GExecutive SummaryReport of Energy Efficiency, Valuation of High-Performance Homes, & Market Transformation on Massachusetts Residential Real Estate, 2013 is the second annual report by Craig Foley, Chief of Energy Solutions, at RE/MAX Leading Edge. In spite of the minimal housing inventory available to buyers in the Commonwealth, this year, the report finds a 110% increase in green certified single-family home sales from 2012 to 2013 in Massachusetts.

In a year during which energy prices spiked dramatically, and the Federal Emergency Management Agency redrew flood maps, rapid growth of green certified properties was clearly evident. There is also evidence in the report that real estate agents and brokers are not able to handle the complexities of green certified listings. Evidence of under-reporting of single family homes and condominiums was notable.

• Listing agents and brokers potentially under-reported 60% of Energy Star home sales in 2013.

• In 2013, agents and brokers may have under-reported sales of green-certified single-family properties in Massachusetts by one and a half times. Evidence suggests that two hundred additional single-family sales should have been reported as green-certified properties. Data from Massachusetts predominant multiple listing service MLS PIN says that 128 single-family homes were sold with a green certification in 2013.

• It is likely that 48% of LEED certified condominiums were under-reported in MLS PIN Massachusetts sales in 2013.

• The evidence suggests that listing agents may have under-reported green condominium sales by a ratio of nearly 2 to 1 in Massachusetts in 2013.

• For new construction condos, the ratio of under-reporting was 3.5 condo sales for every 1 whose listing agent correctly used MLS PIN’s data entry.

• ‘Solar feature’ is one of the green data fields in MLS PIN. There was no clear evidence of what may be traditionally termed a ‘solar feature’ in 39% of the 192 listings that used this data field as a selling point in 2013. This may be evidence of listing agents over-representing a home’s green features. This is an increase from the 28% that may have used this feature inappropriately from our 2012 study.

Evidence of the lack of accurate reporting of green certified single-family homes and condominiums threatens the growth of the emerging high-performance home marketplace. Accuracy of all data fields by listing agents is vital to a healthy marketplace. Potential home buyers, and their real estate agents, depend on the accuracy of listing data when considering an investment in real estate. Appraisers and bank underwriters depend on accurate information in the local multiple listing service when evaluating the buyer and banks’ exposure in the transaction. Market transformation to homes that are more energy efficient and built with sustainable, healthy building materials will be made more difficult if the findings in this report cannot be addressed.

The Overview of 2013 Initiatives to Support Market Transformation section of the report gives ample evidence of both national and state momentum towards support of market change. The report’s evidence of under-reporting of green certified housing sales suggests that there are many challenges still in front of the industry.

Report of Energy Efficiency, Valuation of High-

Performance Homes, & Market Transformation on

Massachusetts Residential Real Estate, 2013

BY CRAIG FOLEY,

CHIEF OF ENERGY SOLUTIONS, RE/MAX LEADING EDGEG

Overview of 2013 Initiatives to Support Market Transformation

A Stronger Massachusetts Housing Market in 2013This is our second annual report on the high-performance home market in Massachusetts. The information in this

year’s analysis will build from last year’s data as well as break new ground in the analysis of the green home

marketplace in Massachusetts.

Residential sales of property in the 2013 Massachusetts marketplace had a very different backdrop than in 2012.

At the beginning of 2012, residential home and condominium sales in the Greater Boston area were only

beginning to emerge from a period of economic uncertainty. By the end of 2012 there were signals of market

improvement. The 2013 market was one that marked a clear transition to a vigorous seller’s market.

The Massachusetts Association of REALTORS reported that the inventory of single-family homes fell by 21.7%

compared to December 2012, and that inventory of condominiums was down by 28.4%.

http://www.bizjournals.com/boston/real_estate/2014/01/ma-home-sales-flat-in-dec-rise-in-2013.html?iana=ind_rre

For buyers, particularly in the Greater

Boston area, the experience of

buying a home was nerve wracking

and extremely competitive in 2013.

The combination of an improving

economy, low interest rates, pent up

demand for housing, and minimal

inventory of active homes on the

market made the process of buying a

home in Greater Boston challenging.

Buyers became accustomed to

multiple bids on properties of

interest, waiving the opportunity to

inspect the home, and having to

consider the phrase ‘escalation

clause’ as part of the offer process.

http://www.bostonglobe.com/business/2013/12/31/hot-year-for-home-sales/jREZ11Sz7cIoX0FyI8My6O/story.html

3

In a Massachusetts Association of REALTORS survey, the top choice of the state’s agent and brokers for

completing the question, “2013 was the year of _________?” the clear winner was “No inventory.”

http://www.marealtor.com/content/NewsTicker.htm?view=38&news_id=2110&news=31

National Momentum towards Green Housing Data and Correct Valuation in 2013The progress made towards ensuring that the correct valuation of energy-efficient homes built with sustainable

and healthy building materials was particularly noteworthy this year. Before we begin the analysis of the

Massachusetts green home market of 2013, it is worth reviewing some of the events that have shaped regional

and national progression towards a healthy high-performance home market this year.

In 2013 there were several documents that reinforced the national momentum towards a market transformation of

green homes. It is impossible to value a home without data that accurately details a home’s features. For property

owners in the United States, most home sales data is recorded through the Multiple Listing Service (MLS). There

are over 900 MLSs collecting data fields on properties across the country. They are, quite literally, the brains of

the residential and commercial real estate transaction.

Courtesy of Elevate Energy. Preliminary Research as reported by verification programs and census data October 2013.

4

2.5M Certified Green Homes in the U.S.

In the largest metro areas of the United States, multiple listing services include data fields

that reach for higher standards of home energy efficiency and sustainability. Version 1.2 of

the Real Estate Transaction Standard Data Dictionary was published in November of 2013

and includes clear definitions of green fields for MLSs to implement, including residential sources for distributed

generation. The MLS Green Implementation Guide offers additional guidance to MLSs that have not taken the

opportunity to upgrade green property data fields. It will also assist MLSs that wish to migrate to green data

fields which have been documented in the Real Estate Transaction Standard Data Dictionary as part of an

overall data dictionary compliance strategy. These documents will serve as guidance for specific and consistent

green data sets for MLSs nationwide.

The Valuation of Green Buildings: Background and Core Competency was produced by the Appraisal Practices

Board (APB) as a first exposure draft to stakeholders in July of 2013. The document clearly establishes best

practices for appraisers to value green buildings in an ethical and competent manner. Although the paper will

not be finished until 2014, the first exposure draft was open for public comment in July of 2013. One note

referred to appraisers having to consider the potential of a “brown discount.” Homes subject to a “brown

discount” are homes without green upgrades in active green markets that may be subject to obsolescence.

GREENBROWN

Reprinted with permission of NAR’s Green REsource Council, www.GreenTheMLS.org

5

Another paper that further reinforced the need to accurately account for

the green premium of high-performance homes was Unlocking the Value

of an Energy Efficient Home; A Blueprint to Make Energy Efficient

Improvements Visible in the Real Estate Market by CNT Energy and the

National Home Performance Council. This document created a blueprint

for addressing the disconnect that exists between energy-efficiency

program administrators, the real estate community, and the homebuyer

and seller. A common issue among real estate agents is that selling a

home with a granite countertop and new kitchen cabinets is easier than

selling one with energy efficiency improvements. Energy-efficiency

improvements are often invisible to potential homebuyers; the essential

question is how does an agent sell the invisible? Unlocking the Value of

an Energy Efficient Home; A Blueprint to Make Energy Efficient

Improvements Visible in the Real Estate Market seeks to find ways that energy-efficiency programs can create

stronger linkages in order for the real estate industry to be able to feature consistent, standardized data about

energy-efficiency features in existing homes that can be taken into account by buyers, appraisers, lenders, and

others during the home sales transaction.

These documents are excellent markers of the national momentum towards ensuring that the high-performance

home market is accurately measured. Green data fields for homes made available to buyers, real estate agents,

and appraisers made systemic progress in 2013, as well as a movement towards industry understanding of the

green premium for high-performance homes. That all of the documents were created or produced in the same

year is clear evidence that 2013 was significant to the high-performance home industry.

In addition to momentum towards accurate valuation of green homes, the SAVE ACT, a bill aimed at encouraging

home energy-efficiency improvements by establishing underwriting guidelines for mortgage lenders that factor in

cost savings for homeowners, was reintroduced to Congress in 2013.

The Sensible Accounting to Value Energy Act of 2013 is sponsored by Sens. Michael Bennet, D-Colo., and Johnny

Isakson, R-Ga. The bill has been referred to the Senate Banking Committee and has the support of many real

estate industry trade organizations.

http://www.inman.com/2013/06/12/energy-efficiency-improvements-could-be-factored-into-mortgage-underwriting/

#sthash.fNCrfnC3.dpuf 6

There were also several national studies that reinforced the vibrancy of the high-performance home marketplace

in the United States. At the beginning of March, the National Association of Home Builders (NAHB) published a

new study entitled, "What Do Home Buyers Really Want?"  Answer number one was energy efficiency.

http://rismedia.com/2013-03-03/what-do-home-buyers-really-want/

In Mid-March of 2013 a ground breaking study of energy-efficient homes was

released by the University of North Carolina at Chapel Hill Center for Community

Capital. In the study author Dr. Nikhil Kaza states that owners of energy-efficient

homes are 32% less likely to default on their mortgages and that "the mortgage-

lending process does not include the financial benefits of energy-efficient savings

in its underwriting decisions."

http://www.imt.org/uploads/resources/files IMT_UNC_HomeEEMortgageRisksfinal.pdf

In a year of great import for establishing the value of green homes,

Exploring California PV Home Premiums was released on

December 12th. A new study from Lawrence Berkeley National

Laboratory found that houses with rooftop solar panels sell for

higher prices than comparable non-solar homes. California home

buyers, according to the study, are willing to pay a premium

for solar photovoltaic (PV) installed on resale residential properties.

Among the houses studied, the value of homes with solar PV systems had a premium of $5,900 for each kilowatt

that an array can generate. Older solar PV systems sold at less of a premium than new systems.

Regional and National Leadership in 2013Regional and federal legislative and executive office leadership towards supporting the energy efficiency of

buildings was also a highlight of 2013. President Obama's leadership on the issues of U.S. energy

production, consumption, and climate change is noteworthy. Although his presidency has been marred by issues

both domestic and international, he is the first president to consistently address the challenges we face regarding

energy consumption and its relationship with America’s built environment.

On January 21, 2013 President Obama addressed the nation with his inaugural address, "We, the people, still

believe that our obligations as Americans are not just to ourselves, but to all posterity. We will respond to the

threat of climate change, knowing that the failure to do so would betray our children and future generations...The

path towards sustainable energy solutions will be long and sometimes difficult. But America cannot resist this

transition, we must lead it."

32%

less likely to default on mortgages

7

A “long and difficult path” could have been a reference to decisions that

our country faces on the benefits/costs of fracking for oil and natural gas,

the Keystone pipeline, investment in renewable energy, permanent storage

of spent nuclear fuel, or perhaps all of the above. All production of energy

requires some risk. There is no question, however, that the energy

efficiency of U.S. commercial and residential buildings is the first line of

defense in taking a stand against the potential effects of climate change.

Despite the politically contentious atmosphere in our nation’s capital in April, a bipartisan bill co-sponsored by

Senators Jeanne Shaheen (D-N.H.) and Rob Portman (R-Ohio) was reintroduced to the Senate Energy and Natural

Resources Committee. The bill would authorize a state-based private financing program to encourage energy-

efficiency upgrades and direct the federal government to undertake energy-saving practices and roll out voluntary

efficiency standards for new building codes.

On February 21, 2013 in the State of the Union address President Obama said, "I'm also issuing a new goal for

America: let's cut in half the energy wasted by our homes and businesses over the next twenty years. The states

with the best ideas to create jobs and lower energy bills by constructing more energy-efficient buildings will

receive federal support to help make it happen." Residents of Massachusetts, a national leader in legislation to

support the energy efficiency of buildings, should feel optimistic about the President’s statement.

Congress introduced a legislative act in 2013 that could lead to energy savings for homeowners as well as lower

environmental stress. The Home Owner Managing Energy Savings Act (HOMES Act), introduced by Congressmen

David B. McKinley (R-WV) and Peter Welch (D-VT), would provide rebates based on projected savings.

http://www.resnet.us/library/congress-improve-home-energy-efficiency

Locally, the state of Massachusetts continues to lead the nation in

a number of energy initiatives. In February, Massachusetts

Governor Deval Patrick was awarded the "Green Governor of the

Year" award by the U.S. Green Building Council (USGBC) and

the Sierra Club. On May 8th, the Boston City Council passed the

Building Energy Reporting and Disclosure Ordinance by a 9-4

vote. Boston became the seventh large metro area in the United

States to require energy disclosure of buildings.

8

President Obama announces new climate change policy at Georgetown University

The Massachusetts State House is taking an active leadership

role in improving the buildings in which we live and work.

There are several bills in front of the Joint Committee on

Telecommunications, Utilities, and Energy that are worthy of

comment. Several acts that address home energy efficiency

and disclosure were discussed by the committee in 2013.

Energy disclosure acts for commercial properties and

municipal buildings are being considered. S.1613 seeks

energy assessments at the time of title conveyance. S.1574

addresses funding for energy-efficiency projects for low

income housing. H.2919 would establish a program for energy-efficiency education for property managers. S.

1587 would establish a net zero building code in the state for residential construction by 2020.

Massachusetts and Solar Distributed GenerationMassachusetts is at the leading edge of states incentivizing homeowners to consider solar

PV as a clean source of power for their home. Homeowners can consider several options

for controlling the costs of installation and their utility bills. A popular option is to lease

the solar PV system with a power purchase agreement (PPA). If a homeowner decides to

purchase the system outright they can take advantage of an aggressive state incentive

called a Solar Renewable Energy Credit (SREC). By selling the clean power SRECs back to

the utility, all of whom have an obligation for renewable energy capacity, the homeowner

can substantially increase the return on investment of the initial solar installation.

The state had set a goal of achieving 250 MW of installed solar PV, a combination of both utility scale and

distributed generation on homes and businesses, by 2017; that goal was achieved in 2013. At the beginning of

2014 the Massachusetts Department of Energy Resources (DOER) is proposing new goals for 1600 MW of

installed solar by 2020.

In 2012 the Solarize Massachusetts program came into full fruition. The Massachusetts Clean Energy Center

(MCEC) incentive program initiated 802 solar projects in 17 Green Communities Act municipalities. In 2013, the

Solarize MA initiated two rounds of the program with communities throughout the state. Round I ended on

October, 31, 2013 with 551 signed contracts for solar installations in Bourne, Brookline, Chelmsford/Carlisle,

Lee, Medford, Medway, Newton, Northampton, and Williamstown. Round II numbers had not been released at

the time of this publication, but included the following communities: Adams, Amherst, Andover, Greater

Barrington/Egremont, Lexington/Bedford, Needham, Salem/Swampscott, Watertown, Wellfleet, and Williamsburg/

Whately/Chesterfield. 9

The Massachusetts Department of Energy Resources is also administering a

pilot program to develop energy-asset ratings for existing homes in eight

communities in and around Springfield, MA. The pilot called, Home MPG,

is an initiative of the Mass Save® home energy services program which is the

Commonwealth’s energy efficiency program run by the public utility

companies. The initiative focuses on existing homes rather than on new

construction, which garners much of the green building community’s focus. Asset ratings offer an apples to apples

comparison between homes by standardizing occupancy behavior and focusing on evaluating the energy

components and systems of the home itself. The pilot looks to drive homeowners to invest in energy efficiency

with the use of a single numerical value to represent a home’s energy use while a second score will offer the

homeowner what their home’s score could be if the suggested energy retrofit work is completed. Typical work

includes, air sealing, insulation, and HVAC replacement. Through 2013, the HomeMPG program has issued

3,036 energy performance scores to homeowners that have resulted in 1,450 signed contracts for energy

efficiency retrofits. The pilot runs through March 2014.

Massachusetts, for the third year in a row, was ranked the most energy-efficient state on the American Council for

an Energy Efficient Economy (ACEEE) Energy Efficiency Scorecard. Boston was ranked first as the most energy-

efficient metro area in the United States. Think Progress cited Massachusetts as one of its ten leaders in climate

change for 2013.

http://thinkprogress.org/climate/2013/12/23/3073901/climate-champs-2013 10

Power Prices Rise in Massachusetts at the end 2013It is also worth noting that the retail electricity markets made an abrupt change from

the historically low power prices that the region has been experiencing since 2009. At

the end of the year, National Grid and NSTAR, the two utilities that serve most of the

state of Massachusetts, increased the supply rates to all end users. The basic service

supply rates increased by 33% for NSTAR residential customers, effective on January

1, 2014, while the National Grid residential supply rates rose 38% and were effective

November 1, 2013. Residential customers within the reach of these utilities that made an investment in energy-

efficiency upgrades will now be experiencing a shorter time period for the return on their investment.

Winter power prices in New England will continue to be a challenge for the region. A significant increase in

generation of electricity by natural gas power plants over the last decade, coupled with the region being at the

“end of the pipeline” creates uncertainty for not only natural gas fueled generators, which do not have firm

contracts with their fuel suppliers, but for New England’s electricity rate payers as well.

http://www.forbes.com/sites/williampentland/2013/12/12/cold-snap-sends-energy-prices-into-stratosphere-in-new-england

Impact of Climate Change in 2013

On May 9th, 2013, the earth’s atmosphere reached an average daily carbon dioxide level of 400 ppm at the

Mauna Loa observatory in Hawaii. The Mauna Loa observatory has been measuring atmospheric levels of carbon

dioxide since 1958. Before the Industrial Revolution in the 19th century, global average CO2 was roughly 280

ppm. During the last 800,000 years, CO2 fluctuated between about 180 ppm during ice ages and 280 ppm

during interglacial warm periods. Today's rate of increase is more than 100 times faster than the increase that

occurred when the last ice age ended.

http://www.nytimes.com/2013/05/11/science/earth/carbon-dioxide-level-passes-long-feared-milestone.html?_r=0

On September 27th, 2013 the International Panel on Climate Change released its Summary for Policymakers for

the Fifth Assessment Report. It is clear in the summary that the IPCC has substantial science that correlates

climate change with mostly human-caused actions at 95% or greater certainty.

http://dotearth.blogs.nytimes.com/2013/09/27/ipcc-global-warming-report-clarifies-humanitys-choices

11

The increasing frequency of extreme weather events, as well as the immense impact of

these storms on local economies, continues to be felt. In our region of the country one can

easily point to several noteworthy climate events. In early June of 2011 a tornado ripped

through Springfield, Massachusetts devastating several city blocks. In August of 2011

Hurricane Irene ran up the Connecticut River Valley in Vermont and New Hampshire

bringing up to 11 inches of rain and causing infrastructure damage on 225 of Vermont’s

251 cities and towns.

http://www.huffingtonpost.com/2013/08/28/hurricane-irene-2-years-later_n_3827088.html

In October of 2012 Hurricane Sandy devastated portions of the mid-Atlantic and Northeast. The year of 2013

will also be remembered for Australia’s “Angry Summer,” Colorado fires, Texas drought, and November tornados

touching down near Chicago. Typhoon Haiyan struck the Philippines on November 8th and killed 6,000 people,

injuring 27,000, and displacing 3.9 million people from their homes.

http://www.cnn.com/2013/12/13/world/asia/philippines-typhoon-haiyan

How extreme weather events will play into the real estate market of Massachusetts in the future is impossible to

predict. There are, however, market signals worthy of deeper investigation.

Redrawing the FEMA Flood Insurance Rate Map

The redrawing of the Federal Emergency Management Agency

(FEMA) flood maps has the potential to have an impact on real

estate transactions in the future. The National Flood Insurance

Program (NFIP) was created in 1968 to cover the void of insurers

not willing to carry flood insurance policies to property owners.

NFIP created a program to ensure homeowners flood insurance

policies in communities that agreed to flood mitigation strategies

in their zoning requirements. Unfortunately, weather events such

as Hurricane Katrina in 2005 and Hurricane Sandy in 2012 have made it impossible for NFIP premium revenues

to equal their damage payouts. It is now estimated that the NFIP is $25 billion dollars in debt. The debt of the

National Flood Insurance Program is clearly not sustainable for our economy.

The NFIP, through taxpayer funding, also subsidized approximately 20% of policy holders in the riskiest flood

zones. The Biggert-Waters Flood Insurance Reform Act of 2012 recognized that the NFIP was on an unsustainable

path. Two initiatives from the Flood Insurance Reform Act could affect homeowners in Massachusetts, as well as

the sale of their properties in new and existing flood zones. 12

The Flood Insurance Rate Map (FIRM) has not been redrawn since 1986. The new map will include flood data

through June of 2010. Expanding flood zones will increase the number of policy holders near the coastline, as

well as along inland rivers and streams that are prone to flooding.

The property owners who will feel the greatest effect of the

Flood Insurance Reform Act of 2012 will be policy holders

who own homes within Special Flood Hazard Areas (SFHA).

Of the 20% of subsidized policy holders that own property

within SFHAs, virtually all of them have been subsidized by tax

payers. The burden on newly unsubsidized policy holders

could be extreme.

The Boston Globe article published an article in October of 2013 on the potential impact of the Flood Insurance

Reform Act on Massachusetts policy holders. In the article, the Globe mentions a 27 unit Marblehead condo

association who feared that the association’s annual flood insurance premium would jump from $4300 in 2013

to $45,000 in 2014 and then climb in subsequent years to $600,000. The effect on the housing market of the

redrawing of the FEMA flood maps is an issue that deserves tracking for future years.

ht tp: / /www.bostonglobe.com/business /2013/10/15/changes-flood-insurance-mean-higher-costs-water /

1hXoKECepAhcpothIhnfeI/story.html

Increasing the energy efficiency of Massachusetts homes is one solution that can mitigate future risks on rising

energy costs to the residential rate payer, lower stress on the regions utility grid, as well as lower stress on the

environment. Rigorous building codes and third party verified green certifications for new construction and

condominiums set reasonable bars towards achieving energy efficiency. For older homes, no-cost energy

assessments and incentives to remodel in ways that lower the home’s operating costs are available to

Massachusetts homeowners. What follows is a review of high performance homes sales in Massachusetts in

2013.

13

MA High Performance Home Market Transformation Results 2013

Sold Single Family Homes with Green Certifications as defined by MLS PINFor the purposes of this report, all data was drawn from Multiple Listing Service Property Information Network

(MLS PIN). MLS PIN, located in Shrewsbury, Massachusetts, is the dominant multiple listing service in

Massachusetts for residential properties. Of the 900 MLSs in the United States, MLS PIN is a top ten company in

terms of residential sales volume. In 2013, real estate brokerages used MLS PIN in over 70,000 transactions

totaling over $27 billion in real estate sales. http://www.mlspin.com/company_snapshot.aspx The information

reported here comes exclusively from MLS PIN and is not a full reflection of total sales volume in Massachusetts.

MLS PIN was at the vanguard of multiple listing services to add green data fields in 2009. Accurate reporting of

homes and condos with green certifications is important for several reasons. For buyers searching for specific

types of green-certified housing, the accurate accounting by listing brokers of a green-certified property is

essential. By neglecting to use green data fields correctly, listing agents may shortchange sellers that have

achieved a green certification for the property by not exposing to the full marketplace. For appraisers and

underwriters trying to accurately value green-certified property, the correct use of the data fields by real estate

agents and brokers is essential. For those of us who wish to study the emerging high-performance home

marketplace, the correct use of these fields is of vital importance.

Currently MLS PIN offers several green data fields for properties that have achieved a green certification or that

have been upgraded with sustainable and/or healthy building materials, or that make their home more energy

efficient. This report will analyze many of these data fields, as well as search for key words within the remarks

section of the property listing information.

According to information in MLS PIN, there were 128 single families sold with

a green certification in Massachusetts in 2013. In last year’s study we reported

61 home sales with green certifications. The 110% increase in sales volume

shows that this subset of the Massachusetts real estate market is rapidly

growing. The properties sold in a price range of $159,000 to $4,100,000.

14

Of the 128 single families that were marked with green certifications, over 85% were built in 2012-2013. An

additional 7% were built in 2010-2011. The green-certified home sale market in Massachusetts is closely tied to

the new construction and development of single-family homes. Given that at the end of 2013 134 of

Massachusetts’ 351 communities had voluntarily adopted the more rigorous energy “stretch code” for new

construction and additions, it is understandable that developers are more willing to seek green certifications.

Only 4 of the 128 green-certified listings were built in the 20th century, the oldest of which was built in 1905.

Interestingly, two of the properties built in the twentieth century were on the far ends of the price ranges, one of

them selling at $159,000 and one of them selling at $3,905,000 ($110,000 over the asking price).

The 128 green-certified properties sold for an average of $721,656 or $236 per square foot and the average gross

living area of these properties was 2,835 sq. ft. The average list price was $729,322 or $237 per sq. ft. These

properties averaged 157 days on market.

MLS PIN currently offers four options for green certifications: Energy Star Home Certified, LEED Certified,

National Green Building Standard, and Other - See Remarks.

15

Green Certified Yes No Unknown Unspecified

Green Certification Type A-Energy Star Home Certified B-LEED Certified C-National Green Building Standard D-Other

Energy Star Home Certified: Many people are aware that home appliances with ENERGY STAR

labels are significantly more energy efficient than similar appliances without the label, but

fewer realize that new homes can receive an ENERGY STAR certification as well. Like

appliances, ENERGY STAR homes can be expected to be more energy efficient than like-kind

new-home construction. Energy-efficiency ratings by a qualified third party are required to

verify that the new home or condo qualifies for the ENERGY STAR label. The Home Energy

Rating (HERS) is given by a qualified professional that has been certified by the

Residential Energy Services Network (RESNET). It is important to note that cities

and towns that participate in the Green Communities Act are required to adopt

the stretch building code for new residential construction and additions. The

stretch code is rigorous: it requires that builders reach a HERS rating of 70 or less

for new construction under 3000 sq. ft. and 65 or less for residential construction

equal to or greater than 3000 sq. ft. Of the 128 green-certified properties sold in

2013, 112 were Energy Star Home Certified. These homes had an average list

price of $706,145 and sold for $699,061 at an average $233 per sq. ft.

National Green Building Standard (NGBS): NGBS also has a green

certification that can be noted in MLS PIN. According to the National

Association of Home Builders (NAHB) website, the ICC-700 National

Green Building Standard™ is the first and only residential green-building

rating system to undergo the full consensus process and receive approval

from American National Standards Institute (ANSI). The NGBS green

certification is divided into four types: Bronze, Silver, Gold and Emerald,

with the Emerald certification being their most rigorous. According to NAHB, the certification is multifaceted and

stresses rigorous energy-efficiency standards. For a home to reach the Emerald level it must be 60% more energy

efficient than average new construction (HERS rating of 40 or less). Four of the 128 single family homes sold in

2013 were certified through the NGBS. These homes had an average list price of $599,450 or $238 per sq. ft and

sold above list price for $604, 975 at an average $246 per sq. ft.

16

Leadership in Energy and Environmental Design (LEED): According to the U.S. Green Council’s Green Home

Guide, “LEED is considered the most rigorous of all the available home programs.” It is the “most difficult

certification to achieve,” as it is comprehensive and focuses not only on the energy efficiency of the home, but

also on other factors, including water usage, indoor air quality, construction materials, and disposal and site

considerations. There are four LEED certifications with increasing levels of rigor:

Basic Certification, Silver, Gold, and Platinum. According to U.S. Green

Building Council, LEED Certified residential homes are up to 30% more

efficient than standard new construction. LEED Silver homes are

approximately 30% more energy efficient. LEED Gold homes are

48% more energy efficient, and LEED Platinum homes are between

50-60% more efficient than standard new construction. Four of the

128 single family homes sold in 2013 were LEED certified. These

homes had an average list price of $2,016,975 or $382 per sq. ft. and

also sold above list for $2,035,415 at an average $393 per sq. ft. It is

unusual that properties at this price point sell over list price.

Other - See Remarks: This is a green certification box in MLS PIN that is being used in a

variety of ways by listing agents. An appropriate use of checking this box is when there is

a legitimate use of an additional certification type that is not included in the MLS PIN

green certification check list. An example is homes or condos that were certified by

Passivhaus or Passive House (there were two condominiums sold in Massachusetts in

2012 that fit this description). Also, if the listing has not yet been certified because the

certification process has not yet been completed, this box may be appropriate to check.

Of the 128 green-certified properties sold in 2013, 13 properties used the “Other - See Remarks” green

certification. These homes had an average list price of $705,538 or $251 per sq. ft. and sold for $687,089 at an

average $245 per sq. ft.

The “Other - See Remarks” check box offers listing brokers an opportunity to label a property as green certified

without an actual green certification. This type of labeling could be considered green-washing, a marketing ploy,

whether intentioned or not, that takes advantage of green labeling without verification. Combined with a lack of

awareness and education of green certifications within the real estate industry, this checkbox has the potential to

be used inappropriately.

17

Of the 13 listings that used the “Other - See Remarks” green certification, 38%

did not contain any information about energy efficiency or sustainable

building products. Only one listing broker used the “Other - See Remarks”

green certification appropriately by indicating “Will meet/exceed Energy Star

Ratings!” Three other listings contained information in the remarks that alluded

to a higher degree of green home product. For instance one listing broker

included “A “0” Energy attainable home. Yes with 12” thick walls a super

insulated home that saves you Thousands of dollars in utility costs.(sic)”

Another agent remarked “Solar Powered Contemporary Colonial.

Environmentally friendly, almost no utilities (sic) bills – Heat and AC year round with 70 insulation factor,” in

another listing an agent mentioned “HERS energy rated for max efficiency.” It should be noted that a HERS rating

of 140 would indicate that they property is 40% less efficient than new construction built to standard code.

Simply having a HERS rating does not indicate that a home is more energy efficient; it is the score, which was not

included in the remarks, that indicates the building’s efficiency.

Under-Reporting of Green-Certified Single Family Home Sales Recognizing that there may be a significant reporting gap of green-certified properties due to a lack of real estate

agent and broker education, it was worthwhile to dig deeper into the data. Using keyword searches in the

remarks section revealed significant under-representation of green-certified properties in 2013 home sales of

Massachusetts properties.

Using “energy star” as a keyword search, 375 properties were found that were sold in Massachusetts that did not

have a green certification. After removing listings that used “energy star” as a description of appliances, heating

or cooling units, windows, and doors, there remained 166 listings that identified the home as “Energy Star

Rated!” or “ENERGY STAR Certified.” An additional 25 listings used language that did not state that the property

was Energy Star Home Certified, but implied that the home was being built to Energy Star specs, “built by area’s

top builder and Energy Star partner,” “w Energy Star specifications,” (sic) “Energy Star Construction,” and “We

build to ENERGY STAR standards.” Seven other listings indicated that the home was undergoing the Energy Star

certification process, “This home will be Energy Star Certified to the New Energy Star standards.” “These homes

will be Energy Star.” “Home to be Energy Star Rated.”

38%did not

contain any 411 about energy

efficiency

18

If the conservative 166 additional listings that clearly indicated that the home was Energy Star Home Certified are

added, the total number of homes sold under this certification rises from 112 to 278 in 2013. Listing agents and

brokers potentially under-reported 60% of Energy Star home sales in 2013. This represents a significant problem

for home buyers that are seeking an Energy Star home, and for appraisers seeking accurate comps for other

recently sold Energy Star Home Certified sales. It also under-represents the number of green home sales in our

region for national analysis of the high-performance home market. In 2012, using the Energy Star Home

Certification data only, there were 49 home sales of property. Using the same data field, 2013 home sales

increased 128% increase in Energy Star Certified home sales. If the conservative number of 278 is used, home

sales of Energy Star Certified homes showed a fivefold increase from 2012 sales.

Essex

Hampshire

Middlesex (inside of 128)

Middlesex (outside of 128)

Norfolk

Plymouth

Worcester

0 150 300 450 600

# New Built 2012-13; Sold 2013 # Green Cert in MLS PIN # Under-Reported in MLS PIN

Single Family New Construction Under-Reporting of Green Certification2013

... statistics continued on next page

19

Essex

Hampshire

Middlesex (inside of 128)

Middlesex (outside of 128)

Norfolk

Plymouth

Worcester

0 3.25 6.5 9.75 13

% Green Cert MLS PIN % Under-Reported MLS PIN

Single Family New Construction Under-Reporting of Green Certification2013

In 2013, agents and brokers may have under-reported sales of green-certified single-family properties in

Massachusetts by one and a half times. Evidence suggests that two hundred additional single-family sales

should have been reported as green-certified properties.

Sold Condominiums with Green Certifications as defined by MLS PINMLS PIN data showed that 89 green-certified condominiums were sold across the state in 2013. This represents

an increase of 78% over last year’s 50 units. Of these sales, 50 units were Energy Star Home Certified, 31 were

LEED certified, 15 were National Green Building Standard certified, and 14 were “Other – See Remarks.” Only

38 of 89, or 42.7%, were built in 2012-2013. Of the reported green certified condominium sales in MLS PIN,

35, or 39%, were within Boston city limits.

20

The same issue of under-reporting was true of green condominium sales in Massachusetts in 2013. When key

word searches were reviewed, the condominium green-certified home sale market looked very different. A

keyword search of “energy star” revealed 161 additional listings, 121 of which (75.2%) had a year built date of

2012-2013. A keyword search of “LEED” revealed 28 listings that had not been included as green certified in

MLS PIN. Of the 28, 15 clearly indicated that the building was LEED certified, while 13 of the 28 used terms like,

“Built to LEED guidelines.” Of the 15 that were clearly marked as LEED certified, 66.7%, or 10 units, were built

between in 2012 or 2013. It is likely that 48% of LEED certified units were under-reported in MLS PIN

Massachusetts condominium sales in 2013. There were no results for key word searches using “NGBS.” Using the

additional keyword searches, condominiums that were clearly green certified reached a total of 265 units sold in

2013, of which 63.8% were built in 2012-2013 according to MLS PIN data. The evidence suggests that listing

agents may have under-reported green condominium sales by a ratio of nearly 2 to 1 in Massachusetts in 2013.

Analyzing condominiums built in 2012 or 2013 and sold in 2013 by Massachusetts counties was also revealing.

For new construction condos, the ratio of under-reporting was 3.5 condo sales for every 1 whose listing agent

correctly used MLS PIN’s data entry.

Essex

Middlesex (inside of 128)

Middlesex (outside of 128)

Norfolk

Plymouth

Suffolk

Worcester

0 125 250 375 500

# New Built 2012-13; Sold 2013 # Green Cert in MLS PIN # Under-Reported in MLS PIN

Condominium New Construction Under-Reporting of Green Certification2013

... statistics continued on next page

21

Essex

Middlesex (inside of 128)

Middlesex (outside of 128)

Norfolk

Plymouth

Suffolk

Worcester

0 3.75 7.5 11.25 15

% Green Cert MLS PIN % Under-Reported MLS PIN

Condominium New Construction Under-Reporting of Green Certification2013

Six counties were the front runners of new construction condominium sales in 2013: Essex, Middlesex, Norfolk,

Plymouth, Suffolk and Worcester counties. Of these, the clear leader was Middlesex County with 729 units sold.

Of condominium sales in 2013 Middlesex County also lead the way in under-reporting of green condo sales

according to MLS PIN data. Of the towns outside of the 128/95 corridor, but within Middlesex County, only 1 in

6 units appear to be listed correctly as green certified. In Essex County, of the 218 new construction condos sold

in 2013, 0 were listed as green certified. However, key word searches revealed that 18 (8.4%) should have been

reported as green certified. In Worcester County, 14.5% of new construction condo sales may have been green

certified, however, only 3.1% were listed as such. Inside the 128/95 corridor within Middlesex county data

revealed 15.8% of new construction condo sales could have been green certified, while only 7.4% were listed

accurately.

22

Other Green Keyword SearchesA keyword search for “geothermal” revealed 21 single family homes sold in Massachusetts in 2013 according to

MLS PIN data. Communities with multiple sales of homes with geothermal heating and cooling included

Medway, Needham, and Northridge. The homes averaged a purchase price of $797,481 or $236 per square foot.

The price ranged from a 10 room, 4 bedroom single family home in Brockton that sold for its asking price of

$229,900 to a 14 room, 6 bedroom home in Needham that sold for $2,550,000. A search in the “Heating” field

of MLS PIN and selecting “Geothermal Heat Source” in the drop down menu resulted in 34 sales of single-family

properties. The average home sale price of the 34 listings was $894,580, or an average of $246 per square foot.

When “Ground Source Heat Pump” was searched from the same drop down menu, 5 sales were recorded in

2013. Only one of the five sales checked both in the drop down menu. What is the difference between a

geothermal heat source and a ground source heat pump? For residential purposes in Massachusetts there is none.

Technically, a geothermal heat source is a utility scale application used in volcanic heat spots to create steam for

large scale electricity generation, but the term is often used in residential building to describe ground source heat

pump loops.

The other four listings that claimed a ground source heat pump as a heating feature made no mention of

“geothermal” in the remarks section of the listing.

Also included in the “Heating” drop down menu is “Wind.” One home sold in Massachusetts selected this as a

feature in 2013. The home had no evidence of a wind turbine in the remarks or photos and was not heated by

electricity.

A keyword search for “energy efficient” or “energy efficiency”

showed that 680 single family homes sold and 295 condo sales

in 2013 used the term as a sales feature. The word “sustainable”

was used in 5 single family home sales and 10 condominium

sales in 2013. The ubiquitous “green” was used in 779 single

family sales and 980 condo sales. The term “deep energy

retrofit” was used for one condominium sale. One single family

home sale featured the term “HERS rating” as well as four

condominium sales in 2013. Interestingly, none of the five

properties had a green certification as a listing feature.

23

Solar FeaturesOne of the green data fields in MLS PIN includes “Energy Features” and a drop down menu enabling listing

brokers to feature energy-efficient windows and doors or programmable thermostats as well as a checkbox for

“Solar Features”. What constitutes a solar feature that is appropriately included in the ‘Energy Features” green data

field? Is it a solar photovoltaic (PV) system? Is it a solar hot water system? Is it a home with a solarium? Is it a

home with a passive solar design? Is it a home that “gets a lot of light?” Listing agents used the field 192 times for

property sales in 2013 in MLS PIN. After reviewing these listings 117 had some evidence of solar energy features.

Clear evidence of solar PV, either in the remarks section or visual evidence in photos, applied to 46 of sold

listings. Solar hot water evidence was apparent in 41 of the sold listings. Evidence of a passive solar design, which

might be best considered a design style, was found in 28 listings. Visual evidence of solariums was clear in 12

listings. It was not uncommon for listings with passive solar designs to also have solar hot water systems. Of the

117 listings, only 3 were built between 2012 and 2013. Unlike the MLS PIN green certifications, listing agents

using this feature were primarily selling older housing stock.

There was no clear evidence of what is traditionally

termed a ‘solar feature’ in 39% of the 192 listings. This

may be evidence of listing agents over-representing a

home’s green features. This is an

increase from the 28% that

may have used this

feature inappropriately

from our 2012 study.

24

Claimed to be Energy Efficient

Actually Energy Effiecient

0 50 100 150 200

Solar PV

Passive Solar Design

Solar Hot Water

Solarium

Untitled 1

0 37.5 75 112.5 150

39%

NO EVIDENCEof Solar Features

46 OF 117

28 OF 117

41 OF 117

12 OF 117

The 46 homes sold with solar PV present an opportunity to analyze resale value of homes with installed

photovoltaic systems. A more detailed report on these homes which includes the size of the PV system and

whether the seller passed on a Power Purchase Agreement (PPA) is recommended.

The Value of a Green-Certified HomeA common perception about green-certified

homes is that the initial buyer costs are

higher due to a green premium. In reality,

however, an investment in energy-efficient

technologies represent a return on the initial

investment in a relatively short period of

time, particularly in the Northeast where

our monthly utility cost is higher than any

other region of the country. (EIA graph) Are

buyers of property in Massachusetts placing

a premium on green-certified homes? Does

the investment payback in a reasonable

amount of time? Is there societal value to

green homes given that every home that

uses less energy on an annual basis contributes to lowering US carbon emissions as well as lowering particulate

matter such as mercury, sulfur dioxide, and nitrogen oxide? Does the cost of carbon apply to U.S. homes? Does

lowering home energy consumption increase U.S. energy security? Is there value to Massachusetts buyers for

homes that not only are more energy efficient, but also use building products that promote healthy living

environments such as no or low volatile organic compound (VOC) paints? These questions are all worthy of

further study as they relate to the Massachusetts real estate market.

The lack of consistent recording of energy-efficient home features, green certification, and solar features make it

difficult to accurately assess if home buyers placed a value premium on green homes in Massachusetts in 2013.

Hopefully this report will make a meaningful contribution towards the importance of accurately accounting

green-home features in Massachusetts real estate transactions.

In October of 2013, the Residential Green Building Committee (RGBC) of the MA Chapter of the U.S. Green

Building Council (USGBC) delivered 20 recommendations to update the green data fields in MLS PIN. Because of

new products in the home energy-efficiency arena, new programs fostering distributed generation, and no-cost

home energy assessments in Massachusetts, the USGBC felt that a fresh look at MLS PIN’s green data fields was

due. MLS PIN is currently reviewing those recommendations. It may be that the USGBC recommendations will

help resolve some of the under and over-reporting of data by real estate agents and brokers, particularly if green

data field updates are accompanied by educational outreach to real estate boards and trade organizations

throughout the state.

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RConclusions & Recommendations

From MLS PIN’s Preamble to "Rules and Regulations":

"The integrity of the Service’s database is essential to achieving its purpose. The Service, therefore, relies on

the prompt and timely Filing of accurate and complete Listing data and information and accurate Images."

Significant momentum toward a green home market transformation is apparent at the upper levels of the

federal government, as well as in the Commonwealth. The importance of President Obama’s remarks

regarding anticipated climate challenges and solutions that include increasing the energy efficiency of U.S.

homes and businesses cannot be overstated. Massachusetts leadership on these issues from the Governor’s

office as well as from the State House put the Commonwealth at the leading edge of the movement seeking

energy solutions that make sense for rate-payers and the environment. Organizations like the Appraisal

Practices Board and the National Association of REALTORS are to be commended for continuing the process

of educating their ranks on the value-add of green housing.

Despite the fact that the ‘above the tree-top’ view of the green housing market made significant progress in

2013, the root and ground levels still face significant challenges. There is evidence of under-reporting of

green home data in Massachusetts, despite the fact that green data fields are in place for use by real estate

agents, brokers, and appraisers. Evidence that over-reporting of other green features, or ‘green washing,’ in

the MLS PIN data-base also exists. In both cases, the misrepresentation of data, whether accidental or

intentional, slows the progress of buyers looking for green-certified properties, for sellers marketing green-

certified properties, for appraisers valuing green-certified properties, and for those of us seeking accurate

data of green-certified home sales at the state, regional, and national levels.

Evidence suggests that agents did not report green-certified home sales accurately in MLS PIN in 2013. Is it

lack of agent education about how to use the green certification data fields in MLS PIN? Or are listing agents

fearful that a green label may not be a marketing advantage? In either case, education of Massachusetts real

estate agents and brokers needs to be a priority for the green home market to move forward. Green-certified

properties bring with them jargon, equipment, and contracts that may take agents out of their traditional

comfort zones. It is important that the home sales industry in Massachusetts take steps to prepare agents,

brokers, appraisers, and bank underwriters for a future that includes the emerging market of high

performance homes.

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RConclusions & Recommendations Continued

Two Articles from the REALTOR Code of Ethics originally adopted by NAR in 1913 may be relevant to the

question of under-reporting of green certified properties. Article 2 demands that REALTORS refrain from

exaggeration, misrepresentation, or concealment of pertinent facts related to property or transactions. Article

2 is pertinent if real estate agents are, in fact, knowledgeable of the green data fields in their local MLS.

Article 11 may get to the core of the real issue; too many agents and brokers in the Commonwealth are not

adequately educated about best practices for handling green certified listings. Article 11 states that

REALTORS are knowledgeable and competent in the fields of practice in which they engage or they get

assistance from a knowledgeable professional, or disclose any lack of expertise to their client. Should green-

certified properties be added as an amendment to Article 11 of the REALTOR Code of Ethics?

Our homes account for 22% of total US energy consumption. For a state that is taking a leadership role in

addressing home energy demand, there is a great opportunity for industry professionals to step-up their

game. One can make an argument that it should, perhaps, be an industry obligation.

27

RAbout The Author

Craig Foley is the Chief of Energy Solutions for RE/MAX

Leading Edge, and a cofounder of inCharge Energy. Craig

joined the RE/MAX Leading Edge team in January of 2012 as a

REALTOR with 13 years of experience and as a leading

advocate for high performance buildings in New England.

Craig is the architect of RE/MAX Leading Edge’s (a top five real

estate company in MA) successful green brand and strategy.

Craig’s combination of real estate and energy management

skills give him a unique perspective about rate-payer,

environmental, and regional energy grid stress and sustainable

energy solutions. He is the author of the first report on high

performance homes in Massachusetts, “Study of Energy

Efficiency, Utility Costs and High Performance Homes on the

Massachusetts Residential Marketplace 2012” which was published in February of 2013. He was named by

RE/MAX New England as the “REALTOR of the Month” for March 2013. Craig is also a public speaker and

has been engaged by organizations such as the Boston Area Solar Energy Association, the U.S. Green

Building Council, ISO New England, and the National Association of REALTORS. He serves as the

Advocacy Coordinator for the Residential Green Building Committee of the Massachusetts Chapter of the

U.S. Green Building Council.

Craig was one of five people in the United States to receive the EverGreen Award by the National

Association of REALTORS and the NAR Green Resource Council in 2013 for his advocacy of the green real

estate industry in 2013. He also serves as an Advisory Board member of the NAR Green Resource Council.

2828

Thanks RSpecial Thanks

To my two chief editors: my daughter Alexandra Foley (Georgetown University Class of 2017 – Go

Hoyas!), and my wife Sarah Spiers, without your support and encouragement this would not be possible.

To our great support staff at RE/MAX Leading Edge, but, in particular Amanda Carreiro, Laura Mcormack,

and Mary Ann O’Callaghan for their time and efforts.

To the ever forward thinking RE/MAX Leading Edge Broker-Owners Steve Chuha, Eileen Hamblin, Linda

O’Koniewski and Paul Mydelski.

To Kristen Short and Amanda Stinton from the NAR Green REsource Council for their support.

To the many people that took the time to review the document and send comments: Laura Stukel of

Elevate Energy, Peter Hubbe of ICF International, Caitriona Cooke of Conservation Services Group, Peter

Rusin of Colorado Energy Office, Benjamin Pignatelli of MA DOER, Bill Holland, Chair, Residential

Green Building Committee of MA Chapter USGBC, and Grey Lee, Executive Director of MA Chapter

USGBC.

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