Home Value Hot Potato – Whose Problem is It?

Are you a home seller, real estate agent, broker, builder, home improvement contractor, appraiser, or lender? Let’s start with the answer then: yours.

Everyone of these persons has some role to play in the home value hot potato game, where the potato is passed back and forth around the circle to ultimately land at the seller’s feet. If you own a home with high-performing, energy efficient features, that potato will usually land on your feet with a painful thud.

The problem begins with the builder or home improvement contractor. The builder should provide the buyer with documentation at the feature level showing the home was built above required residential code – making it more energy efficient than other homes. Often this kind of documentation comes in the form of a HERS rating, which while useful for buyers interested in an MPG like comparison for energy costs, doesn’t do much to help a future appraiser understand what in particular is special about the home. The home improvement contractor should provide an owner with documentation that the installation is above federal minimum product standards, as with an ENERGY STAR appliance, or code, as with insulation.

My company, Pearl Certification, works with home sellers who have high-performing home features and want to get maximum value for their homes. We send a certification professional to the home to collect data on high-performing home features not only because we are a third-party program, but because often the owner simply doesn’t have it. The builder sold them on the home having a HERS rating but provided no documentation; the contractor sold them on the above code install but the final invoice says little to nothing about what was actually done to the home. (Note: if you’re curious to know if your home qualifies for certification, take Pearl’s free online pre-qualification survey here.) 

At resale, it becomes the real estate agent’s job to list and market the home, but agents aren’t home energy professionals. If the seller doesn’t share with them documentation on the home’s features, understandably agents aren’t going to incur liability by checking off data fields they can’t verify. But home value left on the table also translates into lost commission for agents. Worse yet, though, are the stories we hear from sellers who did try to provide their agents with documentation, only to be told “buyers don’t really care” or “that’s great for marketing, but it won’t affect where we price the home.” Wrong on both counts.

Appraisers and lenders aren’t served either by the home value hot potato. They become the inadvertent perpetuators of an under-valued housing stock with a lower risk lending profile. Studies show that mortgages on high-performing have a lower default rate. Owners of these homes have less stress on their monthly cashflow due to rough weather months or rising energy costs, and therefore have more available cash to make their payments.

As the real estate market begins its cyclical shift away from super tight inventory (aka a seller’s market) back to longer days on market and more negotiated pricing (aka a buyer’s market), what sellers can get for their homes becomes more dependent on data driven marketing. By that I mean using MLS data fields to differentiate the home and document features that contribute to home value, particularly features that affect the home’s performance. As with an expensive car or high-end laptop – performance impacts price and value.

Written by Cynthia Adams, CEO – Pearl Certification
Originally Posted here – The Daily Progress