Issues that Come up When Buying and Building a Green Home

Green home - Passive House pictured at night

Green home - Passive House pictured at night

Ever wonder what it might be like to own a green home?  How about the issues you might face in building one?

Green building attorneys are generally removed from the day-to-day issues facing the owners and contractors building the project. On a commercial project, these issues are more transparent and attorneys are utilized more often. But green-built residential projects are more of a secret. Attorneys are generally disassociated until a problem arises.

I was excited to read a post on the green building blog, Jetson Green. One of their writers interviewed a new Passive House owner to discuss the nuances and “behind the scenes” procedures espoused by the Passive House building process. The interview revealed some of the problems that arise, the public prejudices against green building and the unpreparedness of financiers.

Issues for green home buyers

Finding financing  – Financing parties are simply not ready for green building. With a bunch of untested technologies in play, banks and lenders are unwilling to take the plunge. The interviewee advised that it had to come up with 35 percent out of pocket to make this work. The owners had to pay for much of the green technology in the home—adding up to about 15 percent of the total cost. Owners should expect to encounter difficulty and prepare early.

Appraisal nightmares – This was the most saddening issue to read. Lender appraisers are simply untrained to evaluate the green building market. As time goes forward, I expect appraisal outfits to train appraisers to understand the different green building bodies, especially as we move closer to a mandated building code. For now, owners should expect some rigidity and may want to research and suggest a green-experienced appraiser.

Owners need education – A green home loses its purpose if it’s not used correctly. Unfortunately, most builders are simply given the task of installing green technology and turning over control to the owners. Owners need to understand that they’re expected to use the home correctly to maximize the benefit of their green home. Owners should seek out training or contract for education from their contractor (if available).

Issues for green home builders

Ensure secured financing –  Many home builders want to see a commitment letter from a financial institution before building. This is a must with a green-built home. Green building comes with cautious lending. In some instances the owner is expected to pay out of pocket for a lot of the work that you’re doing. Be sure that you can confirm that funds are available. If the owner is expected to pay a significant portion out of pocket, you may consider using an escrow fund to secure funds during construction. While liens are available for security, nothing is better than cash.

Complete planning before starting – A very valuable component to a dispute-free building process: complete design and planning before building. The owners stressed that they spent a year on design and had a complete set of plans prior to building—this is an incredible stress reliever. Even on conventional projects, builders know that owners often change their mind, plan on the fly and make a mess of scheduling. Contractors should have completed design drawings and a confirmed building plan before starting. This should be a part of your contract.

Provide education –  Owners are buying a well-oiled machine from you. But, owners can easily let performance fall to pieces by improper use. Contractors should consider selling education as part of their contract. You may consider inviting the owners to the site to view the systems after they are installed, explaining how they work. After completion, you should perform a walk-through and tutorial of all the systems and how they work. You may also want to teach your customers how to read their energy statements to ensure that the systems are up to snuff. Education is a worthwhile addition to your contract.

For owners, contractors and attorneys—building green is still a learning process. Listening to those who go through it—priceless.

Your turn… What other problems have you seen or might you foresee?

[box]By Douglas Reiser. Republished from The Builders Counsel Blog by Reiser Legal (Creative Commons BY).[/box]

image: Jeremy Levine Design (Creative Commons BY)

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