Do energy efficient features increase a home’s value to buyers?

  • Yes (89%, 17 Votes)
  • No (11%, 2 Votes)

Total Voters: 19

Sellers continue to sit on the sidelines while they wait for an end to the housing market’s recession. Where before they may have taken advantage of high demand and low interest rates to sell and upgrade, expect to see more homeowners opting to stay put and simply improve their present homes.

The good news for homeowners: Uncle Sam is ready to give homeowners a discount on their income taxes for making specific types of energy efficient improvements. Essentially, a tax credit is prepaid taxes directly reducing the amount you owe on taxable income.

Since the start of 2023 through 2032, homeowners are eligible to receive up to $3,200 in federal income tax credits annually to reimburse the homeowner for up to 30% of their cost of energy efficient home improvements made to their principal residence.

Eligible improvements include the installation of energy efficient:

  • heat pumps;
  • heat pump water heaters;
  • insulation;
  • doors; and
  • windows.

Upgrades to electrical panels and ordering home energy audits are also included.The Home Energy Rating System (HERS) index is the U.S. standard rating system for energy efficiency in the home. To find a certified HERS rater in California, visit the California Energy Commission.

Residential Clean Energy tax credits also offer homeowners a federal income tax credit of 30% on their principal residences and second homes on the cost for installation of:

  • rooftop solar panels;
  • wind energy improvements;
  • geothermal heat bumps; and
  • battery storage.


Editor’s note — Many agents erroneously believe they cannot give their clients advice on the legal and tax aspects of a transaction, but this is not the case.
In law, real estate licensees are not only permitted to share their tax knowledge — hard-earned by education and experience — but may also be required by their agency relationship to do so depending on:

  • the scope of the agent’s knowledge;
  • the type of property in the transaction; and
  • the client’s intended use of the sales proceeds.

While there is no fee involved for an agent who provides tax advice to a client not likely to sell, helping your clients save money to improve their homes today will ensure you remain top of mind when they do sell — more likely during the next mini-boom following the recovery from the 2023 recession than anytime in the next two years when prices will continue to dive.


Related article:

The truth about giving tax advice to clients

In the meantime, expect these tax incentives to keep even more homes off the market, placing further pressure on the already anemic inventory of homes for sale.

California is already well-known for its limited MLS inventory, which in the past has added rocket fuel to competition, causing prices to rise far faster than the pace of incomes. State tax incentives like Proposition (Prop) 13 — the “welcome stranger” law — encourage homeowners to stay put rather than move and increase their property tax burden. Federal tax incentives like these energy efficient tax credits will only add weight to the chains keeping homeowners in place… and keeping listings out of the hands of agents.

Disclose energy costs

For prospective buyers, the cost of each energy source consumed or caused to be consumed by owning a home are material facts they need to become sufficiently informed to consider owning a particular home, and whether one home is preferable over another on these grounds.

Disclosure of the data might alter negotiations, or chase some prospective buyers away from high energy consumption properties, which of course is why the energy costs are material facts required to be disclosed. [See RPI Form 306]

Another way to quantify a home’s energy costs —and savings— is through the federal government’s Home Energy Score program, designed to:

  • encourage homeowners to make their homes more energy-conscious; and
  • motivate homebuyers to buy homes with better improvements that allow them to consume less energy for shelter and travel.

The federal Home Energy Score is a rating assigned to each home by a home energy specialist. Using this rating system scoring, buyers can determine the relative amount of energy the home and its occupants consume due to its current physical condition.

Homes with a high energy score require the expenditure of a lesser amount of energy — they are more energy efficient. Conversely, homes with low scores are less energy efficient. For homeowners and sellers, the specialist will suggest changes to the structure to improve the score.

Related article:

A property’s energy consumption: known and demanded in a recession: Part 1


Marketing energy efficient improvements

To stand ahead of the competition — and justify the seller’s asking price — sellers with energy efficient improvements need to market them appropriately.

The marketing task of the seller’s agent is to communicate to potential buyers that the energy-efficient home is in fact a better deal than comparable homes lacking energy efficiency. To best accomplish this, a property operating cost analysis worksheet is prepared, itemizing data on the seller’s monthly operating expenses a buyer will likely experience as owner of the property. Of course, this information is included in the marketing package the sellers agent prepares for the property.  [See RPI Form 306]

Communicate the savings to potential buyers by comparing the operating costs of an 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 – real savings illustrated with real numbers. An alert agent will further demonstrate the long-term savings the buyer will receive over the years. [See RPI Form 306]

An operating cost sheet, together with a Comparative Market Analysis (CMA) presentation, demonstrates a more expensive house with the right energy features absolutely pays off in savings over the long run. [See RPI Form 318]

Related article:

A property’s energy consumption: Part 2: Marketing a property’s energy use