Big Green Home Bust

A well-appointed green home outfitted with energy-saving appliances and other eco-friendly features might save money on utility bills and ease your conscience, but it won't always help close a sale in a tough real estate market, a California homeowner has learned.

The warning sign for the green residential market: A house for sale in Costa Mesa that was the first in Orange County to receive a coveted LEED Platinum certification (green building's Good Housekeeping Seal) had its price slashed by half a million.

The seven-bedroom, 4,900-square foot Craftsman-style house is the ultimate green showcase, boasting everything from low-flow faucets to solar panels (see "Home Energy Saving Projects for Every Budget"). But even those hallmarks of sustainable design were no match, it seems, for the cruddy economy and skittish buyers. According to the Orange County Register, the green home's list price recently dropped $500,000, from $2,999,000 to $2,499,999.

The hefty drop underscores the continuing debate about the resale value of green homes. Many have believed that green would command a premium among buyers who aspire to a sustainable lifestyle, but now it appears that green might not be as big a selling point in a market that has gone off the rails.

So how green do prospective buyers want to go?

There's not much hard evidence to go by. Anecdotes suggest that sustainable homes can sometimes sell faster than conventional ones, especially if energy-efficiency is the main marketing theme, according to the National Association of Home Builders. On the other hand, some green condo buildings in urban markets like New York, that were expected to fly off the market in the boom, have had a rough ride.

Green or not, buyers are still constrained by the market's current tight financial conditions, the NAHB says, and even the prospect of lower monthly energy bills "has not gained the attention of the lending community."

One problem is that most people are in the dark about what green building really means, and more importantly, if it's worth paying for. Green can also be confusing: Quick, what's the difference between LED and LEED? (Answer: LED is energy-efficient light emitting diodes, used in lighting and LEED is Leadership in Energy and Environmental Design, the much touted green certification program that includes a checklist of environmental standards).

Search Homes for Sale Browse through photos of millions of home listings or search foreclosure listings Although the price gap between green and standard housing is reportedly closing, buyers aren't always interested in the technical aspects of how and why green will improve their lives, especially if they are agonizing over a big financial commitment. The Costa Mesa home, for example, which sits on a golf course, features dual-flush toilets, an internal gray water system, and drought-tolerant native plants in the garden (see "Landscaping With Low-Maintenance Lawns Saves Money").

Sounds great, but most buyers are more likely to wonder whether they can afford the mortgage.

For more on green homes and related topics, see these AOL Real Estate guides:
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REIA Oakland

This Article points out what I feel is one of the leading problems for real estate investors when assessing the value of green rehab and new build projects..."The problem is that most people are in the dark about what green building really means, and more importantly, if it's worth paying for. " For any project manager taking on the task of incorporating green items into a property knowing what is out there, what is right for their target customers wants and needs and understanding what sustainable options produce the most value to buyers in terms of lowered heat, air and electricity costs are some of the areas all investors in the market can benefit from knowing more about. Any good lists out there on what organizations and experts are leading the way in valuable resources on the topic?

June 12 2011 at 12:52 AM Report abuse rate up rate down Reply