Green MLS

By Laureen Blissard | 4/9/2012

While the housing market is taking a beating, some adventurous home sellers and buyers are embarking into the new territory of green residential real estate with the aid of their realtors. In some markets, they are beginning to use a tool called the Green MLS (Multiple Listing Service) which highlights a home's green attributes and helps buyers find the sustainable features they seek.

 

Building The Right Tool

The idea of a Green MLS may not be necessarily new, but creating a consistent listing method for green features is revolutionary. The National Association of REALTORS(r) (NAR), through its Green REsource Council and NeighborWorks(r) America, organized subject matter experts from across the country to create a toolkit to assist MLS organizations in developing their own Green MLS. Deliberate focus was placed on developing a team of individuals that either had direct experience with MLS system management and/or implementation of a Green MLS initiative.

Before we go any further, emphasis needs to be placed on the fact that there are over 800 Multiple Listing Services. They are regionally and independently owned and they set their own rules. There is no state or federal government oversight beyond any individual state rules regarding real estate. The industry lacks a consistent method to enforce or require adoption of a Green MLS, so it remains voluntary to this day. Each adoption is done through the work of committed individual agents and industry stakeholders who collaborate with their individual MLS organizations on a market-by-market basis.

Regional Market Transformation

One of the toolkit development teams is a coalition of Chicago-area Realtors who work with residential and commercial properties. In the spring of 2009, they formed the Sustainable Real Estate Alliance (SREA). Their purpose was to collaborate with the Midwest Real Estate Data LLC (MRED) MLS, which serves Chicago's metropolitan area and northeastern Illinois, to create their own Green MLS.

The SREA first approached the idea by identifying the need to distinguish green residential listings from traditional residential listings. Also, with cooperation from NAR's Green REsource Council and outreach to other professionals, the SREA was able to analyze the successes and approaches of other MLS organizations. Additional considerations included the inconsistent definition of green real estate and no defined fields by which sustainable attributes could be cataloged or searched.

The end result of the SREA's efforts was an additional "Green" Disclosure Document, new searchable "Green" fields, and a list of standard "Green" features within the MRED MLS. The intent of these three key elements is to provide enough information for the realtor or buyer to interpret the level of green for a particular property. A website was also created to provide a toolkit and encourage other Multiple Listing Services to adopt the same elements.

The "Green" Disclosure is a voluntary document that encompasses the currently recognized green industry trends suitable for either new construction or rehab/remodel. It can be viewed as an enhanced MLS listing designed to differentiate the property in the marketplace. Within the "Green" searchable fields, it has a place in which can be indicated whether it has been provided as a part of the property listing.

The other searchable "Green" fields include the HERS (Home Energy Rating System) Index score, third -party verified certifications (if applicable), and other specific green features (see sidebar for list). Remember, this example is the development of a specific Green MLS for Chicago. The Green MLS toolkit only assists in designing the tool and it is up to each individual MLS organization to decide how it will be implemented.

What's a "Normal" home?

So far, well over 100 MLS organizations, mainly in metropolitan areas,have adopted a Green MLS. A partial list of the adopting metro areas includes Atlanta, Austin, Chicago, Houston, Phoenix, Portland, Seattle, and the Metropolitan Regional Information Systems (MRIS). The MRIS covers the Mid-Atlantic region, including Maryland, Virginia, Washington, D.C. and parts of Pennsylvania, Delaware and West Virginia.

One of the active participants in the development of the Green MLS toolkit, Al Medina, the Director of NAR's Green Designation, provides additional statistics on Green MLS adoption:

"A Green REsource Council and NeighborWorks(r) America survey of MLS operators conducted in late 2010 indicates that 13 percent of respondents have some level of searchable green fields in the MLS system. Eleven percent of the remaining respondents are at some point of implementation, and an additional 13 percent have it on their agenda for discussion." (73% of all MLS organizations participated in the survey).

As more and more MLS organizations adopt a Green MLS, there is a potential affect on the "norm" for real estate appraisals.

Jason La Fleur, a green home consultant with Eco Achievers and instructor for the Appraisal Institute explains, "Often times, green builders have asked lenders and appraisers, "Why can't you give me more value for my high-performance green home?" The reality is that appraisers do not 'give' value; they assess the local market preferences. In order to support any value adjustments for green building, appraisers need to have the infrastructure in place for sales data to compare green homes vs. non-green homes. "That's where the importance of a Green MLS comes in.

Many of the markets that have recently adopted a Green MLS do not have sales information as it takes time for transactions to occur. Fortunately, there are some markets with usage data available. A 2011 study done by the Earth Advantage Institute based on data provided by the Portland Multiple Listing Service indicates that existing homes with a green certification sold for 30 percent more than homes without such a designation. Sales prices were also up by as much as 8% for newly constructed homes with a green certification in the six-county Portland metropolitan area as opposed to new non-certified homes.

Another study done by GreenWorks Realty for the Seattle area showed that for the month of July 2009, two years of steady growth in the market share of green homes culminated in over 49 percent of new homes sold with a certification. This is an exciting trend because when the market share of certified green homes exceeds 50 percent on a consistent basis, appraisers will be required to discount any home that is not certified green. This means that certified homes have the potential to become the market norm.

La Fleur continues, "At first glance people may be willing to discount this as Portland and Seattle are unique areas. However, what's noteworthy is that they have had an established MLS with green features for many years, and now have rich sales data. Once the market percentage tipping point is reached, people will begin to question buying homes that are not green. Savvy investors and homeowners see this market shift coming, and are building and buying green homes now as a risk mitigation strategy to ensure that their principal asset - their home - receives maximum value in the future."

We can draw conclusions from studies that there is a sale price premium for homes that have a third-party green certification. We can also assert that it will not be long before conventionally built homes, both new and old, will be devalued. But the ramification of a Green MLS for home sellers and buyers goes beyond monetary value. It becomes the tool by which homes can be appraised for sustainable value. It is also important for home sellers to keep in mind that, as home buyers increase the demand for credible sustainable features; any new homes or rehab projects that are done conventionally are already obsolete once they hit the market.

 

To see this article as presented in our September 2011 issue, with additional graphics and photos, please visit our Magazine Archives.

 

 

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