What Exactly Does "Green Building" Mean?

LEED certification is a great marketing tool, but what does it mean?

“Green building” is the growing buzzword in construction and real estate these days. The concept of green building has gained favor with the general public, who perceive value in a building’s longevity and reduced maintenance costs.

As more and more homes and commercial buildings tout their “green building” status, few consumers actually understand what this means. In its most general sense, green building refers to a method of building that protects the heath of its occupants, efficiently uses water and energy and reduces the building’s impact to the environment.

Green building standards have been established by the U.S. Green Building Council’s Leadership in Energy and Environmental Design. The LEED rating system has emerged as a powerful tool to rate the design, construction and maintenance of a green building.

LEED ratings give points, or credits, for the presence or absence of several factors. At the lowest end of the ratings scale, a green building can be LEED Certified. The more credits a building is awarded, the greater chance of it being awarded the prestigious LEED Silver, Gold, or Platinum status.

LEED credits are awarded according to six factors:

SUSTAINABLE SITES
Where a developer chooses to build is a crucial first step. A green building will address density (for example, a mixed-use residential/commercial project) and access to the surrounding community. Alternative transportation is also considered. Does the building give its occupants easy access to public transportation? Incorporate bicycle storage? Address parking capacity and ride-sharing?

Other factors in sustainable sites include redeveloping a brownfield, restoring or protecting a habitat, and maximizing open spaces. A truly green building will also reduce the thermal difference between the building and surrounding environment. This is done with solar panels or light-reflecting roofs, as well as by planting trees and other vegetation around the site.

WATER EFFICIENCY
Landscaping is an important consideration in this step. In recent years, there has been a push to incorporate indigenous plants into the landscape of a potentially green building. This also means utilizing drought-tolerant or drought-resistant vegetation, as well as alternative watering methods.

Rainwater collection, drip irrigation, and graywater reuse are becoming popular in green buildings. Higher water efficiency is also established through the use of low-flow fixtures, such as energy and water-efficient toilets, shower heads, washing machines and dishwashers.

ENERGY AND ATMOSPHERE
A green building must have energy systems that are properly installed and calibrated. When operating, these systems must meet minimum standards of energy efficiency. A green building will further reduce ozone depletion by not using chlorofluorocarbon (CFC) refrigerants, not only in its heating and cooling, but in its fire suppression

Additionally, a green building will ideally reduce the demand for energy, perhaps by harvesting free energy or recovering wasted energy. Some green buildings also incorporate advanced monitoring systems that will easily point to problems within each system. Of course, green power is ideal, including the use of renewable energy sources such as solar, hydro and wind power.

MATERIALS AND RESOURCES
In order to be a green building, a close examination of the building’s construction is necessary. The program gives credits to building remodels where a significant portion of existing walls, floors and roof are reused. In the green building’s construction phase, waste management is taken into account.

Building materials that are recycled, created locally, or farmed from rapidly renewable materials are also highly desirable in a green building. These items may be found in flooring, insulation, architectural salvage, and myriad other methods. It should be noted that a green building must also have an on-site area for collecting recyclable materials.

INDOOR ENVIRONMENTAL QUALITY
Under this category, a green building must provide a healthful environment for its occupants. This is not only achieved through proper ventilation. In order to achieve this, builders must control or eliminate building materials that may emit hazardous contaminants, such as paints, sealants, finishes, stains and carpets.

A green building’s environmental quality is also measured by individuals’ ability to control temperature and lighting. By increasing the number of individual light switches and thermostats, occupants in a green building are more comfortable use less energy. And by designing primary living and working spaces around the perimeter, lighting costs are reduced, as well as increasing quality of life within the building.

INNOVATION IN DESIGN
Many consumers think that this category refers to the unique appearance of a green building. But innovation in design actually means that a building exceeds standards designated under the green building program. This can be achieved through design, technology, education and equipment.

Building owners can achieve innovation in design by utilizing Energy Star appliances, following green housekeeping procedures, saving water, and using natural pesticides in landscaping. Some green buildings earn these extra credits by tremendously exceeding the requirements other categories.

Foreclosure Roundup

There were a number of submissions to the Foreclosure Central roundup. I can only assume that most people were tied up with taxes, as very few of the submissions had anything at all to do with foreclosure.

The most insightful blog author regarding foreclosure was Andrea Dickson at Wise Bread. In her article "How to Avoid Foreclosure" she gives homeowners who might be facing foreclosure some real tools and steps to follow.

I also like that Andrea touches on the community impact of foreclosures, stating "At least 4 properties (all rentals, all owned by the same person) on my street alone are being auctioned off within the next month, and that kind of activity is going to affect my property values..." Scary stuff.

Each state's foreclosure process is somewhat different. To see an overview of each state's foreclosure process, go to Foreclosure Basics - By State.

Meanwhile, as more investors shift from residential to the more stable commercial side, Craig S. Higdon at Investment Property Insider explains some basics with Commercial Real Estate Credit, and urges potential investors to "Weigh your risks carefully"

Subprime mortgages and foreclosure statistics continue to dominate real estate-related news stories.

Nationwide, CNN Money shows that foreclosures are up 7% from March to February of 2007, a whopping 47% increase from last year at this time.

For the third straight month, Nevada leads the nation in foreclosures. Las Vegas has the second-highest foreclosure rate among cities monitored by RealtyTrac. The article reports that "Nevada reported 4,738 foreclosure filings, more than triple the number in March 2006. Its foreclosure rate showed 1 filing for every 183 households, more than four times the national rate of 1 per 775 households"

More bad news for Florida. RealtyTrac says that Florida ranks second in the nation for foreclosures with an increase of 33% from February to March of 2007.

The San Francisco Chronicle reports Foreclosures, default notices hit 10-year high. "The number of California homeowners who defaulted on their mortgage payments jumped to its highest level in almost 10 years, exacerbated by slowing home sales and adjustable-mortgage resets."

But Washington State's real estate market remains strong. The Seattle Times shows Foreclosures in state fall, bucking national trend, while the Atlanta Business Chronicle points to a bounce in that state's foreclosure rates as well.

Financial Services Chariman Barney Frank is calling for a quick pass of legislation that would set national protections for all mortgage borrowers and clearer disclosure statements.

Thankfully, not everyone is jumping on the bandwagon for a legislative bailout. The Cincinnati Enquirer reports Go slow on foreclosures, Congress told. "Federal regulators and mortgage lenders this morning warned congressional lawmakers against moving too aggressively to regulate the mortgage industry in response to a soaring number of home foreclosures."

Senator Chris Dodd was one of the earliest and most vocal proponents of legislating the nation out of the subprime debacle. Today it seems he has made a quick about-face. He is quoted as saying "I'm not overly anxious to legislate," he said. "We think there may be enough laws on the books."

Fannie Mae and Freddie Mac are developing new types of loans to help distressed borrowers with high-risk mortgages, including a possible 40-year mortgage.

Lowest Common Denominator LawsAnd the Subprime Lending Market

In the United States, laws are typically written for and around the very small percentage of the population who, for some reason, need to be told very basic things. It’s truly unfortunate that some in our society do need laws and penalties to prevent or punish them for things the rest of us would simply never think of doing. And I truly think that the majority should not accept this any longer.

In the small California town where I grew up, the Fourth of July parade used to be a thing of wonder for children. Not for the parade itself, but because all of the families in town used to pitch tents in the wide grassy medians that separated the north and south-bound lanes of the town’s main road.

Everyone would bring their picnic baskets, sundries, and toys. Children ran around playing tag during this town-wide slumber party, and adults would discreetly sip wine or beer from plastic cups. These July 3rd evenings were so uneventful that there was rarely even any good gossip to talk about the next day.

As time went on, folks from other towns started crossing over into the community to participate. They too brought their tents and sleeping bags, but their foreign presence changed the environment. The first evidence of this was that ‘stranger danger’ at the campout meant that parents felt the need to always have their kids in sight.

The newcomer adults inevitably took the lax police enforcement of open containers to mean that this was more Mardi Gras than town social. For the first time, there were fights and arrests for disorderly conduct. I’m sure you can figure out what happened next. Alcohol was quickly banned, a decision that the town of course supported. Within a few years, camping on the median was also a thing of the past.

I wanted to share this example because, as you can see, when the town had to shift their standard operating procedure for July 3rd and 4th, it wasn’t a reflection of the town itself. It became necessary because of the small percentage of folks who came into town and couldn’t or wouldn’t behave within the established codes.

I like to call these kinds of shifts “Lowest-Common Denominator Laws.” They’re created in response to the small but powerful number of folks who throw a wrench into the works. And by extension, the rest of us get locked into this new norm, even when we can and always have handled the extra burden of responsibility like good citizens and intelligent adults.

The L.A. Times this week points out that the same trend is happening with mortgages. The article points out that the more relaxed lending standards are responsible for allowing a record number of Americans the opportunity to own their homes.

As the “Lowest Common Denominator” rule goes, not everyone is living up to the responsibility. And now Congressmen and Presidential candidates alike want to legislate their way out of the problem.

I’ve got several problems with that. The first is that private industries gauged their risk tolerance and (one would think) moved forward with due diligence. It is worth noting that not all subprime lenders are in the same boat. Obviously, some managed their risks better than others. But because some firms jumped in head-first, this is another instance of “Lowest Common Denominator” thinking.

My second problem with legislating our way out of the subprime mortgage downtick is that fully NINE out of TEN subprime borrowers are paying their notes.
So why should it be acceptable that the 10% who either cannot or will not meet their obligations now become the standard for lending?

Future borrowers will no doubt be held to a standard that is designed to protect against 10% of the population. The 90% of marginal borrowers who own their homes are not even factored into the equation. And thanks to this, 100% of future borrowers will be disallowed the opportunity that 90% of previous borrowers have lived up to, but 10% have ruined for everyone.

The 2006 Real Estate Year in Review

The 2006 numbers have been tallied, and it turns out that it was a bit of a cool year. Overall, real estate prices continued to trend upward, but at a much slower rate than in previous years.

What will 2007 hold? Of course, real estate agents and brokers are nervous. They and the folks in the mortgage industry will be watching Fed rates closely in the coming year. The days of easy refinances and quick sales seem to be gone for now. But those professionals who evolve with this current market, rather than clinging to the 'good old days' of just a couple of years ago will continue to do just fine.

In trying to predict the 2007 real estate market, those in the real estate industry are doing some interesting dances. The National Association of Home Builders reverses themselves in two back-to-back articles. On January 15, 2007, they write the optimistic article "Eye On the Economy: Home Sales May Be Firming Up." Just a week later, they draft an article titled "Recent Reports to Fed Show More Cooling in Housing Markets."

The National Association of Realtors is covering itself in a similar fashion. On January 25, 2007, they lead with the article "Existing-Home Sales Ease, Supplies Tighten." On February 1, they write "Pending Home Sales Index Rises." One can't help but wonder if these conflicting reports are drafted with the idea that one set goes to home sellers and the other to home buyers, as the broker or agent sees fit.

	EXISTING HOME PRICES	PERCENT CHANGE	AVERAGE PRICE
2002	$166,200	7.6	$208,400
2003	$180,200	8.4	$225,000
2004	$195,200	8.3	$245,800
2005	$219,000	12.2	$267,400
2006	$222,000	1.4	$269,600

A Common Myth of Home Buying

Piggybacking off of my last post, Hiring Real Estate Agents, What's Your Method of Choice? I'd like to address a common misconception among home buyers.

Every couple of months, it seems, I have to talk a friend or family member out of doing this, so I thought I'd share this common myth with the rest of the world.

Home buyers often convince themselves that they will save money by choosing one of two options. They believe that if they A) represent themselves, or B) work with the selling agent, they will somehow save themselves 3% of the commission.

Here is the honest-to-God truth, from someone who does NOT work in the real estate industry: Nothing could be further from the truth.

The reality is, commission is set by a contract between the home seller and the agent whom the seller chooses to represent the home. The selling agent, then, determines how much of that they are willing to share with the "other side", the buyer's agent.

If the agreed-upon commission is, say 6%, a selling agent could very well choose to offer only 1% to the buyers' side. This is unlikely, as few buying agents would leap at the chance to sell a home for 1%. Conversely, if the agent needs add extra incentive to sell the home quickly, they could choose to offer 5% to the buyers' side. During the time I was involved in real estate marketing, I did see several 4% offers to the buyer's side in return for quick sales.

If there is no buying agent, the selling agent keeps the 6% commission to themselves, since that is the contract they have with the seller. A home buyer does not play a role in the contract between seller and seller's agent. And, again, that is where commission is set.

Home buyers are often convinced that a selling agent will reduce their side of the commission of there is no buyer's agent. This is highly unlikely. When it does happen, let me tell you why you should be extremely wary of these folks:

1. You are not adequately represented in the largest financial contract most of us will ever be involved with in our lifetimes. If you choose to allow the seller's agent to have "dual agency", where one agent represents both sides, how good of a deal do you think you're getting in contract negotiations? Particularly if the agent has agreed to do twice the work for half the pay, per your insistence?

2. An ethical agent who will reduce commission and allow you to represent yourself will wind up representing you anyway. Only rookie agents will make this mistake. And a rookie agent will have a hell of a time navigating the complex waters of implied dual agency.

An unethical agent will take advantage of you to the fullest, since he or she will have to explain each step of the process to you, thus creating a lot more work.

No matter how you feel about real estate agents (and I'll state right here that I've got plenty of mixed feelings myself), you need to be represented when you purchase a home.

I'm flummoxed when I hear otherwise rational human beings, people who realize that after a certain age you just hire professionals to do things, suddenly decide to forego a buyer's agent.

Unless you're willing to pick up another full-time job, you're saving yourself nothing. By that I mean that you must be prepared to see homes, navigate inspections, negotiate contracts, etc. and do it well enough to protect what is likely the largest investment in your 'portfolio'.

If you don't do it well enough, you can find yourself in a home in need of serious repairs, in a contract that exposes you to a world of liability, or any number of worst-case scenarios.

I don't know too many people who would drive without car insurance, no matter what the expense. Because the reality is that, if something goes wrong, it goes very wrong. And no amount of money saved compensates for that.

I hope this posting will clear up a widespread myth about home buying. I know a lot of people will be irritated to read this, but I hope that ultimately most people find it helpful.

Hiring Real Estate AgentsWhat's Your Method of Choice?

This is a topic that I'd like to pose to both consumers and real estate agents:

With literally millions of agents to choose from in America, and hundreds of thousands in major American cities, what is the most effective way to hire a real estate agent?

Personally, I'm one of those highly-strung researchers who spends ages of time fleshing out a topic before I move forward. But I know that the vast majority of consumers are not like this.

In fact, many of those consumers are my friends and family. And I watch as they hunt and peck their way through the buying process, going through multiple agents before they finally pair with one who suits them.

For consumers, I wonder, how do you choose an agent? I know many folks rely on referrals from friends and family. But, (in the realm of theory here) say my little brother is looking to buy his first condo....is it right to assume that the elderly lady who sold my parents their multi-million dollar golf course-fronted retirement villa is a good match for him?

So how do you filter through the thousands of options? How did you find your last agent, and if you had it to do all over again, what would you do differently?

For agents, I'd like to give you a forum here. What things do you wish clients would know, do, research, or ask when they're looking for an agent? I know you all would be just as happy as your customers if clients and agents were paired appropriately. How can we make this happen?

After all, you've probably had your share of bad clients. I'm also pretty sure you may have salivated as you saw someone in your office working with a client who is an 'okay' fit, but would be a perfect match to your expertise.

I'm really looking forward to hearing from readers on this topic. It will certainly answer a lot of questions for home buyers across the country.

The Changing Face of Homeowners Insurance

Two states to watch in 2007 will certainly be Mississippi and Florida. The real estate markets in these two states have traditionally withstood natural disasters such as hurricaines. But insurers are fleeing the disaster-prone areas, leaving homeowners, and states, with no safety net.

State Farm made a huge round of news stories when it announced that it would not write any new policies in Mississippi. At the heart of the issue is whether hurricane damage was caused by wind or water damage, as homeowners' policies do not cover against water damage.

Insurers in Florida are in the process of scaling back their wind policies. Now Florida's legislators are trying to keep both insurers and property owners in the state. "At the root of the trouble is that insuring against a major storm in much of South Florida has been deemed simply too risky to be affordable."

Mississippi's response has been to threaten to mandate insurance companies into writing policies in that state, which has drawn widespread criticism from homeowners in other states. Florida's plan, meanwhile, has been to promise billions of dollars of bailout monies for both parties.

Certainly, every state has its own unique propensity for natural disaster. From tornado damage in the Midwest to California's ubiquitous earthquakes, the nation is poised to watch the developments in Florida and Mississippi very closely.