Energy efficient housing: strategies for agents

This article provides tips on how a seller’s agent can market an energy-efficient home, and how to meet energy-efficient demands on older homes.

In today’s stagnant economy, why should agents care about energy efficiency, or being “green;” aren’t there more important things to worry about?

While there are more immediate concerns troubling the housing industry, in this helter-skelter economic climate seller’s agents need to strategize and work beyond what has been “standard practice” to get their listings sold. One way they can do this is through properly marketing properties that qualify as energy-efficient homes.

Energy-efficient features vary from simple to complex, from installing an Energy Star dishwasher to solar panels on the home’s roof. Each has monetary benefits, which an informed agent is prepared to explain to a potential buyer.

What do buyers want?

Buyers are motivated to purchase energy-efficient (or “green”) homes for two reasons. The first, and easiest to quantify, is the savings on operating costs.

Second, there is a social motivation present (mostly in high-tier communities) which gives a homeowner green bragging rights. Since most home sales occur in mid- and low-tier housing, we will focus on the operating cost motivation.

Listing an energy efficient home

When given the opportunity to list a home with energy-efficient features, proper marketing is helpful to move the property effectively.

Agents representing a seller need to be prepared to demonstrate how the listed home is going to stand out, be uniquely different from the pack of homes for sale in the neighborhood. The home’s location is pivotal, as every home in a neighborhood is going to trend toward an average price per square foot.

The seller’s agent’s marketing task is to communicate to potential buyers the energy-efficient home is actually offering a better deal than similarly priced homes.  To best accomplish this, a cost analysis worksheet needs to be prepared on the monthly operating expenses the buyer will experience as owner of the property.

Communicate the savings to potential buyers by comparing the energy-efficient home with that non-energy-efficient home down the street. This will show the buyer exactly how much they will save in ownership costs each month. An alert agent will further demonstrate the long-term savings the buyer will receive over the years. [See first tuesday form 306]

Comparing investments

Hand a potential buyer an operating cost sheet on the property, demonstrating the value of the home beyond the initial asking price. Buying a home for most families is an emotional investment, but numbers speak louder than feelings, especially for well-informed buyers who want to get their money’s worth.

An operating cost sheet, together with a comparable market analysis presentation, is used to demonstrate that a more expensive house with the right features does pay off in savings over the long run. [See first tuesday form 318]

Sample buyer operating cost sheet

	Without Energy Improvements	With Energy Improvements
Home Price	$150,000	$154,816
Loan amount	$135,000	$139,334
Monthly Payment	$991	$1,023
Energy bills	$186	$93
Energy bills + Monthly payment	$1,177	$1,116
Monthly savings	$0	$61
Savings over a ten-year period	$0	$7,320

*Numbers from the Department of Housing and Urban Development (HUD’s) Energy-Efficient Mortgage Home Owner Guide

Of course, a little effort is required of the seller’s agent to gather the utility cost data on the listed property and from the utility company to determine the monthly energy savings, or possibly getting the costs incurred by a comparable property without the energy-efficient improvements.  For locating a buyer and intelligently presenting evidence of the home’s energy-efficient amenities and cost savings, points the seller employed you to accomplish, the seller’s agent receives a fee.

A seller’s agent preparing and delivering to prospective buyers a property operating cost sheet such as the one above provides the buyer with a concrete comparison. Better yet, encourage and get authorization from the seller to order out a home energy audit from a Home Energy Rater certified by the Department of Energy. Check out their costs and be prepared to show the seller how they can help you assemble a comprehensive marketing package on the property. [See Due Diligence and Disclosures, Chapter 12: The home inspection report]

Related article:

Energy audits – good for the buyer, better for the seller?

Home energy efficiency; save money by upgrading your property

Making it easy

The goal of the seller’s agent should be to make the home buying process as simple as possible. If the agent throws up his hands and says, “It’s not standard practice for the seller’s agent to get you this information; you’re going to have to figure out the energy costs yourself,” the buyer is heading out the door and down the street to the next house on the block with a more buyer-friendly agent who has done his homework, knows what the listing property is all about, and has the information in printed form to hand to them.

It’s a low-demand, high-supply market (a buyer’s market) out there in the MLS marketplace, and that means the buyer gets to call the shots. Demand for housing is very low among buyers who will own and occupy, only half the current sales level.  Presently supporting the sales volume at between 40% and 50% of single family residence (SFR) and condo buyers are absentee buyers– speculators – with no intent to occupy the property themselves.  They intend only to flip them and, if necessary to reduce their negative cash flow, let out the properties until prices jump up and a profit can be had on a resale.

But what if the listed home is anything but energy-efficient – complete with minimal insulation, behemoth water heater and drafty windows?

Marketing the fixer-upper

You may have seen the TV show: a buyer visits multiple run-down listings with an agent and contractor in tow. The contractor informs the buyer how much improvements would cost, and what can be improved within their budget.

Now, most buyers cannot afford to hire a contractor to accompany them to each house they’re interested in. Further, the buyer’s agent is not in a position to invest the time researching each qualifying property’s energy efficiency when the seller’s agent has failed to do so. Seller’s agents of properties needing deferred maintenance must do the legwork themselves. By working with a contractor to find out how much it would cost to install energy-efficient improvements, the seller’s agent takes the guesswork about the property out of the equation for buyers and their agents.

Energy-efficient improvements offer a higher rate of return than other, more cosmetic improvements, so buyers can feel comfortable about installing suggested improvements. For example, in California solar panels on average create a 97% return on investment in property value increases after accounting for federal and state subsidies, according to the National Bureau of Economic Research. This is in addition to the actual energy costs saved each month.

Incentives and rebates

The government has made several efforts to encourage energy-efficient home improvements in an effort to reduce the nation’s combined energy use.

Energy mortgages are a relatively new offering, of which few buyers are aware. These mortgages finance both the purchase price and the cost of energy-efficient improvements – a perfect tool for the seller’s agent marketing a fixer-upper. The rules for obtaining energy mortgages are more complex, but good agents will be familiar with the basics so they can market the financing option to potential buyers.

Related article:

Energy mortgages: monthly savings take you from red to green

A property’s energy demands: an evolving factor in marketing

Further, local rebate programs offer monetary compensation to homeowners installing energy-efficient improvements. These rebates pay for a portion of the installation cost, and should be mentioned to encourage potential buyers considering an update.  There are also statewide property tax deductions for buildings installing solar energy systems.

For a list of energy efficient rebates and incentives available in your area, visit Engage360.

The marketing efficiency of a seller’s agent selling a non-energy-efficient home in this new paradigm of a real estate market seems now closely coupled to an energy efficiency conversation.

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