This study was designed and conducted by Northwest real estate appraisers for Northwest
real estate appraisers.
A question exists among real estate professionals about whether homebuyers in the Northwest perceive energy efficient and green certified homes of being of greater value than similar, non-certified homes. To address this market uncertainty, the Northwest Energy Efficiency Alliance (NEEA) commissioned an appraiser-led study to assess the market reaction to third-party certification on residential properties in key markets in Idaho, Oregon, and Washington. The study documents the market valuation associated with the predominant green and energy efficiency home certifications used in the Northwest, including ENERGY STAR®, Built Green®, and Earth Advantage®.
Project Goal: To analyze the potential contributory value of energy efficient and green certified homes in the Northwest and provide real property appraisers with reliable and geographically relevant data for use in developing home valuations.
Research: The project team employed a statistical methodology based on a comparable sales approach. The project appraisers reviewed observed sales prices and other real estate listing and transaction characteristics, as found in the Multiple Listing Services (MLS) systems serving the cities within the study area. The team established sample size guidelines through a power analysis and employed the following principles in working with the resulting data:
- Normalize: The project team “normalized” the pool of subject properties. Removing properties from the study that contained anomalies ensured that price adjustments applied by the project statistician were limited to time of sale, Gross Living Area (GLA) range adjustments, and bedroom and bathroom adjustments.
- Verify: Importantly, the project team verified the accuracy of the listing of each subject property used in the analysis. By cross-checking the list of properties marketed on the various MLS systems as having an energy efficiency or green certification with the administrators of those programs, the project team discovered an unintentional, yet crucially important finding: energy efficiency and green certifications are frequently misidentified on MLS listings in the Northwest.
- Adjustment for Time: The methodology also made time of sale adjustments developed from specific neighborhoods or MLS areas. This mimics the process that appraisers actually undertake, instead of applying the results of large regression analyses using a less precise method, such as quarterly market increases or decreases.
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- Several areas in western Washington showed a significant positive market reaction to ENERGY STAR and Built Green certifications. ENERGY STAR homes located in the west side of King County reported the highest contributory value, with a sales premium of 8% over comparable noncertified properties. Perhaps surprisingly, ENERGY STAR homes located in Kitsap County had a 7.4% sales premium. Though there was a smaller sample size than optimal, Built Green homes located in the city of Seattle produced a statistically significant sales premium, with a 7.6% greater sales price in comparison to noncertified homes.
- Other areas of western Washington showed a marginal premium depending on the certification type. ENERGY STAR homes located on the eastside of King County showed a 4.5% contributory value. Built Green homes in the western and eastern suburban areas of King County had a statistically insignificant premium of 2.8%.
- ENERGY STAR homes in and around Boise, Idaho showed a statistically significant premium of 4.5%.
- Several areas showed little indication of a sales price premium associated with third party certifications. No statistically significant difference between certified and non-certified homes was found in Snohomish County (1.4%) for ENERGY STAR homes and in suburban King County (1.3%) for Built Green homes.
- There were similarly flat, statistically insignificant results in Portland, Oregon for Earth Advantage (1.2%) and ENERGY STAR (-0.2%).
Summary: Northwest real property appraisers now have market data to consider when developing a contributory value for energy efficiency or green certifications in property valuations.
Read the full study and download an Appraiser Reference Sheet at:
Home Valuation Report & Appraiser Reference Sheet >>
