Magazine

The Green Issue

Will green improvements boost your home’s value?

Experts weigh in on the buying and selling of real estate with energy-efficient upgrades.

Illustration by Michael Korfhage

Shopping for a single-family home, Elahna Paul and her husband, Hal LaCroix, compiled a pretty typical wish list: high ceilings, hardwood floors, good closet space, and a big backyard. Four years into their search, they toured a 110-year-old Victorian in Somerville’s Spring Hill section and liked what they saw. Not only did the home check many of the items on their list, it also had all new dual-pane windows. “That was a plus,” says Paul. “It meant the energy costs would be lower.” The couple bought the house in August 2011.

Paul and LaCroix are environmentally conscious, but they would be the first to tell you their energy-efficient windows didn’t close the deal. They paid for the whole package, not one feature. Same when they installed solar panels in 2014 — they wondered what the panels would do to their home’s value but took the plunge without being able to settle that question. And that makes the pair pretty typical for the Greater Boston housing market.

“Buying and selling green homes is in its infancy around here,” says Somerville-based agent Thalia Tringo, “but we’re moving to a more educated public.” Similarly, real estate agents, sellers, and appraisers are learning more about the wide variety of green-home features now available, trying to determine how they can affect a property’s value. Since green renovations don’t translate into dollars and cents as easily as traditional renovations, it can be tough to calculate the value they add — or perhaps subtract — when it comes time to sell.

Advertisement

A few years ago, real estate broker Craig Foley, chief of energy solutions at RE/Max Leading Edge, wondered whether “buyers were speaking with their wallets when it came to lower energy costs for homes.” He studied about 4,600 homes in Greater Boston, measuring whether buyers preferred natural-gas heating to oil, which tends to be more expensive. It turned out that natural-gas homes commanded $11 more per square foot — that adds up to a $22,000 premium on a 2,000-square-foot house. “Those numbers,” says Foley, “reinforced a number of studies nationally that said for every $1 of annual energy savings, it equates to $15 to $20 at the time of sale.”

Get Today's Headlines in your inbox:
The day's top stories delivered every morning.
Thank you for signing up! Sign up for more newsletters here

Foley believes those figures speak to buyers’ general desire for lower home operating costs. And that desire, he noted, increased after last winter’s frigid temperatures left many owners with sky-high energy bills. Still, when greening up your home, it’s hard to know where to put money down.

Once a year, the trade magazine Remodeling publishes its much anticipated Cost vs. Value Report. The magazine surveys real estate agents around the country to determine, for nine regions, how much a bathroom remodel, deck addition, or even a new front door will affect resale value. But green projects, says editor in chief Craig Webb, have “stymied us for a while,” and they’ve been left out. The problem is that more variables come into play. “For energy-efficiency projects, the value does not consist solely of curb appeal in the eye of the next buyer or solely in terms of energy savings,” Webb says. (The 2016 version of the report will list figures related to new roof insulation.)

Homeowners and buyers face the same challenges. Better windows, more efficient HVAC systems, and air-tight exteriors don’t scream selling point the same way granite countertops and finished basements do. And then there’s the fact that not a lot of so-called greened-up properties have exchanged hands yet in this area.

“Here in New England and Massachusetts, the solar industry is very strong, but it’s also relatively new,” says Ben Mayer, vice president of marketing and director of residential projects at SunBug Solar, an Arlington-based installation company. He notes the region’s “sample size — where we can say, ‘Oh, there have been X number of homes that have installed solar and have been sold, so we have true data about them’ — is relatively small.”

Advertisement

When prospective SunBug customers ask, “What is this going to do for my home value?” Mayer’s answer usually boils down to “It’s complicated.” The available data do suggest that a solar system increases home values at a rate of about $3 per installed watt. So with a typical 6,000-watt system that costs around $25,000 before incentives, a customer could expect an $18,000 appreciation in home value.

There are problems besides a paucity of data. Some inexperienced agents might undersell energy-efficient features in their marketing. Then there are the agents who purposely oversell them, in what’s known as “green washing.” “We need standardization of green language, so that everyone knows what we’re talking about,” says Sandra K. Adomatis, a Florida-based appraiser who wrote the book Residential Green Valuation Tools. Once that standardization happens, we should begin seeing higher sale prices, especially for improvements that can be quantified, Adomatis says. “We’re already seeing that in some markets.”

Illustration by Michael Korfhage

A few years ago, economists from the University of California Berkeley and UCLA examined 1.6 million home sales in the Golden State from 2007 to 2012 to see whether green labels — Energy Star, LEED, GreenPoint — increased sale prices. Controlling for key variables, they found green-labeled single-family homes sold for an average of 9 percent more than non-labeled homes.

Another study of roughly 66,000 home sales in the San Antonio area showed that properties listed as “energy efficient” — meaning they included features such as high-efficiency HVAC systems and dual-pane windows — enjoyed a 5.8 percent higher price over comparable properties lacking those features. For houses on the Multiple Listing Service advertised with a specific “green” feature, such as low-flow toilets, there was a 1.7 percent price bump.

In some ways, these studies suggest that most buyers are interested in specific ways to save money, rather than making the largest purchase of their lives based on principle. That means the green real estate market is still a lot like the one for hybrid and electric cars: Although lots of Prius and Volt buyers are looking to do their part to save the planet (especially those who happen to live in Cambridge), surveys show even more of them just want to save a few bucks at the gas pump. Smart sellers can find a way to capitalize on that.

Advertisement

The advice from the experts is to keep the sales pitch simple and straightforward. Buyers may be more familiar with the lexicon of energy efficiency now, but it’s still easy to bury valuable information in a flood of talk about R-values, thermal bridging, and low VOC finishes. Electricity bills that quantify savings can make all the difference. “People will pay somewhat more for energy efficiency that can be documented for them,” says Thalia Tringo, the Somerville agent.

Brian Perry, who markets energy-efficient new construction in Boston’s Fort Hill, points out environmental benefits but generally tries to keep his terminology “pretty basic.” Meanwhile, Placetailor, a Boston-based design, build, and develop co-op that specializes in Passive House properties, highlights livability advantages such as cleaner inside air, quieter rooms, and consistent temperatures. “We don’t get excitement out of people because our walls are 16 inches thick versus 12 inches thick,” says company co-owner Evan Smith. “We get excitement because our houses can be far more comfortable and far more healthy and far more cost-effective long term.”

Duncan MacArthur, a developer and real estate agent focused on energy-efficient buildings in Greater Boston, agrees. “Once people are in an energy-efficient home and experience it, they appreciate it,” he says. “You’re aware, and when you buy your next home, you’ll start asking questions about energy efficiency.”

But for the vast majority of buyers, location and design still drive sales, MacArthur adds. “I’ve yet to see anyone who’s saying, ‘I’m changing my parameters because I want this green house.’ ” And that makes it hard to put a price tag on comfort and other green-home perks.

When Maryann Thompson bought her Cambridge home in August 2013, she looked into solar systems and liked the energy cost savings. But as an architect, Thompson was also concerned with aesthetics, especially since solar panels are out in the open, compared with insulation hidden in walls or on-demand water heaters tucked into basements. “When you go past my house, you’ll see that I integrated the panels in a way that was geometric, that looks very intentional,” says Thompson. “They wrap around a skylight, and it looks like a nice composition.”

That kind of attention to how a house looks is just good business, especially in an area that values its unique architectural history. Ben Mayer of SunBug cautions that home-owners who aren’t smart about installation can actually hurt resale. “If you were shopping for a home and you came across

a home that you really liked in a lot of ways, but somebody had put an ugly solar system on the roof, put panels in dumb places, you might go ‘I wish they hadn’t done that,’ ” he says.

The problems can be especially pronounced for homeowners who rent solar arrays, rather than buy them outright. In a residential power purchase agreement, homeowners allow a system to be placed on their roof — the company decides the type of panels and the layout — and then buy the electricity that the panels produce. Since homeowners renting solar arrays often sign a long-term contract, ranging from six to 25 years, they could find themselves looking to sell while they have years left on their contract. Experts say lots of home buyers might be wary of getting saddled with that kind of commitment.

But there can still be a seller’s premium related to owned systems. According to studies by Ben Hoen, a renewable energy researcher for Lawrence Berkeley National Laboratory, there tends to be a higher premium in places where electricity rates are more expensive. (Cities like Honolulu, New York, and Boston have some of the steepest rates in the country.)

Hoen, Craig Foley, and Sandra Adomatis all say they plan more studies on the cost versus value of solar panels and other green features. Like buyers and homeowners, they want more specifics. But they also believe greened-up homes will become much more of a must-have in the future.

“With the trends that we’re seeing in other states, I already see clear signs that we’re moving in that direction,” says Foley. “The trends are irreversible and inevitable in their spread to Massachusetts.”

Shira Springer is a Globe staff writer. E-mail her at shira.springer@globe.com and follow her on Twitter @shiraspringer.