impacts of Third Party Certification on Residential Properties,” Earth Advantage Institute, May 29, 2009.