Builders face challenges in selling the green home story

Builders face challenges in selling the green home story

When it comes to building and marketing high performance homes, some building professionals may be ahead of the curve.

It can be difficult to convince home buyers of the value of investing in energy-efficient and healthy homes that may come at a premium price compared to homes of similar size in the same market. But some forward-thinking homebuilders are doing it any way. 

However, green builders face some challenges in the marketplace. A national survey, the ninth annual Energy Pulse study from The Shelton Group, also found that 81 percent of those surveyed said energy efficiency would have somewhat to very much impact on their selection decision when comparing two homes.

Additionally, a recent UC Berkeley/UCLA study of 1.6 million home transactions found that green labeling improved selling price. Controlling for all other factors, such as location, school district, crime rate, time period of sale, views and amenities, researchers found that the 4,321 homes sold with ENERGY STAR, LEED or GreenPoint rated labels commanded an average price premium of 9 percent.

So how should building professionals get their message across? According to the study, new messaging directions that elicit stronger, more emotional responses rather than "save money" messages should help encourage homeowners to prioritize energy-efficient improvements.

"Linking energy efficiency to home value is a powerful messaging strategy," said Suzanne Shelton, president and CEO of The Shelton Group."It seems we have work to do to convince homeowners that energy-efficient improvements are worth the investment, both for lower utility bills and increased resale value." talked with builders about the challenges of marketing high-performance or green homes to help buyers understand the value that extends beyond the purchase price.

In Lady Lake, Fla., Green Key Village is a 148-home of net-zero ready homes that will meet the Florida Green Building Coalition standards as well as Energy Star and Department of Energy Zero Energy Ready Homes. Builder Greg Thomas helps buyers understand the long-term cost of ownership that makes a green home a better value.

How do buyers respond to the idea of a paying a premium for a high performance home?

We tell them, compared to an average $200 a month power bill, with the lower utility costs of these houses, you have $42,000 to $43,000 more power buying over the life of the mortgage. Whether you’re paying cash or using a mortgage, your overall buying power is that much more.

The math works. And you get a much a much healthier house. With the no-VOC paints, the low-VOC carpets and cabinets, your home is healthier. The ERVs are bringing in fresh air 24 hours a day.

In Texas, T.W. Bailey Sr., president of Bailey Family Builders builds award-winning green homes and remodels existing homes. He has been a long time industry leader in shaping the future of energy-efficient home building.

How do you present the benefit of green building to your clients?

The old school of return on investment says you typically need to pay it back in about 6 years or so. With green building it's a whole different story, and I when I explain this to prospective clients they get it, whether they're a wage earner buying an entry level home or an upper income person buying their second or third luxury move-up product. The return on investment on what you spend for green building is typically realized the first month you're in the home.

Here's a real example of a 3,00 square-foot home with $300 month average utility bill. If you spend $10,000 additional on the green aspects of the home, you can reduce that energy cost to $150 per month. At today's mortgage rates, the $10,000 you spend costs you about $30 per month. You've saved $150 in utility costs and you've spent $30 to do it. Your positive cash flow that first month is $120, and it will be at least $120 a month after that.

Whenever I've explained that to a customer, whether they're buying a $100,00 home or $3 million home, they've never failed to embrace it and find great value in it.

I tell the real estate community, who do you think will be more able to make their mortgage payment: The family that has $120 less capital outlay every month or the one that has $120 more capital outlay every month? I submit it will be the family that has $120 less expense every month.

From your experience, is the home buying public embracing green and high-performance homes?

We find today that many of our clients are more educated about performance and sustainability than a number of our builders.

There's nothing that will lose credibility for a builder quicker than to have a client ask you a question they maybe know the answer to and they are just looking for your opinion and you come off with some outdated response. They'll continue to be nice to you throughout the conversation and next thing you know they're talking to another builder.

I encourage building professionals to not fight the curve but join the curve and use it to their advantage. By getting themselves properly educated and being able to carry on a subject specific dialogue with their clients they have much more credibility in the marketplace.

In Atlanta, Joe Thomas of Elemental Green completed a sustainable renovation on a mid-century brick ranch that earned the coveted EarthCraft Platinum renovation certification.

Built in 1963, the three bedroom and three bathroom house with a split floor plan and a finished basement was treated to a thorough renovation to provide sustainable, eco-friendly living for its next occupants. EarthCraft is a green building certification program designed to address climate, energy and water issues unique to the southeastern United States.

Why did you choose a remodeling project to achieve a certification?

I was renovating the house to resell it, and I think it's a whole lot easier to remodel it and get it certified than to convince clients to do an EarthCraft renovation on their own lot.

How receptive has the market been to a green certified home?

A few real estate agents are familiar with EarthCraft, and more are familiar with the name only. One lesson is that there will have to be more education required to tap in to the green home market that I understand from market studies is there.

The model for my company is to buy homes and do green renovations and I'm trying to stick at price point at or below $300,000. That's based on a market study of millennials, who are really a market that is just coming into the home buying age. And by the market study at least, they care. The idea is to tap into that market.

Matt Belcher is director of the High Performance Buildings Research Center of the Midwest Energy Efficiency Research Consortium at the University of Missouri, and a principle in Verdatek Solutions LLC, a green building consulting firm, and chair of the National Association of Home Builders Green Building Committee.

Belcher believes the secret to selling high-performance homes is bridging the disconnect by getting prospective customers to understand the value of purchasing a home that works in their favor. And builders must do so in a manner that connects with them and in terms they can easily comprehend.

"We don't sell green," Belcher said. "We build a high-quality, high-performance home that, at the end of the day, green happens because of what we do."

He starts a project by looking at the customer"s budget. The largest piece of the monthly home-ownership pie is the mortgage, followed by operating expenses that consume about 30 percent of spending. Belcher aims to cut in half what someone might shell out for electricity, water and maintenance.

He transitions into showing them that the way to do that is by viewing the whole home as a set of systems, all working together toward efficiency. He then focuses on design and creating a solid envelope that will seal the home tightly throughout its life.

The result: Belcher closes 90 to 100 percent of deals on high-performance homes once the benefits are explained.

"We're cutting utility bills in half or close to nothing," he said.

Builders must figure out what works best for each situation and each customer. Planning is vital, he said. But builders can’t be so focused on achieving certification and ratings for projects that the customer and their needs get overlooked.

"Numbers are impressive," Belcher said. "But customers don't understand them. It's like a Sleep Number to them."

Beyond that, efficiency creates equity for owners, enabling them to reinvest in their homes, to put more money in their pockets and to strengthen the potential resale value.

"You can do this at affordable levels," Belcher said. "You just need to think about how to do it."

Read more about green building.

Topics: Building Green, Certification / LEED, Cost of Ownership, Energy Star, Going Green, GREAT GREEN HOMES, Healthy Homes, Home Design & Plans, Sustainability Trends & Statistics, Sustainable Communities

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