Last month in this space, I reviewed a series of market projections for 2014 from Harvard University as well as the industry’s leading associations.
How new energy codes could affect every remodeler
The U.S. Department of Energy is dictating that homeowners and by default remodelers take note of the International Energy Conservation Code
There is no denying the importance of doing all we can to impact our environment in a positive way. So why aren’t more of us doing it?
My answer: We are all in the business of making money. That being said, can we make money with green remodeling projects and if so, how? If green remodeling does not benefit the bottom-line for the consumer and the remodeler, then why bother?
A home is an investment. The value of that investment is determined by the housing market. Energy efficiency equates to lower operating costs. Lower operating costs means savings and that savings makes a home more desirable to potential buyers, thereby increasing the value of a home as an investment.
As a result, despite the sluggish economy and anxiety about price it appears “savvy” homeowners that are aware of the benefits of sustainable building solutions are willing to pay for the smart ones. Who are the “savvy” homeowners?
Savvy homeowners are the ones who know how to protect their investment. Whether purchasing or improving a home, people should realize they are making an investment with the objective of making a profit — at some point.
Even so, there is a lack of understanding about how environmentally friendly improvements in a home are affecting today’s housing market. In an economy that’s made money a little tighter for everyone, are green improvements really necessary, which ones actually add value to a home, and more importantly, how much value?
The answers to these questions are not subjective. To the contrary, the U.S. Department of Energy is dictating that homeowners and by default remodelers take note of the International Energy Conservation Code (IECC) and the impending 2012 residential changes to that code because it is about to have a substantial impact on the value of their investment.
Does the IECC really have any teeth?
This is the technical and boring part, but bear with me. Typically the IECC is similar to the energy related components of the International Residential Code, though the two are not always identical. At present each state has its own energy code requirements, which is often based on some version of the IECC. Remodelers have the option to choose which code to comply with, however, this is about to change.
Despite the objections of the NAHB, in October of 2010, building bode officials from across the nation in a collaborative effort with the New Buildings Institute and the American Institute of Architects voted by an overwhelming majority to pass a series of energy-saving changes to the IECC.
Directly effecting remodelers, one of the 2012 code changes is the elimination of a former duplication of model energy codes between the IECC and the IRC, streamlining the process into a singular, efficient path to residential compliance.
An increasing number of cities in more than 40 states are already using the IECC to set baseline energy efficiency standards for residential construction because it is the only residential energy code recognized in federal law and its adoption is linked to states’ receipt of State Energy Program funding under the $800 billion stimulus package. Furthermore, there are a growing number of
cities, counties and states passing ordinances and bills making home energy rating mandatory (see sidebar for a few examples).
There is even talk of a national mandate. H.R. 2454 was a proposed bill mandating energy audits and labeling before any home was sold, directly impacting the seller or purchaser. The bill passed in the House of Representatives in 2009 but stalled in the Senate because it was viewed as too stringent.
The energy audit mandate has now been reintroduced in bill S. 1733. Predictions are it will pass this time because of the IECC and the 30 percent Energy Savings Goal changes to be enacted in 2012. This isn’t going away; the “powers that be” cannot agree on how and where to build new energy plants to increase supply so this leaves no option but to decrease consumption.
One of the first things homeowners want to know about any home improvement is, will it be a good investment? They understand that a typical remodel project will add 65 to 85 percent of its cost to their home’s value and when it comes time to sell the updates can make their home more desirable to potential buyers.
Conversely, clients are skeptical of green renovation and though they may be interested, they tend to have some antiquated ideas about what it involves and whether or not it is a justifiable expense.
Nearly two-thirds of homeowners say they will invest in renovation projects this year, according to the latest American Express Spending & Saving Tracker.
Even though homeowners’ confidence in the real estate market has increased compared to last year, only 43 percent believe they would get the asking price for their home if it was on the market today.
Operating cost savings aside, research shows that across the nation eco-friendly homes are selling faster and for more money than traditional properties. The numbers vary, but in general they command 8 to 30 percent more than their counterparts. In 2010, certified green homes spent an average of 97 days on the market, compared with 123 for traditionally remodeled homes.
Education is the key, for both the client and the remodeler. Remodeling companies that understand how the housing market is being influenced by the IECC and are familiar with the vast amount of products, systems and design ideas related to sustainable building are ahead of the curve and can gobble up market share.
You know something your competition doesn’t. Subsequently, you appear more knowledgeable and trustworthy to a homeowner. This narrows the playing field. Armed with the facts and figures, selling green becomes much easier.
The hardest part for remodelers will be helping homeowners decide just how “green” they want to be. They don’t have to do everything, but anything they choose to do is a good investment in one way or another.
Knowing all this doesn’t mean you’ll be a success if you weren’t one before. It’s simply another tool in your toolbox.
The process of selling is not always about comparing two price tags. More often than not it comes down to expertise. Industry professionals demonstrate a dedication to being the best at what they do by obtaining designations, certifications and a commitment to continuing education.
Once you have established yourself as the expert, substantial knowledge of industry trends and products affords you the ability to give your client options. Consumers need to know what their choices are and which ones will benefit them the most. Green remodeling is not easily defined because everyone has a different set of values, but it can be a straightforward process. It requires homework, thinking and training because in the end, green is just a term for best building practices.
This year, consumers are spending smart and looking for a greater ROI when it comes to home renovation, this is the most compelling way to sell green because right now it makes more sense to invest in your home than it does an IRA.
The adoption of the IECC 2012 code changes will at some point force homeowners to incorporate green into their remodel projects or take a loss on their investment.
You would be remiss not to inform your clients of this important information because not only would you lose revenue now, you could potentially lose the future revenue of a returning client because “you didn’t tell them.”
You are no longer just a remodeler; you are an investment advisor too.
Larissa Michael, CGA, handles the advertising, marketing and public relations for Gryphon Builders, an award-winning remodeler and custom builder in Houston, and is active in the GHBA Remodelors Council.