I arrived at the showing five minutes early and saw my buyer was already there outside, pointing what looked like a gun at the house. This could have been a rather unsettling scene in Reading, Mass. But I knew better than to worry. On this cool morning in early 2019, Travis was busy capturing several thermal images on his infrared camera. As a savvy, sustainability-minded consumer, he wanted some assurance that the home’s sealants and insulation would keep heat loss to a minimum when temperatures plunged during winter.
In New England where I work, a home’s resilience in the face of extreme temperature swings from winter to summer, whether through energy-efficient HVAC systems or green building materials, is becoming an important focus for home buyers.
Although you may not run into clients with their own IR cameras, it’s not unusual for a home inspector to have one. On the American Society of Home Inspectors’ website, it’s easy to search for inspectors who use infrared thermography.
The impacts of climate change, and greater awareness about energy and water efficiency, are coming up in conversations with clients more and more. Climate risk is top of mind for most home shoppers particularly among younger buyers. Why? Nearly half of all homes in the U.S., 44.8%, are in danger of severe or extreme damage from a range of environmental threats, according to a recent realtor.com® report. Almost $22 trillion in residential real estate is at risk of flooding, wind damage, wildfires, heat or hazardous air quality. According to the National Association of REALTORS®’ latest REALTORS® and Sustainability Report: Residential, 45% of members said clients were at least somewhat interested in sustainability.
Indeed, many of my clients seek me out because I’ve made sustainability a pillar of my real estate business for the past 15 years, starting even before sustainability gained much traction in either the residential or the commercial sector.
Soon after I became chair of NAR’s new Sustainability Advisory Group in 2019, I wrote an article for REALTOR® Magazine on the impact of climate change on the real estate industry. Since that time, we have seen accelerating engagement not only by NAR but also in the lending, insurance and home building industries.
NAR now has a 10-year sustainability plan for our association, and as of this year, we are including a subject matter expert in sustainability at the Executive Committee level. The Sustainability Advisory Group has developed a toolkit to help state and local associations include sustainability initiatives in their planning. If you are a REALTOR®, a member of NAR, with a passion for this topic, I encourage you to form a coalition of like-minded professionals and use the trove of resources NAR has made available to benefit members and their clients and customers.
Enviro-Leadership at the Brokerage Level
In addition to my work as an agent, I’m the chief sustainability officer at my brokerage LAER Realty Partners, one of very few companies to create a leadership position prioritizing issues like high-performance home valuation and other climate-related real estate issues.
The industry would benefit if more brokerages proactively championed and showed their commitment to the cause by installing leaders who can serve as a reliable touchpoint on sustainability for other agents, consumers, and the industry. Staying up to date on industry and legislative initiatives at the local and national level should be the responsibility of every brokerage in the country.
In April, the Securities and Exchange Commission voluntarily stayed its proposed mandate for publicly traded companies to disclose their scope 1 and 2 GHG emissions and their climate risk as the agency defends the disclosure requirements in court. The review in the Eighth Circuit U.S. Court of Appeals in St. Louis comes in the wake of multiple lawsuits by the energy industry and other business groups. Yet, the issue continues to gain traction. Tools are available to help home buyers anticipate climate risk themselves. Realtor.com added Risk Rating to its platform in 2020, and Realtors Property Resource® added Climate Check in 2021. Both tools use predictive analytics to project potential property risks 15 and 30 years out.
Amid the continuing brisk rise in home prices, clients are increasingly focused on ways to reduce (or maintain) insurance and utility costs and potentially gain tax credits through the installation or retrofits of green energy systems in homes and commercial spaces. Looking ahead, questions swirl about how climate change will affect communities and home ownership five, 10 or 20 years from now. It’s wise for you to be able to show your knowledge and competence as economic and environmental conditions evolve.
Managing Uncertainty
As we rethink our value proposition to clients, remember that we help buyers, especially first-timers, manage the uncertainty of the most stressful and important transaction in their lives. Besides becoming comfortable talking with buyers about energy and water efficiency, renewable energy solutions, and climate risk, we also strengthen our long-term relationships when we can help new homeowners and past clients become aware of federal tax incentives to improve a home’s energy efficiency and make it more comfortable, lowering their operating costs, and improving indoor air quality.
NAR members who achieve their GREEN designation may have an advantage presenting their value proposition to home buyers simply because they are more fluent than other agents about environmental improvements pertaining to advances like heat pumps, solar photovoltaics, and induction cooktops. They have the insights and expertise to serve these potential clients. For example, does your MLS include green data fields? Some 40% of them now do. All real estate pros must be committed to completing these fields wherever applicable.
The mortgage lending industry has also acknowledged how climate risk is affecting its practices and policies. In September 2021, the Mortgage Bankers Association and the Research Institute for Housing America produced a research report titled, “The Impact of Climate Change on Housing and Housing Finance,” noting that “housing finance is likely to face increasing stress as the consequences of global warming mount.”
And Fannie Mae, Freddie Mac and the FHA now require appraisers to factor in energy-efficient features in property valuations. Similar to the competence requirements of Article 11 of the NAR Code of Ethics, the Uniform Standards of Professional Appraisal Practice require appraisers to show competence in valuing the properties they are appraising. Several appraiser education providers offer appraisal of green housing courses and certifications to ensure appraisers meet competence requirements.
Real estate agents who are more climate savvy and can speak to clients’ desires for energy and water efficiency have an opportunity right now, with support and insights from NAR, to simultaneously uphold our responsibility to mitigate harm to the environment, to defend the communities that we serve, and our increase value to clients. The opportunity is huge, and the obligation to our industry, consumers and the communities we serve to be forward-thinking about a sustainable future is nothing short of a moral imperative.
