Patty Da Silva SELLS Homes | Green Realty Properties®

REALTORS® in Cooper City, Davie, Miramar, Pembroke Pines, Plantation, Hollywood

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The hot topic in real estate is green homes. People are building, buying, and remodeling existing homes to make them more energy efficient,
healthy, and have less of an impact on the environment. While it is a
fairly recent trend in housing, it started in commercial building more
than two decades ago as owners looked for ways to cut rising utility
bills. The field quickly grew beyond a concern with energy to
incorporate materials, techniques, and products that conserve scarce
resources, recycle used materials, and avoid the use of toxic
ingredients and processes. As better and cheaper products and materials
became available, green or eco-friendly building spread to residential

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Green building is fast becoming the norm for new commercial projects, but it
isn't clear how many houses are actually being built with energy saving
and environmentally friendly features because the statistics still
conflate commercial and residential markets. In 2006, McGraw Hill
Construction estimated that by this year green building would represent
10 percent of all construction and the president of the U.S. Green
Building Council (USGBC) said last April that green construction had
contributed $178 billion to the gross domestic product during the
previous eight years. But in neither case do we know if residential
building represents 20 percent or 90 percent of those figures. There is
anecdotal evidence, however, that green building is a growing factor in
both new residential construction and remodeling. For example, the
State of California just enacted the first statewide "green" building
code and 6,500 builders have signed on to build Energy Star approved
homes. USGBC's LEED program which originally monitored green commercial
construction now offers five levels of certification for housing. We
can also assume that however big green home building is today, it will
get bigger; to what degree is still an unknown.

So far there hasn't been a lot of news about financing green homes, partially
because a special mortgage would be overkill for many purchases. A lot
of green building merely reflects new technology applied to old
products such as Low-e (low emission) coating on window glass or
formaldehyde-free kitchen cabinets. Where a green house is just a
regular home with green features, a plain vanilla mortgage will work
just fine.

Nonetheless, some environmentally sensitive homes do have financing issues.

A subset of very green homes such as domes,
Yurts, and earth bag homes are growing in popularity but many projects
do not get off the ground because the chosen construction methods,
while valid, confound appraisers or scare lenders. Even ordinary homes
that have a single unique feature such as a geothermal HVAC system or
solar embedded roofing shingles can run afoul of underwriting
guidelines. Construction loans are also an issue. Think of all the
usual problems inherent in placing construction financing for a single
family home and quadruple it if the house is really green. Building
codes have not yet caught up with green technology - it is another year
until even California's new regs take effect - nor have many of the
loan officers who must sign off on construction advances.

There are green mortgages available but so far they aren't widely known. FHA
offers a wrinkle to its 203(b) and 203(k) loan guidelines that permits
recognition of the cost savings of green improvements. The Energy
Efficient Mortgage (EEM) program allows the borrower to incorporate the
cost of some green improvements on the top of the approved mortgage
without qualifying for the higher loan amount or basing the down
payment on it. Freddie Mac, Fannie Mae and VA mortgages offer similar
concessions and Energy Star, a joint effort of the EPA and Department
of Energy, has a pilot program underway which, in addition to the
features of the FHA program, encourages lenders to offer preferential
rates, reduced fees, or lower closing costs to borrowers. There are
caps on most of these EEM programs but they are still useful,
especially where customers are pushing the limits of their ratios.

It would appear that, at present, green home financing has the following characteristics:

* The size of the potential market is unknown.
* There is an unmet demand for creative products in some sectors.
* Programs are that are available are not being appropriately marketed and promoted.
* No one really understands what is going on.
* Not many people are doing anything about it.

Sounds like the very definition of an opportunity. There appears to be a need
for entrepreneurs who understand what is going on out there and some
excellent reasons to position yourself as a green financing expert.
It is a pretty empty niche. If there are lenders specializing in green
loans they are doing a poor job of marketing. Google green mortgages,
green lenders, or green mortgage brokers and you will get millions of
hits but the top ones lead to blogs bemoaning the lack of green
financing or to the Websites of mortgage brokers named Green. USGBC's
national green directory lists only six financing sources. The National
Association of Realtors offers members a green designation, the
Mortgage Bankers Association does not.

Becoming the green mortgage expert in your area code or even staking a national claim to
the title would not be difficult. First, learn the basics of green
building and green home ownership. Most of the methods and terminology
are pretty simple and there are dozens of books and Websites to get you
started. It is important that you are familiar with the underlying
concepts of green building such as sustainability and, while you should
be aware of materials and products, technical knowledge is not
required; it is good to know what a geothermal heat pumps is but not
necessary to know how it works.

Learn who the players are. LEED, USGBC's Leadership in Environmental Education and Design program
mentioned above, is one of the gatekeepers, establishing standards for
green building and for professionals in the field. Energy Star has long
rated appliances and other products for energy efficiency and is now
doing the same for new homes. The National Association of Home Builders
is active in developing green residential building standards and the
Forest Stewardship Council certifies the sustainability of wood-based
building materials. You will quickly learn about another dozen or so
organizations and agencies which are active in the field.

Qualify for existing programs such as those offered by FHA or the pilot Energy
Star program. If you are in a position to do so, develop programs of
your own. Talk with your investors about this potentially explosive
market and how you might capitalize on it. If you can develop a conduit
for financing some of the more extreme building techniques, you will be
a market maker. Techniques such as straw bale building have a long
history, are structurally valid, and are growing in popularity, but can
be mortgage orphans.

Be prepared to educate appraisers and insurance agents. A lack of comps or the ability to secure hazard
insurance kills a lot of green financing. There is no reason a home
with a conventional gas furnace cannot be a comp for one with a
geothermal system and when an insurance agent balks at insuring a straw
bale house he needs to know those houses have four times the burn
rating of stick construction. You will sometimes have to force these
people to lift their heads out of their rule books.

Marketing a green business focus is easy and relatively inexpensive.

Contact green builders in your area as well as realtors, especially any holding
the NAR green designation. Qualify as a partner with Energy Star at: ... r_benefits.

If you can provide financing for any of more outré building techniques,
contact and post on the dozens of blogs that support their use;
financing is a big topic of discussion. Advertise in the USGBC and NAHB
directories and, depending on your focus, in community directories in
green conscious cities such as Austin, Texas; Portland, Oregon; and
Cambridge, Massachusetts.

The trend to green building could become a mega trend; develop into the industry

standard, or merely remain a small and healthy market sector. Mortgage lenders who start to
focus on this market early could find a steady flow of new business or
a potential bonanza. In any case, they will be ahead of the curve when
the competition finally discovers the market. --David

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