By Pamela Brookstein, Senior Project Manager, Elevate December 15, 2021
What makes a home “high-performing”? A high-performing home is built or renovated according to building science principles to make it more healthy, comfortable, safe, and resource-efficient than an average home. These homes may generate and store their own energy and may also include a wide range of high-performing features such as air sealing, insulation, energy-efficient heating and cooling equipment.
Who Wants a High-Performing Home?
National and regional studies over the past decade have consistently shown that homebuyers are interested in energy efficiency, renewables, and features that make a home comfortable, healthy, and safe. In fact, energy-saving features such as ENERGY STAR® windows, appliances, and whole-house certifications ranked among the top ten must-haves that buyers wanted from a list of over 170 home features (Dittman Tracey, 2019). A majority of homeowners also see clean indoor air as essential or desirable; features including home dehumidification systems, electronic air cleaners, and low volatile organic compound (VOC) paints all help improve indoor air quality (National Association of Home
Real estate agents connect homebuyers to homes, and according to the National Association of REALTORS® 2021 REALTORS and Sustainability Report, most agents don’t realize that high-performing features increase a home’s value. © FG Trade
Studies from across the U.S. consistently demonstrate that consumers not only are interested in these home features but will pay more for high-performing homes that are clearly marketed as such. This means that homebuyers will pay a “green premium” or “high-performing premium” that reflects the contributory value1 of the home’s high-performing features. Recent studies from across the U.S. have found high-performing premiums ranging between 2.19% and 14% of the home’s total sale price.
Real Estate Agents: An Opportunity
We know that homebuyers are interested in high-performing homes and are willing to pay more for them. So what’s stopping these homes from taking over the market?
Real estate agents are the key that connects homebuyers to homes. And according to the National Association of REALTORS® 2021 REALTORS and Sustainability Report,2 most agents don’t realize that high-performing features increase a home’s value. When agents aren’t able to recognize a high-performing home, its value is underappreciated.
Some real estate agents do understand the value of these special homes – and they stand out in the market by helping their clients sell and purchase high-performing homes at their proper value. These agents represent an opportunity in the real estate market – if we can ensure that the benefits of high-performing homes are being made visible and fairly valued in the market by educated agents, there is a potential to create a virtuous cycle in which homeowners want to invest in high-performing improvements and homebuyers are willing to pay more for homes with these features. Agents with the skills to market the growing inventory of high-performing homes will have a market advantage in capturing new clients.
What Barriers Do Real Estate Agents Face?
Given the benefits that high-performing homes and features provide and the opportunity to sell the homes for more money, why would agents not prioritize learning about the topic? Despite the desire from homebuyers, these homes are not always easily visible to agents looking to market these homes. It is evident from studies and surveys that homebuyers value the benefits that high-performing homes provide. However, homebuyers often do not know the features that provide the benefits of a high-performing home. Instead of asking real estate agents for a home with insulation and air-sealing, homebuyers ask for a home that is “comfortable” and “warm.” Because of this, real estate agents don’t see a demand for high-performing anything. This apparent disinterest from buyers de-prioritizes the urgency agents might feel to learn about clean and efficient energy features.
Additionally, there is a lack of visible inventory of high-performing homes on the market. In 2021, Elevate’s 2021 appraiser analysis3 found that appraisers and real estate agents both drastically underestimate the number of third-party certified high-performing homes in their markets. If agents and appraisers aren’t aware of the substantial number of homes that could be marketed as high-performing and valued for more at the time of listing or refinance, there is little incentive for them to invest time learning about the topic.
Related to the lack of visible inventory is a lack of high-quality education about high-performing homes. Real estate agents are accustomed to learning about and taking continuing education classes through their local associations (or boards) of REALTORS,® In fact, one benefit of belonging to a local association is access to a variety of regularly offered classes for either general education or continuing education credit. The education staff at local associations of REALTORS® are tasked with offering access to interesting, engaging programming that will help their members stand out from the competition in a crowded field. With some notable exceptions, most associations do not offer courses that cover rooftop solar and energy efficiency. Because most agents are not asking for these classes (because there is a lack of visible inventory), education directors are not sure that people would attend.
Standing Out from the Crowd: How Real Estate Agents Market High-Performing Homes
Despite the barriers, there are real estate agents that appreciate the benefits of high-performing homes and features and are interested in including the information in their listings. These agents go above and beyond to meet the desires of homebuyers, which makes them stand out in a crowded real estate market.
It is evident from studies and surveys that homebuyers value the benefits that high-performing homes provide. However, homebuyers often do not know the features that provide the benefits of a high-performing home. © urbazon
The good real estate agents are masters at marketing – they can take a fairly basic home and make it sound like a castle. The very best real estate agents take on the challenge of making high-performing homes easy to understand and exciting to homebuyers. Understanding the variety of home features, like solar panels, charging stations, ENERGY STAR appliances, well-sealed ducts, and windows that tout their U-Value and Solar Heat Gain Coefficient, that a high-performing home has to offer help agents market a home as something special and unique that is worth investing in.
Inseparable from marketing know-how for real estate agents is navigating liability concerns. Effective marketing is all about highlighting a home’s special features, but agents need choose their words carefully to not over-promise and under-deliver. Homebuyers want to know the benefits of a high-performing feature, not just that it was installed in 2021 and is 96% efficient. A talented real estate agent can translate what these numbers mean in terms of benefits to the homebuyer – for example a quieter home, cleaner indoor air quality, lower energy bills – to show the homebuyer why it’s worth paying more for those features.
Progress in High-Performing Homes Markets
Here’s what’s clear: Although homebuyers say they desire high-performing homes, real estate agents are not typically prioritizing learning about high-performance or solar because of the lack of visible inventory and high-quality education. When agents leave high-performing features out of the real estate listing, homebuyers don’t know the true value of their homes – so, we end up with a negative cycle of disinvestment in high-performing homes and features. How, then, do we reach market transformation where homeowners consistently invest in high-performing features because they pay off immediately and in the long-term, at the time of sale or refinance?
The very good news is that there is progress being made on multiple fronts.
Elevate, a nonprofit invested in clean and efficient buildings, understands the importance of engaging real estate agents. In order to reach these professionals in an engaging and meaningful way, Elevate, with guidance from real estate agent educators, created two three-hour continuing education classes: “Stand Out from the Crowd: High-Performing Homes” and “Solar for Real Estate Agents.” The classes were designed with the understanding that real estate agents are small-business owners, and that time spent in the classroom is time away from work. With that in mind, the courses not only cover the benefits of high-performing homes and solar, but techniques for building their business with this new knowledge.
Additionally, there are REALTOR associations that are on the forefront of an effort to bring this education to their members. Read more about the Chicago Association of REALTORS®4 and the Iowa Association of REALTORS.®5
And despite the challenges, there are real estate agents across the country who have built their knowledge of high-performing homes into their business models. Even better, they are seeing a higher value for the high-performing homes that they sell.
Case Study: Selling a High-Performing Home in Chicagoland
When the owners of a home in Oak Park, an inner-ring suburb of Chicago, decided to list their home in March 2020, they did so at the beginning of the COVID-19 stay-at-home orders. This meant that the typical things that happen when a home goes onto the market, like open houses and freely scheduled home showings, were curtailed. The owners did not know what to expect.
This bungalow in Oak Park, Illinois features high efficiency furnace with MERV 16 filtration, SEER 13 Lennox AC, new water heater, 200 AMP electric, R58 insulation, newer windows throughout. © realtor.com
The owners of this 1936 bungalow had invested in many energy efficiency upgrades, including a high-efficiency HVAC system and advanced air sealing and insulation in the attic and in the walls. These improvements enabled the home to meet the criteria for a Gold Pearl Certificate, awarded by Pearl Certification. The home sellers’ real estate agent was knowledgeable about the value energy efficiency upgrades and third-party certification can have in the real estate market and expressed confidence that these features would draw homebuyers in. The agent listed the house at a price 10% higher than homes of similar size, location, and age because of its high-performing upgrades and third-party issued certification. In this case, the home also “spoke for itself.” Pearl Certification provides an engaging package of marketing materials that document the home’s high-performing features and their related benefits. The materials are meant to be shared by email and displayed at showings for potential homebuyers. Because this home was listed during the pandemic, this was especially important as buyers were advised to limit their time in the house and to avoid touching things. The marketing materials were a window into the special features of the home that couldn’t be ascertained from a visual inspection and limited time in
The home sold in 28 days at full list price with a backup offer over the list price. The agent credits this success to the marketing material provided by Pearl that called out the high-performing features and their benefits.
What lessons can be learned from the sale of this special Oak Park, Illinois home? What steps can or should be replicated in other markets or contexts?
- Highlight high-performing features. Use marketing materials to present and package the benefits of high-performing features in an engaging and exciting way. People buy homes based on emotion and feelings.
- List a high-performing home for a higher price. Homebuyers may pay more for a high-performing home than one that isn’t, but only if the listing price is higher and the benefits of that home are well marketed.
- Use the Green and Energy Efficiency Addendum. The Appraisal Institute’s Residential Green and Energy Efficiency Addendum is a worksheet that provides fields that allow a home’s energy efficiency features, renewable energy systems, and other high-performing features to be documented and provided to the appraiser and the lender in a standardized way.
About the Author
Pamela Brookstein is Elevate’s real estate subject matter expert, leading real estate partner engagement, research and development and professional education. Ms. Brookstein works to make the value of high-performing homes visible in real estate transactions. She has created continuing education courses for real estate agents on high-performing homes and teaches them nationally. She managed the research, writing and publication of two papers for Elevate: ‘Realizing the Value: An Appraiser-Led Analysis of the High-Performing Home Premium in Leading Midwest Markets’, a first of its kind analysis done in the Midwest, and ‘Making the Value Visible: A Blueprint for Transforming the High-Performing Homes Market by Showcasing Clean and Efficient Energy Improvements’, a paper intended to provide guidance to energy efficiency advocates who want to effectively engage the real estate market. Ms. Brookstein has spent much of her career building relationships with municipal leaders, community organizations, and local residents to improve public health in Chicago.
1 Contributory value is the change in the value of a property as a whole, positive or negative, resulting from the addition or deletion of a property component