How Do I Get Home Buyers to Recognize The Value of My Energy Efficiency Improvements?

Home Energy Improvements May Be Worth More Than You Think...

If you remodel your kitchen, you expect to recover some of the cost when you sell your home. The same goes for finishing basements, adding a deck, upgrading windows, and many others. How does that apply to improvements which increase the energy efficiency of your home such as adding insulation and air sealing?

The concept is easy to understand. If two houses sitting side-by-side in the St. Louis area are exactly the same except one uses $1,000 per year more in electricity and gas than the other, which one would you pay more to own? The answer is obvious, with all other things being equal, most people would pay more for the home that costs less to own.

As with many things, the devil is in the details. You would pay more for the energy efficient home but how much more? And how does a home improvement that pays for itself in energy savings compare to a home improvement that depreciates over time such as windows or a deck?

According to a study done by the Appraisal Journal, the selling prices of homes increases by $20.73 for every $1 reduction in annual energy bills. For the two example homes above, the home using $1,000 per year less energy would sell for $20,730 more. This makes even more sense when you consider that, in 2010, the owner of the average home spent more on energy (electricity and fuel) than on either property tax or homeowners insurance.

This last fact can be difficult for people to grasp. We tend to be very aware of our property tax payments and our insurance costs because we see those on our monthly and annual statements. We love to complain about our property taxes,and we love to complain about our utility bills but we rarely think about which one is greater.

The future is bright for home energy improvements

Two current initiatives show that hope is on the way for recognition of the value of energy efficiency home improvements. One is the SAVE Act (Sensible Accounting to Value Energy), which was reintroduced as a bill before Congress in 2013. This bill provides a method for federal mortgage loan agencies to take into account homes that are energy-efficient when underwriting mortgages. For more detailed information, go here:  http://www.imt.org/finance-and-leasing/save-act.

Another example is what’s happened in Chicago and Northern Illinois. Illinois homeowners in that area who make home improvements and earn Gold or Silver Certificates through the Illinois Home Performance with Energy Star program also get a check box on the Multiple Listing Service (MLS) serving that area. We are hoping that a similar capability will be implemented in the St. Louis metro-east area. For more detailed information, go here:  http://www.illinoishomeperformance.org/what-expect/certificate.

For now, when selling your home, you can make your monthly energy bills available to potential homebuyers. Also, in the description of your home for sale, you can include energy efficiency upgrades you have made and tout your low energy bills. The key is to get potential buyers to think in terms of the total cost of ownership.