Green Housing: It's no Illusion

Energy-saving houses are more than nice--they're an opportunity.

May 1, 2001

Builders and lenders have been dabbling in the energy-efficient market for years. Now real estate practitioners are getting into the act, setting the stage for increasing interest in the green housing market.

“The development and finance communities are finally starting to see the importance of our role in selling green houses,” says Patricia “Pattie” Glenn, senior vice president of Bosshardt Realty, Gainesville, Fla., and a green building trainer for real estate professionals.

This year, for the first time, green building issues from the real estate practitioner’s perspective--how energy-efficiency ratings work, how to translate efficiency data into money-saving information for buyers--will be part of the building industry’s main green development conference, hosted annually in September by the Energy Efficient Builders Association.

“Just the fact that this group is hosting this session oriented to sales professionals indicates a major shift in thinking on how to move green building into the mainstream market,” says Glenn, who will lead the EEBA session. “Who’s in a better position than we to market the benefits of energy-efficient house features? We’re the educators at the point of sale.”

Consumers are increasingly demanding environmentally friendly, energy-efficient houses, and that trend will only accelerate now that energy prices, led by the California power crisis, are rising and concerns over global warming are escalating.

“Consumers are the ones driving green housing in the building industry,” says Tony Allen, vice president of sales and marketing for new-home builder Pulte Homes, Tucson, Ariz.

A survey conducted by Cahners Residential Group, a building trades publisher, found that consumers are ready to pay for a house that has alternative building materials and energy-efficient systems. Almost 80 percent of respondents to the survey listed the environment as a top concern, and almost 90 percent said they’d pay more for a house with environmentally friendly features.

The real beauty of the green housing movement, though, is that the attractive financing products available and the money-saving benefits of energy-efficient systems create their own demand. For you, energy-efficient systems can mean

  • More qualified buyers, and more buyers qualifying for more expensive homes. That’s because many lenders offer green mortgage loans. Details vary, but in general the loans offer borrowers higher credit ratios and, in some cases, lower interest rates. To qualify, the house must meet energy-efficiency standards. Fannie Mae, which buys so-called energy-efficient loans, qualifies loans based on EPA Energy Star standards.
  • Heightened deal-making power. Let’s say you’re at risk of losing a deal because the house has a bad roof or an old HVAC system. You can turn the problem into a plus by promoting green retrofitting.

“How many deals fall apart because of a bad roof?” asks Glenn. “Knowing what financing is available and what the energy standards are gives the buyers the opportunity to fix the roof using green mortgage financing. They can get reduced interest rates and stretched debt ratios. And think of the difference this information can make to an allergy-sensitive buyer who’s looking for housing alternatives.”

To serve this market, you need to get to know your local energy raters and green lenders--and know how to involve them in a deal. They’re the ones who assess the energy use of a house and determine what’s needed to achieve energy efficiency. They also know how much money that buyers can save once they adopt energy-efficient features.

Energy raters may be unfamiliar players in your market, but in many areas, they’re becoming integral in the sales of energy-efficient homes. They provide the independent verification that lenders look for to ensure that a house meets the applicable energy standards and thus qualifies for favorable mortgage treatment, says Glenn.

Pulte’s Allen says his sales associates benefited tremendously from training sessions he arranged to help them showcase home health, affordability, and energy-efficient features. Ever since that training, sales of energy-efficient Pulte models have taken off.

“What we found was that we had this Porsche,” Allen says, comparing the energy-efficient features of Pulte developments in Arizona to the high-end sports car. “But unless someone opens up the hood, [buyers] aren’t really sure what you’ve got under there.

“Some buyers just couldn’t believe that in Tucson, where it gets well over 100 degrees in summer, we could say their average energy costs wouldn’t exceed $31 a month. They laughed.”

With a little green know-how, you, too, could be laughing--all the way to the bank.

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