Value of insulation not reflected at resale time

Insulation reduces utility costs but adds little to the value of a house, analysts say.
Insulation reduces utility costs but adds little to the value of a house, analysts say. (Owens Corning)
Posted: January 19, 2014

It's not sexy, or even fun. Yet few of us would want to be caught at home without it.

We speak of insulation, the barrier under drywall or plaster that helps keep at bay temperatures either too cold or too hot.

You might think that for a house hunter, knowing how well a property is insulated - let alone whether insulation exists at all - would be a high priority.

You'd be wrong.

You'd also think that a house with superior insulation - that is, one with sprayed-in versus batt insulation - could always command a higher price.

Not precisely.

Which is easier and cheaper, at least up front: putting on a sweater or efficiently insulating a house, specifically an older one in the Philadelphia area, likely built with no insulation?

Exactly.

Even if you go to the expense of using spray-in foam insulation - which builder and architectural and civil engineer Joe Schwartz of Malvern calls the best there is - there's no guarantee you'll realize any kind of return at the settlement table.

Reason One: The odds are none of your neighbors has done this, so as a seller you can't make an apples-to-apples comparison. Reason Two: An appraiser most likely won't have quantifiable figures available to raise the value of your home - they don't exist, said real estate appraiser Sandra Adomatis of Florida.

"If we don't have databases that allow us to do research and extract a dollar amount for insulation, you can't quantify the dollar amount," Adomatis said.

There are signs, like crocus shoots in March, that greener homes could claim more green at settlement. But don't count on it just yet.

"Nobody notices. It's not glamorous," said Joanna Bellinger, a Realtor with Long & Foster in Blue Bell. When a potential buyer is looking at a house, "they are not sitting on the couch for an hour. They are looking in cabinets . . . they are not noticing drafts."

RE/MAX's Joseph McCormick, who sells homes by referral in Delaware and Chester Counties, agreed:

"We see [insulation] when looking at new construction; it's in front of your face," he said.

Bellinger searched the Multiple Listings Service to see how many houses had information about utility bills, a prime indicator of good insulation. Of 3,014 active listings in Montgomery County - houses valued between $100,000 and $2 million - only 34 listings provided utility-bill information.

"I was surprised at how low" the number was, she said.

Philadelphia listings on Trulia, Zillow, and the MLS also turned up few utility-bill details.

Adomatis, who has written a book, Residential Green Valuation Tools, to be published in February by the Appraisal Institute, said that of the 850 Multiple Listing Services in this country, only 185 have "green fields" in which Realtors can include such information as utility costs and a Home Energy Rating System (HERS) rating.

The HERS index makes it easier to gauge, and quantify, the greenness of new homes. Ratings are based on "mechanical tools that measure the tightness of the envelope and duct work, efficiency of the mechanicals, insulation ratings, and window types," Adomatis said.

Even with a HERS rating, said Bellinger, "if one house had it and three [on the same block] didn't, I wouldn't expect that one to get much more money."

McCormick said he asks clients to put on seller-disclosure forms information about their homes' insulation. Though the form typically lists defects, he wants his clients to put in the positive things, as well.

Bellinger said that if she is selling a house valued at less than $300,000, she will ask for the utility bills. "Eighty percent of first-time buyers will ask," she said.

Schwartz, whose business is J. Schwartz Fine Homebuilding & Remodeling, said a homeowner who shows that heating bills are much lower with spray insulation, as compared with a neighbor's, might well be able to get more money.

"It's probably an advantage to put it in the MLS, and list the energy bills," he said, offering this example:

A client with an 11,000-square-foot, energy-efficient house paid $500 a month for gas and electric. "The furnace came on twice a day," Schwartz said.

Added value, certainly.

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