The “Right House/Right Buyer” Theory
The real estate market operates most efficiently when a match is found between the RIGHT BUYER and the RIGHT HOUSE.
Buyers are generally seeking the RIGHT HOUSE from among all those that are available for sale. That's the one house that best achieves an overall balance of practical, financial and psychological needs and wants.
Sellers seek the RIGHT BUYER, the one person who prefers their house to any other house available for sale, and therefore feels they will fall short of best meeting their wants and needs if they are unable to complete the purchase. No one wants to settle for second best.
Buyers are generally seeking the RIGHT HOUSE from among all those that are available for sale. That's the one house that best achieves an overall balance of practical, financial and psychological needs and wants.
Sellers seek the RIGHT BUYER, the one person who prefers their house to any other house available for sale, and therefore feels they will fall short of best meeting their wants and needs if they are unable to complete the purchase. No one wants to settle for second best.
When RIGHT HOUSE and RIGHT BUYER are matched, the Seller most likely receives top dollar from a Buyer who is highly motivated to complete the purchase and will likely remain happy with that purchase long after the transaction is completed.
In this era of short sales the RIGHT HOUSE/RIGHT BUYER theory takes on a somewhat different complexion. Buyers often purchase short sales or REOs because of a very attractive price, regardless of whether the house resonates strongly with their psychological needs. At a certain price, anything looks attractive. The theory still applies, but the financial aspects come to outweigh the other factors.
In this era of short sales the RIGHT HOUSE/RIGHT BUYER theory takes on a somewhat different complexion. Buyers often purchase short sales or REOs because of a very attractive price, regardless of whether the house resonates strongly with their psychological needs. At a certain price, anything looks attractive. The theory still applies, but the financial aspects come to outweigh the other factors.
For Buyers concerned about energy efficiency finding the RIGHT HOUSE is a challenge. There is essentially no comparable information about energy efficiency available at this time, either from MLS systems or agents. Estimating energy efficiency from the scattered information that is available is nearly impossible, even for trained professionals. After tests are conducted and computer applications used to run the resulting data a rating, be it HERS II, BPI or some other index is assigned and comparisons are possible. Another complication is that poor energy efficiency ratings can be attributable to factors easily and/or cheaply corrected. A low energy rating isn't necessarily a huge detractor, if the report shows an obvious reason that's simple to correct. There may even be rebates for the correction.
The average Buyer or agent does not have the knowledge or expertise to compare diverse "green features" (if input into the MLS at all) among similar homes to arrive at an estimate of relative energy efficiency. So what happens? A Buyer ends up purchasing a house that they think is the RIGHT HOUSE, based on available information. If they had known the energy efficiencies of the houses on their short list, they might have chosen a different house. I guess there's a "if they don't know, it won't hurt 'em" argument to be made, but if the utility cost differential would cover a $20,000 or $30,000 loan amount, most Buyers are not going to make that argument. One the other hand, the real estate industry doesn't pay the utility bills every month or suffer lagging appreciation when energy efficiency becomes a more important consideration in future purchase decisions.
Now consider a Seller, whose house really is the RIGHT HOUSE for a particular Buyer, but sees it passed over in favor of another house that is not the best choice, because of significantly lower energy efficiency, a fact unknown during the decision process. That Seller lost a RIGHT BUYER, a sale and probably the highest price he or she might receive. Obviously, some other Seller got that Buyer and probably received a higher purchase price than warranted had energy efficiency been known.
What about the agents? They earned a commission regardless of energy efficiency. Most agents are genuinely concerned with finding that RIGHT BUYER/RIGHT HOUSE match. It really does feel good when it happens. The real estate industry is opposed to making energy efficiency part of the decision process in deference to a "business as usual works fine for us" mentality. Individual agents can make a difference, but not a very big one. Comparison requires similar information for most of the available properties--like we already have for lot size, living area, ocean views, bedroom/bath count, etc etc. Some agents might willingly pay the cost of a HERS II rating for each listing (less than cost of 6 weeks of print ads), but without other HERS II rated houses for comparison, the benefit of the cost would be limited.
In summary, at present there is a de facto suppression of energy efficiency as a factor for Buyers to consider in choosing the RIGHT HOUSE. The real estate industry has decided that energy efficiency should not receive consideration because of point of sale doctrines, the possible stigmatization of energy hogs and the simple fact that business as usual is more comfortable. This policy also takes energy efficiency off the table when valuation is considered.
The only stakeholder who benefits from such suppression is the Seller of a not so stigmatized house that is an energy hog, but doesn't appear to be (I term those - stealth hogs). The Sellers of stealth hogs actually benefit from present the prevailing treatment of energy efficiency. That's a curious focus for industry thinking because ALL Buyers and all other Sellers suffer the consequences. What about the planet Earth and the municipalities trying to meed Climate Action Plan required reductions in CO2 emissions?
How great a cost is the benefit of "business as usual" really worth? As mentioned in the previous post, that discussion isn't happening. It could, if more stakeholders were willing to participate. The consumers should know the energy efficiency of the houses they are considering for purchase. They know the MPG rating of cars and that knowledge has had a huge impact on national fuel consumption. High MPG cars are worth more. Would the Prius even have survived without MPG ratings?
The average Buyer or agent does not have the knowledge or expertise to compare diverse "green features" (if input into the MLS at all) among similar homes to arrive at an estimate of relative energy efficiency. So what happens? A Buyer ends up purchasing a house that they think is the RIGHT HOUSE, based on available information. If they had known the energy efficiencies of the houses on their short list, they might have chosen a different house. I guess there's a "if they don't know, it won't hurt 'em" argument to be made, but if the utility cost differential would cover a $20,000 or $30,000 loan amount, most Buyers are not going to make that argument. One the other hand, the real estate industry doesn't pay the utility bills every month or suffer lagging appreciation when energy efficiency becomes a more important consideration in future purchase decisions.
Now consider a Seller, whose house really is the RIGHT HOUSE for a particular Buyer, but sees it passed over in favor of another house that is not the best choice, because of significantly lower energy efficiency, a fact unknown during the decision process. That Seller lost a RIGHT BUYER, a sale and probably the highest price he or she might receive. Obviously, some other Seller got that Buyer and probably received a higher purchase price than warranted had energy efficiency been known.
What about the agents? They earned a commission regardless of energy efficiency. Most agents are genuinely concerned with finding that RIGHT BUYER/RIGHT HOUSE match. It really does feel good when it happens. The real estate industry is opposed to making energy efficiency part of the decision process in deference to a "business as usual works fine for us" mentality. Individual agents can make a difference, but not a very big one. Comparison requires similar information for most of the available properties--like we already have for lot size, living area, ocean views, bedroom/bath count, etc etc. Some agents might willingly pay the cost of a HERS II rating for each listing (less than cost of 6 weeks of print ads), but without other HERS II rated houses for comparison, the benefit of the cost would be limited.
In summary, at present there is a de facto suppression of energy efficiency as a factor for Buyers to consider in choosing the RIGHT HOUSE. The real estate industry has decided that energy efficiency should not receive consideration because of point of sale doctrines, the possible stigmatization of energy hogs and the simple fact that business as usual is more comfortable. This policy also takes energy efficiency off the table when valuation is considered.
The only stakeholder who benefits from such suppression is the Seller of a not so stigmatized house that is an energy hog, but doesn't appear to be (I term those - stealth hogs). The Sellers of stealth hogs actually benefit from present the prevailing treatment of energy efficiency. That's a curious focus for industry thinking because ALL Buyers and all other Sellers suffer the consequences. What about the planet Earth and the municipalities trying to meed Climate Action Plan required reductions in CO2 emissions?
How great a cost is the benefit of "business as usual" really worth? As mentioned in the previous post, that discussion isn't happening. It could, if more stakeholders were willing to participate. The consumers should know the energy efficiency of the houses they are considering for purchase. They know the MPG rating of cars and that knowledge has had a huge impact on national fuel consumption. High MPG cars are worth more. Would the Prius even have survived without MPG ratings?
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