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Free Market, Liability, and Greening an MLS

In the world of residential valuation, a green-built, energy-efficient, or high-performance new home or retrofit is essentially invisible to the consumer if the MLS doesn’t support green fields (i.e., fields in the MLS data form that enable the listing agent to define the green features).  Without green fields, if a potential buyer is interested in a home that’s resource efficient or has superior indoor air quality, for example, brokers searching the MLS on their behalf can’t identify this property type. Likewise, an appraiser undertaking a green home assignment isn’t able to identify comparables, isolate possible premiums being paid by consumers for green features, or identify local market information such as market share, days on market, and price per square foot.

As market awareness of and demand for green homes grows, what is an MLS’s responsibility to its members to provide green fields—and what liability issues should be of concern?  According to studies by the Institute for Market Transformation, a nonprofit organization that promotes energy efficiency, energy benchmarking of commercial properties has revealed a simple truth: When information is disclosed to the market, the market has the opportunity to react to that information.  Market reaction can be reward or punishment—that’s the nature of a free market. But either way the consumer benefits from the competition as a result of disclosure.  The ability then to identify market reaction lies at the heart of both real estate investments and valuation.

Yet every MLS must consider its liability when considering green fields. Corrupt data occurs for two reasons: a lack of education or awareness on green building certifications and features, and/or a lack of accountability with regard to requiring supporting documentation when a green certification checkbox is marked by the broker.  The most cited example is confusion between the ENERGY STAR Home certification and ENERGY STAR appliances.

However, for the approximate 650 MLSs in the nation yet to instigate green fields (76 percent of the 860 MLSs in the country), the experiences of the early-adopter MLSs are invaluable.  Lessons learned:

  • Require that supporting documentation (the verified checklist or unique identifier number) be uploaded within three days or the field is rejected.
  • Reach out to the local green building/appraisal community for free review/commentary on the accurateness/relevance of proposed fields.
  • Encourage brokers to take the first step and educate themselves on the growing green homes market estimated to be worth $87 billion to $114 billion between 2011–2016, according to McGraw Hill Construction–Smart Market Report 2012).

Fiona Douglas-Hamilton

Fiona Douglas-Hamilton is the founder of SEEC LLC, a consulting and education firm providing services to support the value of sustainability in the built environment. She was a founding member and former co-chair of the Green Building Value Initiative, a collaborative of non-governmental organizations that worked 2007-2009 to determine whether third-party green certifications added value to residential and commercial real estate projects. She was also sustainability director for Apple Homes, an Olympia, Wash., based custom home builder. Previously, she founded a design–build management company developing hospices and large commercial nursing homes in England. Douglas-Hamilton is also a former president of the Northwest EcoBuilding Guild and a national speaker on residential green building valuation.

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Comments
  1. Rob Larson

    Did you know that the Real Estate Stands Organization, the group that created the RETS standard, has a Data Dictionary supporting the same green fields found in http://www.greenthemls.org? Adoption is growing and all MLSs are invited to review and comment on the standard. Goto RESO.org.

  2. Great article Fiona. As an appraiser I have just taken a two day course on appraising high performance homes and the instructor made the exact same point you have about MLS’s around the country providing fields for green features in homes. From an appraisal standpoint it will help us to sift through a lot of sales data to determine the value or lack thereof for these types of features. I hope MLS offices will work to accomodate this information to help market these types of properties as well as to help appraisers in their market research.

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