Certifying Home Performance
Certification, appraisal, and finance: each of this triad is a critical piece if we’re going to see widespread implementation of high-performance housing. It turns out that it’s all about the money.
It’s an oft-noted conundrum in the North American home performance industry: we know how to build decent buildings, we have a solid network of contractors willing to do competent work on both the new and existing buildings, but we lack the reliable demand that would signal we’re achieving any significant market transformation. In some up-markets, it’s easy to see the outlines of success, but in many regions it feels as if the home performance industry is all dressed up with nowhere to go.
In researching the first of these tools — certification of a home’s performance — we’ve seen that some of most hopeful work is being done by the organization known as Pearl Home Certification, based out of Vienna, Virginia. I spoke recently with Pearl President and COO Robin LeBaron about their organization. I think that their success bodes well for the future of sustainable housing.
Habitat X Journal: Help us understand how the Pearl Certification works in the marketplace. Who buys it and who uses it?
Robin LeBaron: Pearl certification allows homeowners to capture the value of their investments in home performance improvements and renewables at the time of home sale. Pearl has two channels to market: building contractors, and real estate brokers and agents. Contractors can offer Pearl Certification as a new value for their homeowners. For the real estate agent, and their sellers, we provide a marketing package that helps them differentiation the home, and themselves, in competitive markets.
HXJ: It sounds like a great idea to evaluate and certify the performance of homes. Yet we’ve seen over and over that North American homeowners don’t seem to care about the bloody details of their home’s operation. It’s as if data is in long supply these days, but the most folks have a hard time wading through it all. How are you addressing this apparent apathy towards home performance?
RLB: In communicating with homebuyers, our goal is to make our reports as interesting and exciting as possible. We use a lot of color and large photos in our reports, for example, because we’ve found that it appeals to the majority of buyers. We’ve found that homeowners have two buckets for home improvements: things that are sexy and that they think have re-sale value, and things that they just want fixed. Our goal is to get everything related to home performance into bucket #1.
We’ve created a point system of up to 1200 for the perfect home, with sub-totals in several categories — there is a lot of detail in there. But our reports also provide homeowners with higher-level comparative information. So we tell them that they have R-49 insulation in their attic (“what’s that?” many will ask) but also that it’s among the 3% best-insulated attics in the state of Virginia.
HXJ: So much for the simple side. Please tell us more about the difficult details, the technical stuff that professional users can use.
RLB: We build what we call asset detail pages. Each takes up to half a page, with color photo. Some, like HVAC, are longer. We anticipate that relatively few readers will drill down to that, but some will be interested — and the appraisers certainly will. It’s all in there.
HXJ: You’ve mentioned appraisers as a primary target for your service. That has often been a hard industry to reach. How are you doing that?
RLB: For starters, our data can now auto-populate the Residential Green and Energy Efficient Addendum (created by the Appraisal Institute). This allows the appraiser to recognize high-performing home features and incorporate them into their opinion of value. We commissioned an appraiser study, and found that Pearl Certified homes sold for 5% more than comparable homes — IF they used the Pearl marketing package. One case study: a buyer had made a low offer, assuming that the property would NOT appraise, but the seller got the home certified and it appraised at the asking price. The seller captured the value he had created
HXJ: Tell us more about your ties with the real estate industry.
RLB: Last year Pearl was one of fewer than ten organizations selected from hundreds of applicants to take part in the National Association of Realtor’s REach technology accelerator program. It’s been an incredible experience for us — through the program’s mentorship program we learned all sorts of things we didn’t know we didn’t know about the real estate industry. REach has also given us access to the NAR’s leadership and to its million-plus members
HXJ: It’s an age-old question in the business of energy modeling: asset versus operational rating? Does Pearl assess just the installed assets like insulation and equipment, or does it consider actual consumption history?
RLB: At present we are not using utility data. We will be commissioning a study to analyze homes that we’ve certified to see how they perform. We DO take into account some features that contribute to baseload, like the “big four white boxes” (washer, dryer, range, refrigerator), and we know that those will affect the consumption in predictable ways. The fifth box, the old refrigerator in the garage with the beer in it, we still need to incorporate into the system.
HXJ: How does the Pearl Certification relate to other existing certifications?
RLB: We’ve certified homes with HERS ratings and homes built to ENERGY STAR standards: our reports highlight these ratings and certifications when they exist. But homeowners or real estate agents find that they don’t get any marketing support from most other certification systems. We can really make a difference there in highlighting that the home has already received a certification or rating.
HXJ: This is all very hopeful. What’s next?
RLB: We’re rapidly expanding our Contractor Advantage Network and bringing new real estate brokerages into the fold. The winds of industry have changed and are blowing at our backs. We’ve now certified over 1000 homes in six states. We should hit 2000–3000 homes by the end of this year. We aim to certify up to a million in year six, or 1–2% of the homes in the U.S. by 2024.
Robin shared much of this information at the 2018 Habitat X Conference, where he joined a panel discussion to discuss real estate valuation.