Pros and Cons Of Green Remodeling

John Murphy of Murphy Bros. in Minneapolis and Bernie Smith of MasterWorks Atlanta discuss the pros and cons of green remodeling

February 28, 2009
Sidebars:

This month featuring:

 



Tom Swartz

Contributing Editor

Read the complete discussion below or click here to listen to the podcast.



Green remodeling’s been the hot topic in the industry for the last few years, but is it here to stay or is it just a fad? What’s the future of green remodeling going to look like? Our participants (see how they’re selling green) share their challenges and successes with green remodeling in today’s market.

Tom: The topic today is “The Pros and Cons of Green.” When green started to be popular, people started being aware of the environment and green products, before the economic downturn. That's going to play a part in our discussion. Bernie, what defines green building and remodeling? Any specific examples?

Bernie: The first question for us when we started doing green was how would we define it and market that to the customer. We became EarthCraft [House] certified so we would have an independent company that would train us. Everyone went through the training program. They would come and inspect basically a checklist you would create and submit. We went through a series of inspections.

Tom: Who does this?



Bernie: EarthCraft. South Based is the name of the company. It’s marketed as EarthCraft. It’s like LEEDS in a way, an independent company that we pay to go through this. Basically, it’s to make the house energy efficient — No.1. No. 2 would be water efficiency and No. 3 would be material efficiency. The energy efficiency would be about 80 percent of that equation. Specifically, you make a checklist and go through it. There’s probably 400 items in the checklist that have points associated with them. There are three tiers of levels. Like a good, better and best. If you do 150 points you’re good, 200 points you’re better and 250 points you’re best. They all deal with different ways of doing all the things I described. We just built a new house and completed it. It’s a teardown/rebuild. We went in and did Icynene insulation which is a open-cell foam throughout the house and upgraded all the heating and air equipment to 18-SEER and 93 percent efficiency on the gas furnace. Basically, we go in and try to create a really tight envelope on the house and bring the heating and air equipment up to par using as little room as possible. Using 24 inches on center of the 2 to 6 wall construction so you have less of a wood stud to transfer the heat or cooling to the outside, so you have more insulation in the wall.



Tom: Bernie that’s very specific, and that’s what I’m looking for. Also you bring in credibility because there’s a third party involved. John, can you add to that? “Green” has been around for a lot of years. Help define, specifically, green building and remodeling. 

 



John Murphy

John: I’m going to go on the camp that green’s been around a long time. A lot of it is educational for our clients. If they understand what creates a green home, or what creates green methods, we’ll usually point to things like energy-efficiency. When I got into this business, energy efficiency was a big thing. Insulation, weather stripping, windows, adding blown insulation to sidewalls and things were big projects right at the turn of the late ’70s and early ’80s. To me, it’s one of those common sense basic premises. Why wouldn’t you want to do that? A lot of what we try to do is really educate our clients as to what green is. There are probably two things moving beyond what was important back then that I would term “green.” One is the source of materials, and the other is the material make up. Are they coming from Indonesia or local suppliers or are they made by processes with chemicals that are not environmentally friendly either to live with or to dispose of. That’s one thing new. Another thing on the “new” part of the forefront with that is about drainage water and managing the water run-off; as far as what’s in it, where is it going, fertilizers and pesticides. Trying to keep things to settle into the ground onsite versus drain-off into waterways. Something on the newer side of what we call green.



Tom: Good. Let’s get into some marketing questions as another part of this. I’ve got about four areas, and we’ll spend a little bit more time on marketing. John, what marketing ideas have you done to present yourself as a true green remodeler and not simply just “green washing,” which would be my term. I see a lot of people out there saying that they’re green and they practice green.

John: Part of it is taking coursework and education so you’ll know what you’re talking about and you’re current on what’s being disseminated as green information. Of course, putting it on your marketing in terms of any advertising or mailings you’re doing so you’re getting people to cue in on that is important. I have gone through the certification process for Minnesota Green Star, which is along the lines of LEED. We actually haven’t done a full Green Star project yet. I think up here we make it a bit more complex. We have an 800-point list. We use it as a talking point. Our clients will like the premise and like where it’s going but don’t want to pay for the extra expense for the inspections and process of doing it.

Tom: Bernie, what do you do for marketing ideas to present yourself as a true green remodeler?

 



Bernie Smith

Bernie: We pretty much follow the same route as John, in that we market the education we’ve all been through. We’re all certified in this EarthCraft class we’ve all taken. We take refresher courses every six months to a year, to learn the latest and greatest things they have to offer. We’ve done all the same things John is referring to. Water management, where the materials come from, it has to be certified as coming from a managed forest and things like that. Once we get the marketing out there on our literature and the tv ads. If the customer has a sense that they want to “go with green,” we educate them on what green means, what it does for them and what the value is for them. The value is actually money savings. Money in your pocket each month for utilities. If you go through and follow this program and create a green remodel, and finance it. Let’s say the financing is $10,000 extra for the whole project. If you’ve refinanced you house, on a 30 year mortgage, that $10,000 is $100 a month, you’re going to save $300 to 400 a month on the utilities. It’s an instant $200 to 300 in your pocket. The problem we’ve run into with it is that folks that think they want to go green, when it comes down to spending that $10,000 — and a lot of times it’s a struggle right now — they want to do something cosmetic for that $10,000. They don’t see it if they spend it on green. That’s where we have to educate them. That they can do a Phase II or Phase III and update these things down the road. This is the “bones” of the structure and is something you really can’t come back practically and redo at a later time.



Tom: In marketing and sales, Bernie, what is the most asked-for green product, system or procedure that you get from your customers?



Bernie: I would say No. 1 would be windows. We have a lot of single-pane windows here. Going from a single-pane window to a double-pane window with a great rating on it is huge.



Tom: What’s the most asked for window brand?



Bernie: I would say there’s a few: Peachtree Windows, Pella, Anderson and Jeld-Wen.



Tom: Mostly wood windows. I don’t see very many vinyl windows, steel or aluminum.



Bernie: No. We recommend wood because of the sash with the insulated glass, the seal doesn’t fail on the insulated glass if you just use wood. It’s expansion and contraction.



Tom: John, what’s your most asked-for green product by customers?



John: Windows are a big part of it. Otherwise, more than a product, it’s insulation in the system. Here, heat loss is a big thing, everyone worries about their bills are going to be in December through March. “What can I do to mitigate heat loss and lower my utility bill?” would be the big thing. As far as windows there would be Marvin and Anderson, made here in Minnesota. Marvin would be our most used window. Anderson is probably three or five. We do use some vinyl windows. It’s usually on a more moderate home where they’ve got a lot of windows. It becomes an affordability issue. Vinyl windows run about half the price of full-line wood windows.

Tom: John, staying on the marketing aspect of it, is being green going to be a fad like lead and asbestos were in the past? Where do you see green going?

John: Honestly, right now, maybe green is being a little overused. People are getting a little tired hearing about it. Some clients have picked up on it and are reading about it and are interested in it. Other clients are just totally clueless and it’s a new thing to them. We’re going to put it out there to show we’re up to speed. We bring it up in every client conversation, at least in initial interviews. We try to get a feeling of where it ranks for them in importance and try to educate them on things, especially things to do with energy efficiency and the longevity of the products we’re using on their homes. We’ve got to say it consistently and then basically educate each client, and take it where it goes depending upon where the client’s interest is.

Tom: When lead-based paint came up that same procedure happened. Also, when asbestos came up it was the same thing. We talked about it all the time. It kind of went away — it didn’t go away but no one talked about it too much. Now lead is back into the headlines with asbestos. You’re saying that green is not a fad but really it is a whole different process, isn’t it?

John: It’s different and it’s going to be around. I think the term green is the thing that’s a little faddish right now.

Tom: Bernie, what do you think; a fad or not a fad?



Bernie:
I think right now it’s like a bell graph that goes up and down. For us here it’s driven ironically, by the cost of gasoline. People here gauge, because of the more mild climate where you have less cold winters and some hot summers, but people here tend to look at the gas pump. When the gas because big enough and green becomes popular, people feel the need to be more energy efficient in their homes, ironically. It’s kind of weird in that way.



Tom: That’s an interesting barometer; not sure I followed that one. Bernie, do you find the client is asking specific questions about green, or is it something that the industry is building up? Is it customer driven or is it contractor driven?

Bernie: I think it’s a little bit of both. The customer asks some questions, but they don’t ask a lot of questions. Maybe one out of 50 we get is really intense on it and has researched it. I think it will become more of a process, like you said. It will evolve into, “this is how we remodel and how we build.” It’s going to become what we do in the future. Various resources are diminishing and will become more expensive. We’ve got to figure more ways to be more efficient about what we do.

Tom: John, what do you think? Are they asking questions and is it customer or contractor driven? Is the industry building this up, or is there an actual customer need?

John: It’s some of both. But, I’d say it’s more industry driven than client driven right now, especially in things like runoff and what-is-green-building material. Those are things that are brought to the client’s attention and we’re making cases on it. I don’t think if the industry didn’t say anything that people would think much of it.



Tom: John, how do you educate the customer? When it comes to green remodeling, have you found yourself teaching them more about green and talking less about the remodeling experience?



John: We present green right up front and try to give them an overview of the components of green so they have a basic understanding. The thing that people will key on are things that have to do with energy efficiency and that translate to dollars in the pocket and how you can help them get there. That would probably be the main key area that they focus on. Then, after that, we get more about the remodeling process and the green, as it makes sense: what kind building envelope are we using; what kind of framing techniques; how we are sealing things; that becomes the details that are “green.” At that point, they usually trust you to do it right for them.



Tom: Do you bring up green first, then the remodeling process, or the remodeling process and then green?



John: Usually, remodeling first. We’ll let the client get the facts out on the table and we’ll wait and get an understanding of their background and what their interests are. Then we’ll weave green into it as we start to respond with our solutions.



Tom: Bernie, what about you? How do you educate the customer when it comes to green? Do you talk to them about the green and less about remodeling?



Bernie: We teach them more about the remodeling process and the process of the company more than we do about the green. We take a look at the project and determine how invasive the project is going to be and how much green can actually benefit them. For example, if we’re doing a kitchen and they want bamboo cabinets or green-certified cabinets. There’s a high premium on that and the return on the dollar isn’t a good value. That’s basically everyone right now in this climate especially. A person wants the value of what I’m doing. “What’s the return for me?” Going in and tearing apart, putting an addition on and changing the heating and air equipment and re-insulating and bringing the house up to be energy-efficient. That’s when we go into educating them. If we go through this process, and you’re getting a loan on it, you’re going to get this money back in your pocket. They’ll evaluate what they’re going to do with it.



Tom: The National Association of Home Builders has a national green building standard for all residential construction: single-family construction, single-family, apartments, condos, land development and remodeling. It was approved by ANSI, the American National Standard Institute. Does it affect your business having that certification by a third party?

John: That becomes one of those benchmarks of competency for any kind of certification. That is why I chose Green Star, which is our local green initiative. I think it creates some credibility with you and your company. I think it’s one of those things that keep you in the game with a client but doesn’t necessarily make a difference on who they want to work with. I think we just have to keep working on consistency and universal acceptance of defining what green is.



Tom: I think this is the only approved, if you go by the American Standard Institute, which is a power as far as being actually certified. And they certify the National Green Building standards. It’s a good start is what you’re saying. Bernie, do you see that to be of value to your business?

Bernie: Yes, definitely. Defining it and streamlining it gives it credibility for sure. Builders, for example, they’ve built this same house 20 times. They can tell you the square foot price for it to be a ANSI certified green or standard construction. People can actually see, touch and feel what it is that they’re getting. I think it’s a great definition of green and it will help all of us.

 

 

 

 

 

Tom: That leads us to costs. The perception of using green products and procedures is that it’s more expensive and costly. Is that reality Bernie?

Bernie: Yes it is. If you do it and do it correctlly, there is cost involved.



Tom: How much? Can you give me a percentage?



Bernie: I would say if you’re building a $300,000 house, it’s going to cost anywhere from $7,000 to $20,000 additional to get it to a level of green.



Tom: That’s an initial investment. Now it’s a matter of trying to recognize how they’re going to get that back. How do you sell that?



Bernie: We do it on a loan basis. If you do it on a mortgage, here’s what you spend, and here’s what you can expect to save. We do an analysis of the house, what the utility bills are in a month, what’s the heating and air system, what’s your SEER rating, etc. Give them a cost analysis so they can see it on a per month basis. Here it is broken down for every month. This is what you would pay for the loan, and this is what you’d get back in savings.



Tom: John, what do you think of the perception that using green products is more expensive than costly.



John: If it’s quality, typically quality costs more. If you’re more careful on details, the use of better quality products beats a standard product if it weren’t so costly. That gets to be an education, too, of cost benefits. People may want to be green, typically in the indoor air environment. Again, a little bit more where we are in geography — we tend to have the windows shut for five or six months of the year up here. With off-gassing and things like that, what are the products that I’m putting into my home doing to my health, my lungs, and the indoor pollution? There’s going to be more cost if you add an air-to-air system to your HVAC system. There are other air purifiers that you can work with a system. Even water purification would fall into that.



Tom: John, to follow up on the cost area. Going green is a cost-to-value aspect. You’ve got to deal with cost to a value. More than anything, value plays a very important part in this. Are your customers interested in how long it takes to pay that money back? Or, are they interested in other things besides just the cost?



John: The payback is the easy equation when it comes to energy. The other items relate to health. What’s it worth to me to have a safe environment for my family? That’s a payback on fear, and what might happen. Some of that is emerging as to the effects of different chemicals and off-gassing on people. That’s something we can educate them on, but we can’t really make any conclusive statements like you can about how much you’re going to save on your fuel bill.



Tom: Bernie, the same question to you. I think that a lot of people — and I really think it’s more with the remodelers than it is with customers — get caught up in just the cost aspect of it. I’m not going to do green because it costs my customer more money and I’m going to help my customer get a better value. What are your thoughts regarding the question of going green is a cost versus value aspect? Give an example of how you would address that question, and what do you do.



Bernie: For us, the cost of value is kind of twofold. You spend the money now in energy-efficiency rating and the money you save in utility bills and water bills, etc. is an immediate payback. No. 2 is the marketability of the house. If you’re going to sell the house and it’s been stamped EarthCraft certified, which means it’s passed all the inspections and it’s transferable to the next owner. They can literally market it for more money because the label is so popular in this area in terms of people who are green conscious and are looking to stay away from green washing as you’ve called it. That label itself gives the home probably 2 to 3 percent more value than if it doesn’t have it.



Tom: That’s a great thought. If two houses are on the same block and one is certified and the other is not certified, even though it’s a little bit more money, at least I have that third party telling me that it has a better value in the house itself.



Bernie: You’re going to save money on the utilities. If you buy the other house, it’s going to be instant money in your pocket, which goes back to a mortgage payment versus utility costs. It’s an investment.



Tom: I’m going to switch gears here. You have yourself and two other salespeople. We say we’re green as well. But after talking to you two gentlemen, I don’t think we’re quite as green as you guys. We say we are, but the challenge we are having is getting buy-in at all levels. We think it’s important not only to have the salespeople understand the benefits of having all the green products, procedures and systems. We believe that more importantly is the production people in the field. If they don’t buy into this or understand it, they could say one sentence and it could really put a kabash on the whole thing. Bernie, what do you do to train your salespeople first, what do you do to train your production people, and lastly, what do you do to train your trade contractors? It’s threefold. Is there any difference? They might be the same. How do you get buy-in train them?



Bernie: The buy-in is easy. We have a culture of young people who actually got me to buy into it. The people who work for the company are all very green-conscious. For the sales staff and the people we have in the field, we go to this class, we take the class and update it, and have general meetings once a month.



Tom: Is the class by the EarthCraft people?



Bernie: Yes. It’s a great class and it educates you completely on the whole process. It’s really involved. It basically takes it from footings all the way up to the peak of the roof. You take the whole structure of the house and everything in it. You understand that the truth is if you were to build a house correctly, you would build it to EarthCraft standards, by definition. Builders all take their shortcuts and leave these little simple things out that lead to what creates the house. The people in the field really need to be tuned in to the little things they have to do to make the house green. Once they get the education and start practicing it, it becomes a culture — that’s how we do it!



Tom: Everyone goes to these classes, including your carpenters, painters and people that work for you?



Bernie: Correct.



Tom: It’s on your payroll, and you’re training them on your payroll to go to these classes. How time consuming is that?



Bernie: The initial class is eight hours. The cost of the class is $300 per participant.



Tom: You pay all of that?



Bernie: Yes.



Tom: It’s eight hours, $300 a person. The key to this is, it’s a third-party certification, is that correct?



Bernie: That’s right. They come out and certify. They look, inspect and we pay an average of $1,000 to $1,500 per project for these inspections. They come out at different stages, like the pre drywall inspection, after the initial inspection just to make sure.



Tom: Again, these are local third parties. Who has certified and who has given the OK that EarthCraft is a good company?



Bernie: The Georgia Home Builders Association has actually pulled them in. They certify them to do the right things.



Tom: That’s NAHB too?



Bernie: Right.



Tom: So, in a sense, the association’s gotten a third party, EarthCraft, and it has been blessed by the Georgia HBA.



Bernie: Correct.



Tom: In that case, it’s association driven, by having the foresight to get those folks in there?



Bernie: Absolutely.



Tom: John, how do you get your salespeople buying in and trained, — and you have one insurance restoration — the production people and the other people including your painters, and then your trade contractors?



John: Bernie is a little ahead of us in being as formal in getting his people involved. Our salespeople have taken green classes. Minnesota Green Star — I’ve been comparing them here, is very similar to what Bernie’s, EarthCraft — in that Minnesota Green Star is endorsed by our Builders Association.



Tom: That’s NAHB?



John: Yes, it is. That’s the training I went through. None of my salespeople have been through that yet. We’ve all taken classes, it seems like there’s no shortage of classes in terms of a two-hour seminar here, something educational in another place, sometimes sponsored by one of our HVAC suppliers, vendors, etc. We’ve been taking coursework regularly. My field guys, production managers and carpenters have been exposed to the same types of coursework. The things we learn in these classrooms are shared during company meetings and discussed at lunch. When I see an article that makes sense that is applicable in any of the trade magazines, I’ll make a copy and put it in the mailboxes to keep them aware of what we’re thinking about and how to stay on top of their game regarding green. As far as trade partners, I think philosophically we have to find people we align with already. If we have to work too hard to convince them, they’re probably not the right trade partner for us. We’re more apt to make sure we’re working with the right people. We have to talk about what is the practical way to approach things, like our insulator in terms of details and things. Occasionally, we might disagree with them, we might educate them on how we really want it done on our projects. If they are basically on line in philosophy to be able to work together and do the projects the way we want them done, it isn’t too hard.



Tom: What’s the most difficult issue, John, you’ve had with getting your salespeople or production people trained and involved?



John: With salespeople it’s not too hard as long as you present it as a benefit to them. They’re going to be more marketable to their clients, and will have more appeal to a wider range of clients. Ultimately, it’s going to put more money in their pocketbook. With salespeople it’s pretty easy to sell them on the concept. With our tradespeople, it’s quality. The tradespeople tend to take a lot of pride in their workmanship anyway. You don’t really have to sell them on doing things better or doing it a better way. Sometimes you might fight with the idea that more wood is better, and kind of overengineer and overbuild instead of advance framing techniques, where you can actually use less framing in your walls and get better insulated walls. Sometimes, it’s the small battles we’ve had to fight. Ultimately, you can show it to them and prove it to them. Over the courses and on the job, as we’re looking at different things and how the systems work together, they tend to come around. They tend to be very quality-oriented already. You can show them that’s the quality way to do it, and they’re usually on board.



Tom: Bernie, what’s the most difficult issue you’ve had with the people in your workforce to buy into the green process?



Bernie: To understand why it’s a better thing. I think the perception coming into it, starting out with what you termed “green wash,” when people say green and it really doesn’t mean anything in their perception, it’s just a loosely used term. Once you start saying “These are the things we need to do,” the first obstacle was, “Why would we to that? I Don’t understand how that would benefit the process.” Once you educate them on why — here’s the reason why, the benefits and here’s what it does. Then the light bulb goes off and “Wow, I believe now, and I get it, and see it, and I understand what to do”.



Tom: Bernie, does green have any effect of global warming?



Bernie: Personally, and I think this is a very uneducated statement, but I don’t think we’ve had enough history in the world.



Tom: You can’t take everything Al Gore is saying, right?



Bernie: Right, exactly.



Tom: I have one last question. John, do you have any horror stories on green failures? Do you have any stories for other remodelers that have been just awful for you, a path you don’t want to go down, or any stories like that?



John: Up in our area, and this is looking back over the last 25 years or so, and is nothing that’s really recent. Early on, in the rush to become energy-efficient and just saying with the underlying premise that energy efficiency overall is good, and it lessens the need for fossil fuels, or any kind of fuels, it’s a good thing and a good noble green mission to reach. I think some of those things we did up here early on in the rush to become better insulated were actually bad building techniques. We’ve had issues around here with condensation inside walls and trapping moisture inside walls. We kind of half got ideas that maybe increase our guide to home but had some unintended consequences that caused some failures to sidings and wall sheetings and sometimes added to frost buildup. Things happened that were unintended but now have become very expensive. The homes which were most affected by that were homes around here built in the early 1980s, where we just put in more insulation and a better vapor barrier on and kept building. We added insulation, but didn’t really understand all the consequences of doing that without making it a really tight envelope and managing the airflow in that structure.



Tom: Yes, that would cause some real problems. Bernie, any horror stories that might pop up?



Bernie: No, I don’t



Tom: Last question. Bernie, is it harder to sell green concepts in this economy?



Bernie: Yes.



Tom: What do you do? Do they still want to buy it?



Bernie: The tighter the money gets, and the less money that’s in the budget, the more people want to see a cosmetic difference, something they can touch and feel rather than something that is just a mechanical system that exists in the background. When it comes down to it, when you have less money to spend, they spend the money on turning it into their dream house. If they’re going to sacrifice something, they want to see what they’re spending their money on. That’s what makes in tougher.



Tom: John, is it harder to sell green in this economy?



John: It is unless you can show it as a direct monthly savings. I still think the energy saving parts are not too bad to sell as long s you can translate it into not costing more on a monthly basis.



Tom: Do you have any last minute thoughts that you would want to leave with a remodeling contractor that wants to talk about green and needs some advice from someone who practices it?



John: I thought of one thing that separates the green washers from the green builders. A lot of the green washers tend to think of things just in terms of things using green products. Really there’s a lot more to it than that. It’s about the whole system of your home and how it relates to both your indoor environment and the durability and longevity of your home, the energy efficiency of the home, and runoff water management of your home. Green is really a comprehensive look at how the structure will be built, lived in and used versus just putting in a bunch of green products. Even Green Star says there are no green products per se. Taking green products aside from the system is pretty meaningless.



Tom: Bernie, what are your thoughts?



Bernie: I would say definitely get involved with an organization that promotes a defined green process. I’m sure there’s going to be certification courses coming out. It’s also good to have a third party like we used to come out and inspect the home so that when they are presented to the customer, it is presented as going through a stringent inspection process. You can trust that when it’s certified it will have all the information on there. It is a good selling technique. For someone wanting to get into it and wanting to turn to green remodeling, it’s really important that they understand what the process is and what defines it. The way to do that is to get involved with an organization that promotes it.



Tom: I think that’s excellent advice. Gentlemen, you’ve been great. You’ve enlightened me on a number of things. I didn’t know where it was going to go. You’ve taken it to new heights and been very forward and frank.

 

This month featuring:

John Murphy, President

Murphy Bros. Designers & Remodelers, Minneapolis

Founded in 1983, Murphy Bros. is a full-service design/build firm with 21 employees and about $3 million in annual revenue.


 

Bernie Smith, President

MasterWorks Atlanta, Roswell, Ga.

MasterWorks has been in business for 26 years and focuses on design/build projects. The company has 17 employees and had a volume of $4 million in 2008.

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