Portland Area Real Estate Appraisal Discussion

Portland Home Energy Score and Home Value
November 8th, 2017 5:45 PM

Portland Home Energy Score

Due to a new City ordinance, on January 1st, 2018 most homes listed for sale in the City of Portland are required to first obtain a Home Energy Score.  Our sister company, A Quality Measurement now offers this service.  Portland’s policy is unique in that sellers are required to obtain the energy score prior to listing the home for sale.  This can be a burden to sellers, but it is a benefit to buyers who want to purchase a home that uses less energy.  The question that always comes up is, “If I get a low score, will my home sell for less?”  I have two thoughts on this.

1.  The Home Energy Score is like the miles per gallon (MPG) rating of a car.  We all know that a car with a lower MPG rating is not necessarily less valuable than one with a high rating.  For example, a luxury SUV may have a very low MPG in relation to a compact car.  However, it is also likely that the luxury SUV will sell for more money.  A low score does not necessarily equate to a low value.

2.  On the other hand, a home with a lower energy score might sell for less.  If two homes are equal except that one uses less energy, we can expect that a well-informed buyer will pay more for the more energy-efficient home.  A long history of scientific (and unscientific) studies link a buyer’s willingness to pay more for a home that uses less energy.  However, most such studies involve new homes where buyers are more likely to have information about estimated energy consumption.  Now buyers of used homes in Portland will have the information and scientists, appraisers, and real estate agents will be watching to see what happens.  Here is a link to a blog post where I go into more detail about existing studies.

Did I leave anything out or do you want to join in the conversation?  Let me know in the comments below.

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Thanks for reading,

Gary F. Kristensen, SRA, IFA, AGA

Gary, I think it is a good idea to know the energy consumption of a house and this could be just one more thing that sways a buyer into buying one house over the other. It will be interesting to see how this may affect sales of lower energy efficient homes.

Posted by Tom Horn on November 8th, 2017 6:48 PM
Thank you Tom for following. I think over time, Portland's Home Energy Score will start to make the less efficient homes functionally obsolete. There might be a day where energy efficient improvements are just as important as curb appeal.

Posted by Gary Kristensen on November 8th, 2017 6:52 PM
Thanks for the post. I'll be watching what happens in Portland. I think this is something that will be coming to other markets in the United States, but Portland is ahead of the curve. In other words you are the energy guinea pig so to speak. I'll be anxious to see how the energy score impacts buyers' perception of value (or not).

Posted by Ryan Lundquist on November 8th, 2017 7:46 PM
Thank you Ryan, my thoughts exactly. If the Portland Home Energy Policy has the intended outcome of reducing the city's need for power production, then other cities will follow.

Posted by Gary Kristensen on November 8th, 2017 7:52 PM
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