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When High-Performance Homes Don’t Sell

Despite the advantages, cutting edge housing doesn't always excite potential buyers

Posted on Jul 19 2017 by Scott Gibson

Five years ago, Brackett Estates was a net-zero community in Wells, Maine, that existed mostly inside the head of builder Jesse Ware. He and his business partners had a single house, a two-story modular packed with insulation and powered by rooftop solar panels — and a plan to build 25 more of them for a new generation of homebuyers who wanted green, energy-efficient housing.

Ware's aptly named company, Futuro, had worked with Portland architects Kaplan Thompson and a modular builder to get the first home in the subdivision ready for sale. Ware had been inspired by high-performance houses he'd seen in southern New England and was convinced they would prove popular with buyers in southern Maine, a market within easy driving distance of eastern Massachusetts and New Hampshire as well as the most populous part of Maine.

The subdivision has indeed materialized. Two dozen houses have been built and are now occupied. Streets are paved, road signs are up. Lawns and flower beds have been planted. But that first house is still the only one with solar panels, and the only one with superinsulated double-stud walls and triple-glazed windows.

Everything else is plain vanilla: 2x6 wall construction, double-glazed vinylCommon term for polyvinyl chloride (PVC). In chemistry, vinyl refers to a carbon-and-hydrogen group (H2C=CH–) that attaches to another functional group, such as chlorine (vinyl chloride) or acetate (vinyl acetate). windows, fiberglass batt insulationInsulation, usually of fiberglass or mineral wool and often faced with paper, typically installed between studs in walls and between joists in ceiling cavities. Correct installation is crucial to performance. , and a two-zone furnace that runs on propane. According to a sales brochure distributed by Gove Group Real Estate, the houses are all Energy StarLabeling system sponsored by the Environmental Protection Agency and the US Department of Energy for labeling the most energy-efficient products on the market; applies to a wide range of products, from computers and office equipment to refrigerators and air conditioners. rated. But they are certainly nothing like Ware had imagined.

What happened?

Good plan, but a struggling market

Ware was selling one of Kaplan Thompson's BrightBuilt designs, a 1,750-square-foot model called the Appledore. With a little more PVPhotovoltaics. Generation of electricity directly from sunlight. A photovoltaic (PV) cell has no moving parts; electrons are energized by sunlight and result in current flow. capacity, the house could have been in net-zero territory. Walls were insulated to R-40, the roof to R-60. Heating and cooling were provided by a Mitsubishi ductless minisplit; domestic hot water came from a heat-pump water heaterAn appliance that uses an air-source heat pump to heat domestic hot water. Most heat-pump water heaters include an insulated tank equipped with an electric resistance element to provide backup heat whenever hot water demand exceeds the capacity of the heat pump. Since heat-pump water heaters extract heat from the air, they lower the temperature and humidity of the room in which they are installed. . Designers hoped the house would test at between 1.5 and 2.0 air changes per hour for airtightness, much better than most code-compliant houses.

At the same time, Futuro had tried to keep finishes on the modest side: vinyl siding, basic kitchen cabinets. Bathrooms had tile floors but plastic shower surrounds. Trim was simple.

Kaplan Thompson and Ware both thought there might be additional savings in time, if not money, in using a modular company to build the houses. They had settled on Keiser Homes, a company 70 miles north of Wells in the town of Oxford. The house went on the market for $429,000.

"So often you say, ‘green’ or ‘net-zero’ and people go, ‘Oh my God, I've got to spend a million bucks.’" Ware said in an interview in 2012. "It doesn't have to be, and we're proving that here. It doesn't have to be a million dollar house. We're in the high threes, starting, and that's a pretty good value, I think."

On paper, Ware seemed to have a great idea. By the time Brackett Estates was offering its first home, the country was starting to leave the recession of 2008 behind. The house was head-and-shoulders above a typical new house in the region on a performance basis, and the developers had kept prices in check by resisting the temptation to load up on fancy fixtures and finishes.

But for whatever the reason, buyers didn't answer the bell.

"Things were still pretty rough in the housing market," said Dan Hussey of the Gove Group, the real estate company now handling sales for the development. "He was priced pretty high, over 400, and the house just sat there and didn't get any takers. It sat there for a year and a half."

Homebuyers had a different priority list

Jefferson Homes of Exeter, New Hampshire, has taken over construction in Brackett Estates with the kind of houses buyers are used to seeing. Houses like the company's signature Glen Ellen are neat and attractive, and built with predictable features. The 2x6-framed walls, for example, are insulated with R-21 fiberglass "with poly vapor barrier," but have no continuous insulation outside of the sheathingMaterial, usually plywood or oriented strand board (OSB), but sometimes wooden boards, installed on the exterior of wall studs, rafters, or roof trusses; siding or roofing installed on the sheathing—sometimes over strapping to create a rainscreen. . Likewise, the spec sheet doesn't mention whole-house ventilation or airtightness, features that shoppers in the market for a high-performance house would look for.

The original high-performance home in the Brackett Estates subdivision in Wells, Maine.

The houses range in size from 1,600 to 2,200 square feet and cost between $400,000 and $500,000, Hussey said. All but one of the 26 houses in the subdivision has been sold.

Those prices aren't much different than what Ware had originally wanted five years ago, although Hussey said that prices have gone up by about 30% since Gove Group got involved with the project. The energy-efficient features that Ware had built into the project, however, just haven't registered with most buyers in the area.

“My perception is a lot of people that inquire, it’s not really on their priority list," Hussey said in a call. "They’re more looking for the things they can see and touch, and more importantly overall whether it’s the right floor plan. I don’t really hear at this price point much about energy efficiency. I think people assume it’s going to be new, it’s going to be much better than their last home.

"They’re, say, upper-middle-class incomes, certainly over 100 to a couple hundred thousand dollars a year," Hussey said of buyers in Brackett Estates. "Electricity and fuel probably aren’t a big deal to them. They just sort of want what they want, what they’re comfortable with.”

If buyers aren't knocking on the door for more insulation, solar panels, and other energy-efficiency features, builders aren't going out of their way to offer them, he added.

“The builders themselves prefer the things they’re very comfortable with, the things they’ve been doing for 20 years," he said. "They warranty it, they stand by it, they understand it. And that’s what they have to offer because that’s what they like to do. I think that’s a big part of it, too.”

Marketing and sales are key

Developers of an energy-efficient subdivision in Yarmouth, another southern Maine community, also are finding that perceptions of much higher costs and a lack of marketing focus can deter potential net-zero buyers.

Writing in the Portland Press Herald, Tux Turkel describes Village Run as a "smart growth" community on the edge of Yarmouth's business district where buyers could choose a net-zero BrightBuilt home, or something more conventional.

Home prices range from $500,000 to $800,000, and buyers like Abbi Baldwin and her husband believed that the premium for a high-performance home was too much. Instead, they're choosing a custom home design with some energy-saving features but not the full palette a BrightBuilt home would have.

In Yarmouth, an upscale suburb of Portland, the time and place seemed right for a community of high-performance homes. Yet most buyers are opting for houses that meet code but don't exceed it, the article noted. Village Run's lead developer, Matt Teare, calls this "Yankee green," paying for energy-efficient features with the best payback, but nothing more than that.

Sixty people showed up at an initial meeting organized by Teare and Kaplan Thompson to test the waters with locals. Many of them said they were interested in a BrightBuilt home, but now Teare says no more than 6 of the 26 homes will be BrightBuilt models.

Melodie Brown, a local broker, said there was a lot of interest in BrightBuilt homes at first, but younger buyers said they couldn't justify the added cost.

"They are more concerned about the layout of the kitchen," she said.

Savvy sales agents are essential

The cost difference between a high-performance or net-zero house and a conventionally built house is more like 10% to 12%, not the 20% to 30% the Baldwins apparently believed, said Phil Kaplan, a principal in Kaplan Thompson and BrightBuilt. And the miscommunication on pricing underscores the need for real estate agents who understand the difference between a net-zero house and a conventionally built one.

“He did entrust the development with a Realtor who was not invested, and in fact didn’t know anything green building at all," Kaplan said of the Village Run developer's initial choice for a real estate agent. "So as much as we tried to educate him, when people came to him and his people they basically didn’t know how to talk about it intelligently.”

With a new agent, Kaplan said, the development is in the hands of someone who understands high-performance features and can explain them clearly to buyers. "It's just such a rarity to have a Realtor who does that," he said.

Kaplan believes another factor is the developer's commitment to high-performance houses even when sales aren't immediate. Citing a subdivision of LEED homes in neighboring Freeport called Kelsey Brook, Kaplan said the developer was patient and eventually sold all but one or two lots. All of the houses in the subdivision, he said, are high-performance homes.

"It's taken a while, but the absolute strength of that is the developer stuck to his guns and basically said, 'This is what we’re going to commit to,' and like-minded people have sort of filled in," Kaplan said. "And it’s been a successful model.”

Still a future for high-performance communities

Ware is still building high-performance houses in southern Maine and New Hampshire — but they are custom, one-off designs, not subdivisions.

He disagrees with Hussey's assessment that buyers with $400,000 to $500,000 to spend aren't looking for high-performance features: "There are a lot of people in that price range who are interested in it," he said in a call from a building site on Lake Winnipesaukee, New Hampshire, where he's currently building a house. "I think it's just the demographics of the buyers he works with. They're just not that concerned with it."

Ware's original plans for Brackett Estates didn't pan out, but he's not ready to give up on the idea of communities where net-zero designs are the norm. He's convinced it's a case of identifying the right market, not changing the basic game plan.

"I think there's a future for it," he said. "We haven't been able to find that spot just yet. The market's there. To do a community like that you've got to have a good area to do it in. That's been our problem. We didn't have the right area to do it in. You've got to have an educated base of consumers."

Kaplan said that a variety of factors can explain the failure of Brackett Estates to develop in the way he and Ware originally imagined. One of them was the local market. Another was a lack of real estate appraisers who know the green housing market, and the scarcity of comparables, or "comps" — similar properties in the area that appraisers use to justify the value they assign to a property.

“I think it was a tricky time and a tricky place," he said. "It was a strong idea. I think the comps probably weren’t there at the time, so it was hard for them to sell things with a higher initial costs. It’s not a new story. Was the appraiser a licensed green appraiser? Probably not. I think that’s just starting to get on the radar of folks. That would have been another lever to pull back then, but no one knew about it or it didn’t exist.”

Kaplan thinks the high-performance housing market is much stronger now than it was five years ago, but he finds the lack of energy-efficient innovation at Brackett Estates "painful."

"The incremental cost to get [to net-zero] is not that big," he said. "People are not looking at the big picture. And the Realtors who are entrusted to sell these things have no idea how to talk about it. They’re not incentivized at all. “


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Image Credits:

  1. Scott Gibson

1.
Jul 19, 2017 1:00 PM ET

ZERH Sales
by Armando Cobo

As a ZERH Instructor, I've recommended our attendees and my Builder clients that the first thing they need to do in sales is to learn how to present an economic analysis and ROI strategy to any prospective client, and to present value vs. price per sqft, as is always asked.
I've developed a 20 minute "building science" PPT presentation that I give to every client. We not only provide design/build differences but also the economical analysis of the house.For our production clients, we train their Realtors on the same presentation.


2.
Jul 19, 2017 1:27 PM ET

People need to be educated
by stephen sheehy

The average home buyer has no idea at all about energy efficiency. They think 2x6 framing is all they need. When people first come into my house and I tell them it's energy efficient, they look at the concrete floor and tell me they'd love radiant heat too. I have to explain that we don't have radiant heat and that the floor isn't heated because the heat load is so low that running warm water in the floor would not be worth the bother.
No one who has ever been in my house, with a very few exceptions, has ever heard of a blower door test or airtightness.
I was lucky that I stumbled upon GBA and spent some time lurking and learning. I was also fortunate to choose Kaplan Thompson Architects to design the house. But without some knowledge of what constitutes efficiency, I'd still have been at risk.
I don't know what the solution is. Even though buying a house is almost everyone's biggest purchase, people buy without any understanding of any technical details.
There's lots of building going on here in Whitefield ME. I've never seen a rain screen. Houses with Zip sheathing are the only ones with taped seams. Nobody uses exterior foam, but lots of people see foam insulation as super efficient, without caring about thermal bridging.


3.
Jul 20, 2017 4:42 AM ET

ROI
by shane claflin

I think RE agents just need to focus more on actual dollars saved over the long term on heating and cooling costs. Operating expenses probably do not effect people, as much, in the higher income brackets, but everyone likes to save money. The ROI of a high performance house that costs 12% more should be explained to a potential home buyer in a dollar value. This means a bit of number crunching by the RE agent. Estimated annual BTU's used for heating and cooling converted to a dollar value based on the fuel cost today, compared to a comparable code minimum built home in the same area. High performance also means better indoor air quality, less moisture intrusion into the building, more durability, and is a hedge against higher fuel prices in the future. People don't think about operating expenses when searching for a home. They want what they want in terms of features.
Builders may be more in tune with the customer base who want a high performance house by offering something in the smaller realm with a lower price point. This is the smaller, younger family who is more interested in saving energy costs and minimizing their carbon footprint.


4.
Jul 26, 2017 10:32 AM ET

Sometimes we ask buyers the wrong questions
by Jeffrey Gephart

Good article. It reminds me of advice from Architect, Eric Corey Freed - to paraphrase loosely: "We ask the wrong questions like, do you want solar panels or how about a green roof? Ask, do you want to keep paying for heat?" Who can say yes?

For our housing to get where it needs to be, Realtors, appraisers, and lenders all need more education to stay relevant. It may not be long before the NEST or Alexa can report a home's energy use or list the home for sale. Like appraisers, Realtors have a competency requirement too. It's Article 11 in their Code of Ethics. Going forward, Realtors have to know more to be industry experts and trusted advisers.

A couple years ago at NESEA commercial appraiser (and owner of the first Passive House in Rhode Island), Brad Hevenor stated that there are three requirements necessary to realize “Contributory Value” for energy efficiency:

“1) The market must be convinced that renewable energy and high-performance building features have value. This is NOT the APPRAISER’S RESPONSIBILITY. It is the responsibility of the builders, designers, real estate brokers, certifying organizations, non-profits, and government agencies promoting high performance buildings.
The APPRAISER’S RESPONSIBILITIES are that:
2) Building technology must be understood.
3) Market reaction to the building features and attributes must be measured.”

In the northeast, energy costs are often the 2nd highest cost of home ownership, 2nd only to the mortgage. Showing total cost of ownership compared to code with documentation from an independent 3rd party is critical to explaining the value to a buyer. In addition, energy efficiency and renewable energy data must be available to real estate professionals through their MLS.

Finally, I applaud the good work of Kaplan Thompson and BrightBuilt Homes in their commitment to building sustainably and their efforts to educate real estate professionals.


5.
Aug 2, 2017 3:32 PM ET

Fighting the "Shiny Ball" syndrome
by William Janhonen

It doesn't take a village it takes an Architect, contractor, realtor and appraiser. I notice in your article how the builder decided to build high performance homes after visiting southern New England (read here Connecticut). Several builders in CT have successfully been able to get architects to create sustainable designs that are being built by several contractors who have educated their subcontractors on how to build very efficiently. They have worked with local realtors to educate them on how to sell Energy Efficiency. The result is cost to build is within 2-3% of building a code built home after much trial and error and hard work and initial loss. The result is an increase in profitability of 15-20% for some builders.
As a Building Science instructor and HERS rater in CT I have worked with many of these builders and since I teach two courses called Green Finance and Green Appraisal I have also worked with lots of realtors. The difficult part in training a real estate agent is to get them to sell benefits as opposed to features. People buying a house are like children seeing a shiny ball. The realtor walks into a home and says,"Oh my, look at the granite countertop or the wine room or the fire pit out back. Nobody ever walks into a house and exclaims, "Oh my, look at the condensing boiler." Yet the benefits of having a condensing boiler may save them enough money to buy 5 countertops, 2 wine rooms and 20 fire pits.
Hold up a NY Times and show them what the hole in the house would be at 10 Ach, then fold it in half and show them a 7 Ach and ask the prospective buyer how big a hole would be acceptable for them in their new house? I bet we all know the answer, "I don't want any holes in my house." Discussions about windows don't have to be about U-factor and Solar Heat Gain Co-efficiency. Tell them how these particular windows will reflect 90% of the UV light so your nice new rugs won't fade and neither will your furniture. You can't sell high performance without giving individuals a rational reason to make an emotional choice. If you don't understand the science behind the energy efficiency and high performance you just are not qualified.
The bottom line is I wish we all could just stop calling it "Green Building" and start using the term "Common Sense" building because if it makes sense, do it. To be successful everybody has to drink the Kool Aid and get on board with how it's done and how to sell it.


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