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Does the Real Estate Market Truly Value Energy Efficient Homes?

September 14, 2016 By Mark Hunke

With the Energy Star certification being provided to residential homes in an effort to encourage more people to build or buy homes that conserve energy, many people are going out of their way to upgrade, retrofit, and even remodel homes in such a way that they are as efficient as possible. If you’re going to be selling your home, is it worth your time? Does the real estate market really value energy efficient homes?

Consumer Demand for Energy Efficient Homes

When it comes to selling your home, there’s one thing that a real estate agent will reinforce more than any other – consumer demand. It is up to you as the seller to show potential buyers that your home suits their unique needs. That’s why cleaning, painting, and even staging is so very important. It helps you make certain that the people who are seeing your home also see its true potential. These days, energy efficiency is a huge demand, and not only because of money. Even the most expensive luxury homes on today’s market are designed or retrofitted to meet that demand. People want to be friendly to their environment, even when money is not a factor.

energy efficient homesWillingness to Buy

In years past, there were some studies showing that people of all income levels – middle, middle-upper, and upper-class households – would skimp a bit on energy efficiency during tough economic times when it came to buying homes. They wanted to get the most home for their dollar, and energy efficiency wasn’t a primary concern. However, an economics professor at UCLA alongside a visiting scholar from Maastricht University in the Netherlands may have proven otherwise back in 2012. They looked at over 1.6 million homes purchased in California between 2007 and 2012, and their results were quite fascinating. On average, Energy Star (or similar) certification adds an average of 9% to a home’s overall value.

It’s Also About the Area

The same study looked at a few other factors in locations where willingness to buy energy efficient homes was higher. For example, they found that people in counties and specific cities with a high number of registered hybrid vehicles were far more likely to purchase an energy efficient home out of sentiment alone. They bought the homes because they wanted to be environmentally friendly, not just because they wanted to save money on utility costs. People in these areas were also more likely to pay a premium for their energy efficient homes. Surprisingly, there was no correlation discovered between utility rates and the buyers’ willingness to pay more for “greener” homes.

What Does This Mean for You?

In the Denver area, people are undoubtedly interested in the environment. The cost of living in the area is average, which includes utility rates and gasoline costs. This means that people don’t feel forced to buy highly efficient homes to save money, nor do they feel inclined to purchase hybrid vehicles to save on fuel costs. However, the people of Denver are conscious of the environment, and they are typically willing to pay slightly more for homes that are energy efficient.

Should buyers spend money to improve their energy efficient homes before putting them on the market? This is a great question for your real estate agent, who can help you discover precisely which improvements will net you the best chance to sell, and the best return on your investment, too.

Filed Under: Denver Real Estate

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