Pearl Certification CEO and co-founder Cynthia Adams talks with Sara Gutterman about how third-party certification documents a home's high-performing features for appraisers and buyers, and why certified homes sell for a 5.5% premium.
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Sara Gutterman: I'm here today with Cynthia Adams, CEO and co-founder of Pearl certification. Can you start with clarifying what Pearl is and the services that you provide?
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Cynthia Adams: We collect information on high performing features in homes. This would be efficiency, renewables, smart devices, water efficiency. And then with that information, we create a certification report and a completed appraisal addendum and some other documentation so that that home is able to sell and appraise for more. Based upon the fact that it is an above average home, it is a high performing home.
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Cynthia Adams: The big idea behind Pearl and what we do is that if we can create a market based mechanism for people to actually increase the equity of their homes from having made these improvements, then we have a virtuous cycle where homeowners are incentivized in their purchasing decisions to install higher efficiency equipment, to install the solar and other things, because they know that not only will they have the day to day benefits, quality of life benefits, living in that house, but they also will have an increased equity value.
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Cynthia Adams: And for many people, their homes are the most important investment that they'll make.
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Sara Gutterman: So why are certifications important and how is Pearl different from other certifications that.
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Cynthia Adams: Are helpful? They are a third party that has verified the information about the home's performance characteristics. So we're not relying solely on the builder, the contractor, the homeowner or some other entity to get it right. What's different about Pearl is that we treat certification like a living sort of profile for that home. We recognize that some homes are built to a very high standard out the gate, but we have over 100 million existing homes in the US, and some date back to the 1700s.
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Cynthia Adams: And so there's very different construction practices, very different states of upgrade and renewal for those homes. So it's important that certification from our perspective is able to address the the entire residential building stock, regardless of where on its home improvement journey that particular structure is. So a homeowner with us can certify a single feature, like a smart thermostat or an energy star dishwasher.
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Cynthia Adams: And as that home accumulates points for the different features, the whole house then can achieve a certification. Silver. Gold. Platinum.
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Sara Gutterman: Do you have any insight or specific data on the perceived value upon resale of something like a Pearl certification?
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Cynthia Adams: We have sponsored studies that independent appraisers have authored, and what they found was that homes that had our certification and were marketed with that sold on average for 5.5% more. This is even in the crazy real estate cycle that we've just exited, from, where it was very much a sell side bias, and homes were selling for much above asking price.
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Cynthia Adams: Even in that particular environment, our homes were selling for a 5.5% premium.
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Sara Gutterman: So I want to ask you about trends. Are people looking for that comprehensive Pearl certification that really hits all the areas of the home, or are they looking more at a spot certification, like for a smart thermostat like you just mentioned? And part two is are there specific markets or geographies that are adopting certifications in general, but specifically the Pearl certification at a faster rate than others?
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Cynthia Adams: If you look at the Home Builders Association surveys, the sustainability report that the National Association of Realtors publishes annually and then some other data on, interestingly enough, luxury homes in the real estate market. You just see this ever increasing trend of interest in having a high performing home, energy efficient home. And largely, this may be driven by the the millennial and Gen Z actually being the largest group of of home buyers these days.
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Cynthia Adams: And their attitudes around sustainability are different, say, from the boomer generation. So that that definitely is is a trend that we see, you know, born out in different types of surveys. I think that insofar as certification is concerned, most people don't know that there exists a certification for homes unless they've built something new and their builder has exposed them to lead or energy star.
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Cynthia Adams: And then in the existing home market, there pretty much is no certification. So what we find is that homeowners, by and large, are introduced to Pearl through the builder or through the trade contractor, say HVAC or solar. And in that instance, if they do a Google search on Pearl, they'll see that we are aligned with the US Department of Energy, the Appraisal Institute, the National Association of Realtors, and other standard setting organizations like BP, for example.
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Cynthia Adams: So that becomes a really good way to instill confidence in not only us, but in the the builder or the contractor that exposes the homeowner to to Pearl. The second question that you asked, we have certain geographic concentrations, but that's come about largely due to interest from contractors wanting to incorporate our certification into how they do business. So, you know, Southern California, the Phoenix area areas of the Mid-Atlantic, Western Michigan, oddly enough.
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Cynthia Adams: So it's a little bit scattershot. But we we've certified over 102,000 homes nationwide in 44 states, and we're certifying about 1000 homes, 1000 homes a week right now. And we expect that to continue to increase. I mentioned before that I, I would address the Inflation Reduction Act. And what I want to say about that is the homes rebate provides $4.3 billion for energy efficiency, whole home upgrades, and this particular program includes the requirement for certification to access any of the rebates.
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Cynthia Adams: The certification is to include information on home improvements. It's to include information that would help the home capture value for equity. So we, to my knowledge, are the only third party certification that meets IRA requirements. And when we think about what this means for certification and expansion, I think what we're looking at now is very much a national focus and one where you have public private partnerships really understanding the value of how certification can become a market mover in creating this, this mechanism that that drives consumer purchasing behavior and ultimately creates more high performing homes.
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Sara Gutterman: What are you seeing with respect to healthy home Driving certification and some of the sustainability upgrades.
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Cynthia Adams: Within Pearl Certification system? We currently collect information around ventilation, filtration, humidity, and building shell related things like air sealing and and then for the ducts, the duck ceiling, which are all very much tied to creating a healthy indoor environment. I think that we are interested in developing an IQ specific certification that would include things like radon and lead based paint, and other types of volatile compounds that are, you know, off gassing and potentially causing problems.
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Cynthia Adams: I hope that Pearl has a role to play in helping homeowners really understand how of the different parts and pieces of their home fit together to provide them with good indoor air.
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Sara Gutterman: Tell us about your green Door offering.
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Cynthia Adams: Homeowners can find it today. They can go to Green Door and create a home profile for themselves. They can take pictures of different model numbers of things in their house, like the water heater, the refrigerator, etc. and we can auto populate their homes record. It has a lot of other resources in there for homeowners too. There's a maintenance widget.
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Cynthia Adams: We create recommended improvements based upon what we know about the house and its needs, and that's tied to its fuel source, the age that it was built, the codes in place, etc. that homeowner can also create what we call a home investment plan, which is their pathway to higher levels of certification, greater home value, and then of course energy savings, comfort, etc..
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Cynthia Adams: And then lastly, they can find qualified professionals to help them if they may need to bring in a new trade contractor to do a particular installation. So we're we're building out a lot of resources in Green Door, but a lot of the homeowners are exposed to Green Door today because when they receive their email from us with PDF links for their certification documentation, they also have an invitation to click through and take possession of their homes record.
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Cynthia Adams: So in that instance, their homes profile is pre-populated by the information we've received from the builder or the contractor. And then in that case, there may be additional things they they want to do, or they may just be more interested in maintaining and managing their home and using green doors and means to do that.