Put an end to square foot pricing

A few years ago, my wife and I bought a house on county land in an area where we knew house prices would spike when our development was annexed by the nearby town of Chapel Hill, N.C. We bought a brand new house, but the third floor was unfinished — 600 sq. ft. of plywood floors and open studs. Over a series of weekends, I finished that room.

It is almost the greenest project I’ve ever worked on. Motivated as much as by our family’s health as by increasing the home value, we used the greenest products we could find. We installed pesticide-free, woven (adhesive-free) wool carpets, a balanced HVAC system, and I gasketed all the drywall. Formaldehyde-free batts were tucked in between the studs in the new knee wall, and the studs were certified by one or more of the leading wood-rating agencies. We used all no- or low-VOC paints, adhesives, caulks, sealants and finishes.

As I installed the premium green material each Saturday, I kept thinking of the premium I’d get on the price of the house when we sold it. After all, whoever bought the home would have to recognize all the extras we were investing in it, right?

 

The town of Chapel Hill soon annexed the development — called Southern Village — the house price soared, and we prepared to sell, as we had planned all along. Our Realtor was a neighbor and so I asked her to drop by to look over the house. When she arrived at the house, she didn’t seem interested in even looking around. Nonetheless, I said, “Before you price this house, I want to take you to the third floor to show you all the premium green material I put in it.”

She said she didn’t even want to see the third floor. In fact, she didn’t even want to look around any of the other floors either.

She wanted only to know the square footage.

 

Why? Square footage is the method used to price all the homes in the area. To price our home, the Realtor would look at the square footage, run a series of comparisons of other homes our size sold for, and tell us what the home was worth. Yet this pricing method didn’t reward green building practices. Anything we did to green-up the house would be dumbed down by the comparison of the guy down the block whose windows openly bled energy and whose house smelled like a gasoline refinery from all the paint and carpet fumes.

You can’t sheer your project away from the square-foot-pricing trap just by giving your word to the Realtor or new buyers. Sorry, that approach won’t cut it in the bare-knuckled world of selling homes.

With whole-house, third-party rating agencies — like LEED, the National Green Building Standard and Energy Star Qualified Homes – architects, builders and designers have the chance of leaving square foot pricing behind. When selling a home and asking a premium because it’s green, these programs (and others, e.g., Built Green) provide a third-party standard that sellers can point to. That third-party standard, which often includes extensive documentation of components and energy performance predictions, can justify a higher price.

Even with strong growth in the green building market, and the increasing recognition of these third-party standards, you still have to educate your Realtors and bankers about the value of these ratings. That said, there are ample market studies that show green homes sell more quickly, and green homes can achieve a premium if the builder is perceptive enough to position the home within a recognized rating system.

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