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This article was published on: 03/01/2003

Profitable niche
Selling Green
Environmentally sensitive homes aren’t just for tree huggers any more.


Say “green home” to many real estate professionals, and you conjure up a vision of solar panels, walls built with straw bales, and sensors everywhere to turn on and off lights every time a homeowner walks by. Interesting, maybe even laudable, but hardly a profitable market segment to target.

But with an estimated 50,000 environmentally friendly homes constructed in the United States between 1990 and 2000, green buildings aren’t just for a few buyers any more. While still a minor segment of the 12 million homes built during that decade, rising energy costs and concerns about environmental degradationas well as more and more municipal building code requirementsare transforming what was once a curiosity into a mainstream phenomenon, notes a January 2001 article in American Demographics.

According to a survey of consumers conducted in 2001 by Cahners Residential Group, a building trades group, almost 80 percent of consumers listed environmentally friendly features a concern when purchasing a home.

“It’s not a niche anymore,” says David Richmond, board president of the Energy and Environmental Building Association and director of construction for the Prairie Crossing conservation community in Grayslake, Illinois. Launched in 1992, the development, which includes 362 homes on 677 acres, has become a national example of how to incorporate green features into a development.

What is “Green” Housing?

But if green homes are moving mainstream, what is meant by the term is still a moving target. Most homes that earn the term “green” today feature energy efficient heating and cooling systems, lighting, and appliances. The most widely recognized seal of approval for energy efficiency is the Environmental Protection Agency’s “Energy Star” program. This voluntary label program encompasses 38 product categories ranging from furnaces and appliances to complete homes.

In newly built homes, the “green” features can also encompass land planning techniques that preserve the natural environment, site development that reduces erosion and protects trees, indoor and outdoor water conservation, use of recyclable and renewable materials, waste reduction, rescue, and recycling during construction and throughout the life of the home.

Adding to the confusing of defining this market segment, there is no universally accepted standard for quantifying energy efficiency in homes. Many states rely on some form of the U.S. Department of Energy’s Model Energy Code, ( first developed in 1983 and renamed the International Energy Conservation Code in 1998, as a starting point in defining a green home. This code contains energy-efficiency criteria for new residential and commercial buildings and for additions to existing buildings. It describes how ceilings, walls, floors, foundations, lighting, and power systems must be constructed to meet its energy conservation standards. To find out about your state’s application of the MCE, consult the map at

To further muddy the green waters, in 2001, the EPA began applying its Energy Star label to new and existing homes. To qualify, a home must be at least 30 percent more energy efficient in its heating, cooling, and water heating than a comparable home built to the 1993 Model Energy Code and 15 percent more efficient than the state’s energy code. The rating has to be done by a home energy rater or included as part of the Builder Option Package verifier, which spot checks only a selected number of homes in a green development.

Energy raters provide the independent verification that a house meets applicable energy standards. They assess a home’s energy usage, determine what improvements could increase energy efficiency further, and compute the savings and payback period of various options. Some energy raters work for small local providers, while others are associated with nationwide energy-rating networks such as the Home Energy Rating System (HERS) and Energy Rated Homes of America (ERHA). Local utility companies also conduct energy audits. The Residential Energy Services Network (RESNET) accredits providers of energy audits and offers training for lenders and real estate professionals in energy efficiency. Its Web site has directories of lenders and energy raters by state..

In the case of new construction, the builder is usually responsible for obtaining an energy rating. Audits can also be arranged and paid for by a seller who wants to add marketing appeal to a home or by a buyer who is trying to qualify for an energy-efficient mortgage. Audits typically cost between $200 and $300.

Next page: Selling and Making the Case for Green

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