Free Market, Liability, and Greening an MLS – Sorta

A few years ago the MS Dev Authority helped promote green building in Mississippi. They co-sponsored a state-wide Green  Building Contest. Licensed contractors joined and promoted their brand and I helped provide support as an NAHB Green Building Verifier.

NAHBRC_Green_VerifierThrough Jo Usry’s leadership, the MLS – Multiple Listing Service of Jackson now includes sections (called fields), whereby the agent can enter information pertinent to specific energy efficient criteria a home might posses when the home is being listed.

Locally the “Green” movement has all but disappeared. However, other areas of the US still promote energy efficient construction. Here’s a current article from National Association of Realtor’s appraiser blog, The Appraisal Insight.

In the world of residential valuation, a green-built, energy-efficient, or high-performance new home or retrofit is essentially invisible to the consumer if the MLS doesn’t support green fields (i.e., fields in the MLS data form that enable the listing agent to define the green features).  Without green fields, if a potential buyer is interested in a home that’s resource efficient or has superior indoor air quality, for example, brokers searching the MLS on their behalf can’t identify this property type. Likewise, an appraiser undertaking a green home assignment isn’t able to identify comparables, isolate possible premiums being paid by consumers for green features, or identify local market information such as market share, days on market, and price per square foot.

As market awareness of and demand for green homes grows, what is an MLS’s responsibility to its members to provide green fields—and what liability issues should be of concern?  According to studies by the Institute for Market Transformation, a nonprofit organization that promotes energy efficiency, energy benchmarking of commercial properties has revealed a simple truth: When information is disclosed to the market, the market has the opportunity to react to that information.  Market reaction can be reward or punishment—that’s the nature of a free market. But either way the consumer benefits from the competition as a result of disclosure.  The ability then to identify market reaction lies at the heart of both real estate investments and valuation.

Yet every MLS must consider its liability when considering green fields. Corrupt data occurs for two reasons: a lack of education or awareness on green building certifications and features, and/or a lack of accountability with regard to requiring supporting documentation when a green certification checkbox is marked by the broker.  The most cited example is confusion between the ENERGY STAR Home certification and ENERGY STAR appliances.

However, for the approximate 650 MLSs in the nation yet to instigate green fields (76 percent of the 860 MLSs in the country), the experiences of the early-adopter MLSs are invaluable.  Lessons learned:

  • Require that supporting documentation (the verified checklist or unique identifier number) be uploaded within three days or the field is rejected.
  • Reach out to the local green building/appraisal community for free review/commentary on the accurateness/relevance of proposed fields.
  • Encourage brokers to take the first step and educate themselves on the growing green homes market estimated to be worth $87 billion to $114 billion between 2011–2016, according to McGraw Hill Construction–Smart Market Report 2012).

Reprint from the Appraisal Insight blog: 

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