It is hard to appreciate what you cannot see. It is even harder to put a monetary value on it. That new modern kitchen? That is fairly easy for buyers to see, Realtors to sell, and appraisers to value. Yet often what makes a home more energy efficient is hidden behind walls, in the attic, and within the efficiency of the heating and cooling equipment, appliances, windows and doors.
Energy labels for homes make the real estate transaction more transparent and easier to see, sell, and value those hidden energy features and benefits. Home energy labels address a consistent market failure: homebuyers and real estate professionals don’t have access to verified information about the expected energy performance of a home. Not all homes are created equal, and often the only way to tell the difference between two seemingly comparable homes is with an energy label. This information helps a buyer make a more informed decision about a home purchase. Greater transparency into a home’s estimated energy costs can help homebuyers easily compare various homes, take their financial circumstances into account, and then weigh their home buying options.
In order to value the sustainable, renewable, and energy efficiency assets of a home, a homebuyer needs trustworthy data at the time of sale. As more homes receive home energy audits, have rooftop solar and batteries installed, and receive third-party home certifications (energy labels); it is critical that information is accurately displayed in a real estate listing.
Since buildings account for 40% of U.S. energy use and about one-third of greenhouse gas emissions in the United States, there is an increased focus on ways to reduce energy use and lower emissions in our building stock. One way this is being accomplished is through energy labeling policies.
A growing number of states and municipalities are adopting mandatory energy labeling policies and programs to help accomplish their carbon reduction goals. This also helps increase homeowner awareness about their home’s efficiency, and often drive improvements prior to listing as has been seen with the City of Austin’s energy labeling ordinance that has been in place since 2009.
The City of Minneapolis has a Truth in Sale of Housing (TISH) policy that included home energy labels starting in 2020. The City of Portland, OR implemented a mandatory Home Energy Score Ordinance in 2017 to improve ‘the health, comfort, affordability and safety of Portland homes, while reducing carbon emissions necessary to meet their collective climate action goals’.
Many feel it is a step forward for consumer protection and a way to provide more information to a potential buyer than what is available during a regular home inspection. An energy labeling policy also helps build a volume of this data in a market which is critical for the real estate industry.
When this information is included in a for sale listing, it allows for the appropriate market reaction of a more efficient home at the time of sale. Otherwise, thousands of dollars of value could be lost because trustworthy data was not available for a listing agent and potential buyers to react to at time of sale.
That lack of data making it into listings has also prevented appraisers and lending institutions from accounting for those market reactions. Studies have shown that in markets where listings have included energy efficiency information they sell for a higher price and in a shorter amount of time.
The documentation that supports a home with an energy label could also provide a buyer more buying power using the Energy Cost Estimate comparisons and including this data on the Appraisal Institute’s Residential Green & Energy Efficiency Addendum. Documentation helps alleviate greenwashing. Documentation shows proof. Documentation helps alleviate inaccurate information. Documentation helps build trust.
Real estate professionals are becoming more aware of the tools at their disposal to communicate energy and environmental attributes. More often than not, local Multiple Listing Services (MLSs) have included data fields that support energy labeling information. Real estate agents can be advocates to improve these systems by requesting the MLS adopt RESO standard fields for Green Verification and Power Production if they are not already part of the MLS database.
When it comes to using energy labels in the home sale process, the following are best practices for selling agents:
Do your green check and enter this information on your listings
Tell the story about the features of the home in the public remarks
Download the available documentation and include it in your listing if MLS rules permit
Add the documentation as a photo or upload as a public attachment or document
Put this information out at open houses
Include in social media marketing for the home
Make sure to provide this information to a potential buyer and the Appraiser!
This Marketing Matrix provides a variety of options that can be utilized to promote energy labels in listings:
The Green Building Registry can also be a helpful tool for real estate professionals, whether a selling agent, a buying agent, or an appraiser to locate this this information. While the Green Building Registry is a tool used to support several State and municipal energy labeling initiatives, the team at Earth Advantage has been working to expand the data available through the Green Building Registry (GBR). Now with over 1.6 million homes, GBR has grown into the largest single source of building certification and PV data in the US. There are homes with energy labels in most major markets and in every state.
These are homes that have at least one building certification; a trained, independent, third party professional has inspected the home and collected the data necessary to create a home energy report for a particular program. The available data in GBR includes:
HERS® Index Score
Home Energy Score
LEED for Homes
National Green Building Standard
Energy Star
EarthCraft
Built Green
Earth Advantage Home Certification
Do your green check! Anyone can search the free GBR website at us.greenbuildingregistry.com to see if a specific home has an energy label or to see how many homes in a defined area have energy labels.
GBR is also available to make an API connection to local MLS systems to automatically populate energy information into listings.