20 Percent of U.S. Homes are Undervalued

Bring up the topic of energy efficiency, and many sales associates will tell you about the investments they’ve made in their own homes for comfort and efficiency.

And yet, the real estate industry hasn’t made the connection between what we all enjoy as homeowners (i.e., comfort) and what buyers are looking for (also comfort!) – even though NAR surveys consistently show buyers want and will pay more for comfortable and efficient homes.

Here’s the problem: in 2018 this disconnect was responsible for sellers leaving $11 billion in potential home value “on the table” at closing.

The U.S. Dept. of Energy tracks sales and market penetration of energy efficient products as well as the number of ENERGY STAR homes built. They also track the requirements and implementation of residential energy code. They know a lot about the profile of our homes’ performance for comfort, energy efficiency, and indoor air quality.

National Renewable Energy Lab and ENERGY STAR data show about 20% of homes sold have significant features installed which have been proven to add value at time of sale. Depending on the regional study, the sales premium ranges from a 2% – 10%.

Let’s assume a potential 4% increase in value is possible for homes with energy-efficient features properly identified and marketed at resale. The average US home price is $250K, and 4% of that is $10K of “hidden” value. If we multiply $10K by 20% of the 5.5M homes sold in 2018, it totals $11billion dollars. Ouch.

Listing agents typically ask sellers about the newness of certain features, like heating and cooling equipment. But, “Is it new?” is not the same as, “Is it energy efficient?” When agents don’t ask the right questions, they don’t get the right answers, and both the features and their benefits remain “hidden” from buyers.

Missing home data affects the CMA, home price, a future appraisal – and ultimately the seller’s return on investment.

Agents who ignore expensive and sought-after features in their listings may find themselves liable for not marketing the home to achieve full value. But there is another important reason to ask the right questions: between housing supply and buyer demand, a very real market opportunity awaits.

Agents who understand where the market is going have an edge over the competition for 20% of the listings out there. To capture this opportunity, agents’ next step to business growth is an easy one with a sure-fire reward: ask the right questions during the listing appointment. Get educated on energy efficient technology and learn how to articulate the buyer benefits these technologies enable. Lastly, agents should be sure to use all applicable MLS fields when creating a CMA to inform their pricing strategy and ultimately to market the home.

Consumer interest, energy building code, smart home automation, and other new technologies demand a higher level of professional service from agents. Or else.

Cynthia adamsAuthor Bio: Cynthia Adams (Cynthia Adams is CEO and Co-Founder of Pearl Home Certification, a real estate tech firm that captures data on high-performing home features to increase home value. Pearl is an NAR REach Technology Accelerator company.)