Going Green to Save Money: The ROI of Green Homes

For many reasons, green homes are more and more popular, yet eco-friendliness can be a complex topic in the housing market. Of course, the reasons are simple enough: green homes have a smaller footprint through sustainable materials and energy efficiency, so are better for our damaged environment; going green lowers energy costs over time; and going green can increase a home’s market value, bringing Return on Investment to sellers. Yet achieving the ROI of an eco-friendly home can be complicated, because it depends on a number of factors, including location, the age of the home, and how soon the owner is listing.

In the last few years, two home-buying trends have established themselves. One is that millennials are making up about ⅓ of homebuyers, and the second is that they are willing and eager to embrace the green home. This is not to say that other groups are ignoring the trends, because they are not, but rather to indicate the large number of buyers committed to spending extra for green homes and features, creating ROI.

New construction has the advantage here, as homes are built to green standards. New homes tend to be located in the trending millennial areas, and cutting-edge, move-in ready has its definite appeal. Older homes can be moved towards the green ideal, but the changes can be difficult and costly; however, since not every home buyer, millennial or otherwise, can afford new construction, there are many markets in which any greener home is valued at  2-7% more.

That green ideal is LEED (Leadership in Energy and Environmental Design) certification, or Energy Star certification, for the highest standards in healthy, energy-efficient buildings. The standards are so high, in fact, that an existing home may need to be gutted and rebuilt by an expert to meet them, which may be out of the question for the owner’s time and budget.

Fortunately, there are many green home improvements existing homeowners can still make that will attract buyers and result in return on investment, even without official green certification.

For one, attic insulation is a tried-and-true project that annual reports consistently list for excellent ROI, over 100% ROI, in fact, in 2017. A tankless water heater is a more efficient and attractive feature than an older tank-style version that needs replacing anyway. The Department of Energy points out that a quarter or more of heating/cooling expenses are, literally, sucked away by old windows leaking in both directions; new windows are a major and good-looking  improvement. Transitioning to renewable energy sources can be another source of ROI, if also a huge project, even when there are tax credits and local government grants for the purchase of solar panels.

For any improvement, home location and individual circumstances make a difference, so homeowners should research carefully before any green commitment. The efficacy of solar and wind energy are dependent on local weather conditions. Leased, rather than purchased, solar panels can deter buyers as an added expense, rather than please them. The efficiency of any green change may need to factor in how long the current owners will reap financial benefit themselves before selling for that higher price, to make the investment worth it.  These examples illustrate how tricky improvements can be if ROI is one of the goals.

For people selling in the near future, the advice of a top real estate agent is invaluable to making the right ROI choices. They will know which improvements are most desirable and have performed the best in the local market. It is also vital to have a home appraiser knowledgeable in and experienced with green home improvements, which is by no means all of them. Ensure through research that your home for sale is appraised by someone who will recognize and not undervalue its green features.