Not all green home improvements make cents
Home improvements that lower energy consumption and protect the planet are in vogue. While oftentimes these green makeovers can be smart for the environment, other times they're not, financially speaking, a good deal.
It's impossible to compile a definitive list of worthwhile green home improvements since so much of the decision-making depends on factors that are specific to you, your home and your locale. Still here are four important points you should consider before you sign up for a green home improvement:
1. Energy efficiency. Some green technologies might not be the best way for you to save money or the planet. One example is solar panels, according to Ericka Jennings, CEO of Green Key Real Estate in Oakland, California. True, these devices conserve energy, but other options might work just as well and at a lower cost.
"You could be pumping a huge amount of solar energy, but it's all going out the cracks in the walls," Jennings warns.
Options like green and locally sourced building materials might be more effective, if less sexy, than costly technologies like solar panels. Jennings cites materials such as composite wood cabinets, cork or marmoleum flooring and paints that are free of hazardous elements -- known as volatile organic compounds or VOCs.
2. Price and operating cost. Matt Grocoff, a net-zero energy consultant in Ann Arbor, Michigan, says homeowners should consider both the upfront and operating costs of a green improvement. One example would be an HVAC system that's cheap to buy, but inefficient to run.
"You might save a few bucks upfront on an HVAC system," Grocoff says, "but if you get one that's even moderately more efficient, it's going to save you more in energy each month. Over time, you'll have a lower operational cost."
You also need to consider whether knowledgeable servicepersons and spare parts are available in your local area. If not, you could be looking at major maintenance headaches and increased operating costs.
Furthermore, if you have to refinance your mortgage or take out a home equity loan to pay for the improvement, you're taking a big chunk out of your projected savings.
3. Resale value. Jennings says green improvements can pay off when you sell your home, especially if they make your home healthier and more comfortable. But she adds that it's difficult to measure the increase in your home's value since the overall quality of your improvements and your local housing market also factor into the equation.
Grocoff says green improvements can make your home more valuable and return more than your initial cost thanks to tax credits and energy company incentives.
The Appraisal Institute has introduced a form that gives appraisers an opportunity to note the added value of a home's green improvements. The "Residential Green and Energy Efficiency Addendum" could be beneficial when it comes time to refinance your mortgage or sell your home.
When you evaluate the potential resale value of green improvements, be wary of improvements that are complicated or confusing, consider the aesthetic impact, especially if the project will be difficult or costly to remove, and don't overdo it.
Jennings says that enthusiasts sometimes "over-improve a property for its location" and that those excess improvements don't hold their value because the owners "put too many systems" into their home.
4. Certification. Certification from a nationally recognized energy-efficiency program can also boost a green improvement's resale value, says Grocoff.
One example he cites is the Home Energy Rating System (HERS) Index developed by the Residential Energy Services Network, a not-for-profit membership corporation founded by Energy Rated Homes of America and the National Association of State Energy Officials in Alexandria, Va.
A HERS score (the lower the better) can help buyers compare the relative energy efficiency of for-sale homes.
"There are a small number (of homes) that have really low HERS ratings and some sort of third-party certification. These homes have a higher perceived value," says Grocoff, who owns a net-zero home.
The bottom line is that green improvements can make your home more valuable, but only up to a point. That suggests you shouldn't spend a lot for green improvements that don't offer a legitimate financial payoff.
"Being a green real estate agent, I know the value is there for green improvements," Jennings says. "(Buyers) will say, 'I don't mind paying a little more.' But there is a certain limit."
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