For 'Eco Flippers,' There's Green in Foreclosed Homes
When Christine Fisk toured a foreclosed home in Phoenix that had been renovated to be more energy-efficient, she wasn’t sold on its environmental benefits. But the two-bedroom bungalow was just minutes from her office and in good shape, so the financial adviser bought it for $150,000. A year in, Fisk is a believer: Her last electric bill was under $40, far less than she expected. “My day-to-day reality is dollars and cents, so everything that trickles down into my pocketbook is important,” she says.
The retrofit of Fisk’s 1947 home was overseen by G Street, one of a growing number of small businesses that buy old homes, renovate them to be more energy-efficient, and sell them. These “eco flippers” spend tens of thousands of dollars to gut properties, revamp heating and cooling systems, improve insulation, and install greener appliances. The business model is “a convergence of the vast number of foreclosed or short sales on the market and customers’ increased interest in energy efficiency,” says Peter Brown, a director at Earth Advantage Institute, a Portland (Ore.) nonprofit that advocates sustainable construction methods. “It goes beyond marketing.”
With 11 million-plus homeowners owing more on their mortgages than their homes are worth, eco flippers have plenty of potential inventory. And the idea holds promise for remodelers, says Kermit Baker, chief economist for the American Institute of Architects. “The big opportunities are really older homes that were not built very energy-efficiently to begin with,” he says. Of course, “It’s a tough time to sell a home. If you’re investing more and therefore need to increase the sale price of the home, that’s an even riskier undertaking in this economy.”
Brent Farrell is convinced that spending $75,000 to $120,000 to retrofit houses in Houston makes economic sense. The founder of ReCraft Construction Services has completed about 15 green remodels since 2009 and says that all sold within a month. Energy-saving features make homes “more marketable, so I will sell faster,” says Farrell, who expects more than $7 million in revenue this year, at least 50 percent more than in 2011.
Countering the doubts of skeptical home buyers about efficiency claims is crucial. Those concerns can be eased by groups such as Earth Advantage Institute, the U.S. Green Building Council, and the National Association of Home Builders Research Center, which oversee the verification process and issue certifications. G Street, which has bought and renovated seven houses in Arizona since 2007, is now focusing on hand-holding rather than buying homes. The four-employee company charges about $5,000 for plans, oversight of a project, and help getting the renovation certified. “We’ll take all the pain out of what typically is perceived as not an easy process,” says G Street founder Philip Beere. He anticipates his company will handle about 1,000 eco-renovations in the next year.
Why not just tear down drafty old houses and build energy-efficient ones in their place? It’s cheaper to renovate a solid existing structure than demolish and start anew, says Aaron Fairchild, who founded Green Canopy Homes in Seattle in 2010. “We’re putting capital to work two times as fast as a new construction homebuilder because we don’t have to go through new construction permitting” and other hassles, he says. With seven renovations sold and six more in progress, he plans to double his staff by yearend, to 20.
Like Christine Fisk, attorney Timothy Harris hadn’t been in the market for “a super eco-friendly home” when he and his wife paid $572,000 for Green Canopy’s first renovation, a 1926 Tudor, two years ago. Now, he says, “When we tell our friends how much lower our gas and electric bills are, they’re amazed. I had an old house that was half the size that cost twice as much to heat. It’s a remarkable difference.”