Green
Equals Value and Affordability
By Chris Lehman, MAI, SRPA, SRA, REALTOR®, Chair SIERRA
CLUB AUSTIN
May 30, 2008
The
Sierra Club and well informed REALTORS® support Point
of Sale (POS) minimum home energy standards.
The City of Austin is considering green building efficiency
standards that some REALTORS® contend will make it more
difficult to sell your house and make homes less affordable.
In fact it will make homes more valuable and more affordable.
This is a much needed opportunity. This article will reveal
some research on energy efficiency upgrades and the possibility
of a point of sale energy audit and minimum standards. The
bottom line is that energy efficiency upgrades, if needed,
are the best investment you can make in your home and the
purchase money mortgage at the point of sale is the best
way to finance it. But, given the many interests at work
to simplify the home purchase you will need mandated minimum
standards to get it done. First, please consider the following
article:
Appraisal Institute’s Appraiser News Online Headlines
Last Updated: April 30, 2008
Vol. 9 , No. 7/8
Green Buildings Selling for More
New analysis shows "green" homes may be a bright
spot in today's real estate market. Environmentally certified
homes sold for 4.8 percent more and stayed on the market
for 24 percent less time than comparable homes sold last
year, according to GreenWorks™ Realty. The firm’s
research focused on the Seattle market.
In
the first year since it began tracking environmentally certified
homes, 19.8 percent of new homes in Seattle sold on the
Northwest Multiple Listing Service were environmentally
certified. These homes averaged 1,477 square feet, just
slightly smaller than the 1,492 square foot average for
all new homes sold. On a square foot basis, this means green
homes sold for a 5.9 percent premium. Green homes certified
by a third party sold for a 10.5 percent premium on a square
foot basis.
"In
today's changing market, this is an important finding for
homeowners to consider," noted Ben Kaufman, founder
of GreenWorks™ Realty. He added, "Environmentally
certified homes offer homeowners a way to get the most value
and sell more quickly."
Environmentally
certified homes include those certified by Built Green™,
Energy Star™ or LEED for Homes™. From September
1, 2007 to March 31, 2008, 168 environmentally certified
single-family new homes were sold in Seattle out of a total
of 848 new homes sold.
"Until
now, the idea that people are willing to pay more for environmentally
certified housing has been mostly based on anecdotes,"
said Aaron Adelstein, Executive Director of Built Green™.
"Now we have the first hard data to back up what many
of us have believed for a long time – green sells
for more," he added.
Kaufman
noted, "When buying homes, it seems buyers understand
the benefits of green homes - from lower energy bills to
healthier indoor air." Kaufman initiated the effort
to include environmental certification checkboxes in the
NWMLS. "These new figures will help appraisers, homeowners
and real estate agents understand what buyers are willing
to pay for an environmentally certified home," added
Kaufman.
Not
only do homebuyers and the nation’s most respected
experts in home appraisals recognize the value of energy
efficiency but the lenders do too.
Energy
Efficient Mortgages Have Been Around for Decades
For
decades now almost all mortgages have been available as
Energy Efficiency Mortgages (EEM) that allow homebuyers
to include energy efficiency upgrades at the time of purchase
and to include them in the loan. An EEM increases the amount
of home you can buy two ways. First it allows you to qualify
based on payments of up to 30% of your income instead of
28% increasing your buying power 6.67%. Second it allows
you to incorporate energy efficiency upgrades into your
purchase thereby reducing your monthly utility expense so
the slightly higher mortgage payment is actually part of
a more affordable house.
Here
is an example of the higher price but lower cost benefit
of EEM from http://www.pueblo.gsa.gov/cic_text/housing/energy_mort/energy-mortgage.htm:
Energy-efficient homes cost less to own than inefficient
homes, even when you finance higher price tags.
| |
OLDER
EXISTING HOME |
SAME
HOME WITH ENERGY IMPROVEMENTS |
| Home
price |
$150,000
|
$154,816 |
| Loan
amount 90% |
$135,000 |
$139,334 |
| Monthly
payment @ 8% interest fixed 30 yr loan* |
$991 |
$1,022 |
| Energy
bills |
$186 |
$93
|
|
The true monthly cost of home ownership |
$1,177
|
$1,116 |
| Monthly
savings |
- |
- $61 |
The
example seems quite old since it is based on an 8% 30 year
fixed rate mortgage. At today’s lower interest rates
and higher energy costs the advantages would be greater.
I did
some independent phone research and, after fighting my way
through a thicket of phone menus, found most lenders were
receptive. Here are a couple of Austin mortgage opportunities.
Countrywide is enthusiastically offering Energy Efficient
Mortgages. I spoke with Mark Sumrall at Countrywide’s
Great Hills Branch (512) 231-3436 direct. They have other
offices if he gets too busy. Countrywide seems to be some
sort of partner in the program since theirs is the only
company logo on the government webpage.
Bank of America still hasn’t called me back but the
Bank of America website March 6, 2007
http://newsroom.bankofamerica.com/index.php?s=press_releases&item=7697
says, “The Green Mortgage Program: Homebuyers will
receive a reduced interest rate or $1,000 back for each
home-purchase mortgage meeting ENERGY STAR™ specifications.”
The
opportunity for reduced interest rates for green homes is
gaining ground. We know that lower risk borrowers get lower
interest rates. And since a homeowner who has a green home
is less vulnerable to steadily increasing utility expenses
the green or energy efficient mortgage is less risky. In
fact, thanks to the ground breaking work of MortgageGreen.com
founder and CEO and others Wall Street will soon be able
to buy Green Mortgage™ backed securities in bundles
that eliminate exposure to those who chose not to conserve
in favor of placing their financial futures at the mercy
of energy cost in an uncertain world. MortgageGreen.com
already offers 1/8% interest rate discounts on green homes
and does business in a profoundly green way.
These
were the few mortgage lenders who responded to my initial
phone survey. I hope you and your friends will make me aware
of more so we can compile a list of suitable opportunities.
I am hoping to offer a list on our website.
But
why you might ask should the City require energy audits
and upgrades to inefficient homes if upgrades are such a
great deal? Have you ever tried to add a condition or special
provision to an offer to purchase a home? Anything that
might add complexity or even the slightest possibility of
a delay to the closing seriously weakens the quality of
that offer. In the eyes of the seller and any REALTORS®
waiting on sales commissions any additional inspections
are a cause for concern. The no look, “as is”,
buyer is the preferred sucker. And since half the agents
already work for the sellers and the other half are keeping
at least one eye on the earliest possible commission you
need mandated standards in order to be able as a practical
matter to get an Energy Efficient Mortgage.
Concerns
about paying for these upgrades are exaggerated. They can
be paid for by the buyer through the EEM so no one has to
come up with additional cash. A newer home or one with a
recent (years old) energy certification will be energy compliant
and require no upgrades. A total wreck of a home is similar
to an oil burning, beater car and should not be allowed
to poison our air even if the smoke is emitted miles away
at some nasty coal burning power plant.
Opponents
not only exaggerate the hassle associated with selling a
home with energy efficiency upgrades but some have suggested
that point of sale (POS) is an arbitrary deadline and that
they would prefer a date certain deadline for all homes.
In fact while a calendar date may seem more orderly the
point of sale is the optimum time in the life cycle of homeownership
for needed energy upgrades because the costs can be rolled
up into the mortgage without incurring additional loan fees
or forfeiting tax deductions on the interest when you use
a different source of financing.
By
the way, not all REALTORS® are evil. Ignoring Energy
Efficient Mortgages that have been available for decades
is a natural byproduct of an unregulated market that allows
energy inefficiencies to drive up the cost of homeownership.
In fact I’m a REALTOR® and although I don’t
list or sell homes other REALTORS® are Sierra Club members
and even advertise in our newsletters.
