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Green Home Buying and Selling

Your official LiveGreen resource to tips and tools you need to live green in your own home.Your official LiveGreen resource to tips and tools you need to live green in your own home.

by Charisse Charters

The question I am asked more than any other is “Is this a good time to buy?” The question seems to come up a lot more now that the market has taken such a drastic turn from the frenzied pace of the previous 5 years. My answer is that it is definitely a great time to buy. Interest rates are still at reasonable lows (face it, the days of the 4% inter-est rate are GONE) and prices are falling. There is also more supply on the market than ever. As of March 2007, there were over 18,000 resale homes available in San Diego county....compare that with 5 years ago when there were less than 4000 proper-ties on the market and you’ll understand why record low interest rates, low supply and high demand (which created bidding wars and) helped fuel record prices for sellers.

The next question is whether or not to search for a “green” home. This becomes a little more complex. The problem I have found is that many of the more substantial green modifications on homes come with substantial cost. Traditionally, owners who are willing to make this type of investment do so knowing that they intend to keep their home for a long time or risk not being able to recoup their initial investment. For example, a solar system is estimated to take 7-10 years to pay for itself. A recent study in the real estate trade publication Appraisal Journal reported that for every utility-bill dollar saved annually because of an improvement, a homeowner gains about $20 in property value. So if solar cuts the annual electric bill by $1,000, the owner could gain $20,000 in home value. That’s an appreciable gain, but still may not offset the initial investment costs (even with the state rebates) if the owner of the system sells the home too soon.

Other green investments such as tankless water heaters, recycled insulation in walls and attics, water reclamation systems, organic gardens, and green landscaping offer a far lower initial investment cost. They can offer the individual owner pride in knowing that they’ve made a contribution to their own sustainability but do little to drive up the listing price.

Another great question: Is this a good time to sell? My answer to that is: Why do you want to? I always ask that question of my clients because inevitably it is a question that the buyers will also ask. Your answer to that is important because buyers are ultimately looking for a weakness or reason to lower their offering price. Buyers will wonder: If this house is so wonderful (good condition, great neighborhood, great features, etc.), why are you leaving? Was this merely a flip or investment? What aren’t you telling me? All of those can factor in to a buyer’s decision as to how much to offer for a property.

Once you’ve made the decision to sell, you’re going to end up being one more home in a market of 18,000 other homes. What’s going to make your house stand out? What will make your house memorable? What will drive potential buyer traffic to your listing? That’s where green improvements may give you an edge. If you can boast certain amenities that can tastefully and appropriately improve the home, your real estate agent can use them as an tool to promote your home and help attract more buyer traffic. Note the emphasis on “tastefully.” Example: a clothesline in the backyard may be great for energy savings, but may not be the most attractive feature for a backyard during showings. However, showing a buyer that you have created an area for the attachment of hooks and the line, you plant the idea that the modification is possible if the buyer chooses it.

So do green homes sell any faster or for higher asking prices than non-green homes? The simple fact is that there isn’t enough data to measure this for certain. First of all, what modifications are needed to declare a home “green”? What percentage of the home has to be modified to earn that title? Is it enough to just install solar panels for energy savings if you contrast that with wasting water by having landscaping requires more water than Sea World in the summer time? What if I have a blue recycling bin outside my garage for bottles and cans.... is that enough? Does a home have to be truly 100% “off-the-grid” to qualify as green? And if so, how many homes in San Diego truly meet this criteria? When talking about a home at this level in San Diego, you are most certainly talking about homes in the higher price ranges ($1 million+). Homes in this range naturally take longer to sell simply because the price limits the number of potential buyers due to budget constraints. Without any clear criteria, it’s almost impossible to get a clear projection on the incentives for sellers.

My advice to buyers....buy the home that you want at a price you can afford. Make modifications that fit your lifestyle and budget. For sellers, modify your home to a level that suits you without making resale your sole motivator. When it’s time to sell, provided the asking price is right, the right buyer will come along and be thrilled with the changes that you’ve made and hopefully purchase the home and continue the tradition of sustainability that you worked so hard to achieve.