Missed Opportunity? Energy Audits @ Home Purchase

It may be the best-kept secret in home real estate: For a couple of hundred dollars, a prospective buyer can add a formal energy audit to the standard inspection.

Ken Harney's article in the Washington Post on Friday addressed the value of an energy audit, and evaluated why they are not commonly part of the home purchase process.

In Energy Audit can alert home buyer to problems  that could be costly... he covers just the right perspective on this topic.  Not the home seller's perspective, or ideas on a required "miles per gallon" sticker on homes for sale - but why an energy audit could be so helpful to a home buyer.

Of the three Realtors interviewed, only one understands the value of the energy audit and includes it when working with clients.  In fact, Leland DiMeco in Boston found that when one of his sellers proactively obtained a HERS score it lead to a higher sale in a shorter amount of time than the comparables.  He explained the value for buyers too,

It just makes sense. Most buyers want to feel comfortable that they’ve done their due diligence and know what they’re getting.

I couldn't agree more!  To fully represent our clients, Realtors need to help consumers ask the right questions before deciding on a home. NAR's annual Buyer/Seller profile shows that about 80% of buyers consider heating and cooling costs when purchasing a ....  Realtors can meet the needs of clients by knowing how an energy audit fits into the picture.

I offer a free energy audit as a closing gift to clients, and I explain why it's a good idea so you can customize the home after move-in.  New homeowners are the best prospects for energy efficient upgrades.  They have the longest timeframe to enjoy the payback, and are willing to invest in doing the work the right way.  Sellers on the other hand are looking to only do the minimum upgrades required to make a sale - lowest scope and lowest bid.

One reason energy audits are not part of the transaction is because Realtors like most consumers don't realize the diagnostic tools are out there to make smart, targeted improvements. (You don't have to live with the bulky sweaters!)

It's important to understand that an energy audit + a home inspection empowers home buyers with a strategic home improvement plan for their new home. But an energy audit and a home inspection are very different.  A home inspection is part of the legal review process.  It is a binary process focused on identifying safety issues and major repairs.

Are there issues or not?

So a faulty deck or a cracked furnace are in scope.  Potential for more insulation is not.  True, inspectors often point out options for improving the home, but this is all up to the buyer to scope in after closing, not a requirement for buyer and seller to resolve during the transaction.

Energy audits are much different, pointing to options for improvement ranging from simple do-it-yourself projects to in-depth upgrades.  An energy audit is all about shades of gray (or green actually!). How much improvement are you after?

So there are two keys.

  • First, Realtors need to understand what an important tool an energy audit is to empower clients to own and operate a home rather than simply acquiring one as we have historically done.  (In my humble opinion - No foreclosure crisis if we had been more focused on home ownership than home acquisition.)
  • Second, an energy audit is comparable not to doing a home inspection, but measuring for drapes during the home inspection.  It's about making the home your own once you move in, not a part of the legal review preceding a transaction.

Energy audits are a powerful tool for home buyers. They are also an exceptional tool for offering service above and beyond to clients that sets a Realtor apart and encourages referral business.

Republished with permission by Laura Stukel, Not Yet Green.  See original at NotYETGreen.com.

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Tags: estate, real

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Comment by John Murphy on December 12, 2012 at 6:23am

Energy audit is not only a good idea but the most important task while inspection at the time of home selling process. It helps to measure the flow of heat within the building. But unfortunately no one follow this process nowadays. Anyways Laura, I really appreciate your post as it contains something very useful that needs proper attention and importance. Thanks a lot...

we buy houses

Comment by Sustainable Me on June 6, 2012 at 1:17am

About 3 years ago the Australian government introduced a solar energy rebate for residents who invest in home solar energy generation. Without going into all the details, this initiative created huge awareness around home energy generation & efficiency which was a positive outcome. Today when we scan through house "For Sale" listings you can see many homes making a big point about their solar generation system. I'm very sure tomorrow's house "For Sale" listings will have an energy efficiency rating scale based on a certified home energy audit report.
Before this happens there needs to be a wide understanding of 'home energy audits' and today we are a long way off unless other initiatives are introduced similar to the Australian government solar offer initiative.
If anyone is interested in understanding the principles of an energy audit, there is a free self paced short course available to everyone at the Energy University website. Here is a link...

http://www.schneider-electric.com.au/sites/australia/en/company/e-l...

Comment by James H. Bushart on June 2, 2012 at 11:27am

Actually, Laura (I do several home inspections a month), the buyer can walk away from any contract for any undisclosed defects uncovered by his home inspection.  The majority of my clients ... about 150 per year ... will renegotiate the sales price, require the owner to make repairs or walk away from the deal.

Comment by Laura Reedy Stukel on June 2, 2012 at 7:34am

Thanks James. Interesting perspective.  Just to clarify, home inspection typically happens after a price has been negotiated and a contract signed.  Seems that's when a buyer might elect to add HES.  Once you are in the contract period buyer uses their team to identify serious safety, repair and permit issues.  This tends to be very black and white. This relates to points I mentioned in my blog - for example, a better HES score is like someone buying a home with light colored paint even though they prefer dark.  You don't win the negotiation to get the house repainted, like you would to get the cracked step repaired. 

In Illinois any home inspection must be done by a licensed professional.  Hurts the legitimacy of the buyer's requests if they chose NOT to hire someone licensed.  So I very much agree with your concerns about who is adding energy inspections to home inspections, their qualifications for that part, their motivation for doing so and the quality of the information to inspire informed decisions. An inspector might be very qualified to do the general inspection, but not as much of a true specialist on the building science.  That could make things very confusing!  Thanks for raising those points!

Comment by James H. Bushart on June 1, 2012 at 9:49pm

What about the home energy score label being tagged on a home that is for sale ... without the knowledge or consent of the home owner?  Home Energy Score for home buyers' use

One by one, national home inspector associations are partnering and recruiting their members to incorporate ... not an energy audit, but the energy score ... with their home inspections.

Comment by Kim DeVoe on May 24, 2012 at 8:29am

Laura,

I am glad to see Realtors such as yourself beginning to address the issue of the energy efficiency of existing homes at the time of sale. Here in CO where there are "transactional" brokers who in my opinion only protect the transaction (an oxymoron for an real estate "agent" in my opinion, and a diservice to all but the Realtors), having a energy audit done as part of a home inspection could lead to a canceled sale or difficult negotiation, if the seller is unwilling to upgrade an energy deficiency such as a very leaky poorly insulated home prior to sale. 

Recently Internachi in conjunction with DOE has added doing a HES as part of a sale transaction home inspection, which at first blush sounds like a good idea. But from a transactional brokers perspctive it just opens more potential "cans of worms" in the transaction.

So I would suggest and I agree with you, that the approach is to make it a proactive move by the seller to upgrade major deficiencies before listing the home, just like painting, and having a energy audit done can identify deficiencies quickly, and should make recommendations for highest priority upgrades.

Realtors need to understand that it is in their best interest to educate buyers that a home that has had energy uprades are more comfortable to live in and cost less to operate, then they will start asking for energy audits on homes that they have made an offer on. The trick will be getting Realtors to view this as a service to their clients and not another impediment to closing the transaction.

You also provide an energy audit to your clients as a closing gift which is nice,  but if I were a buyer and I had an energy audit AFTER the closing and found it had major energy efficiency and comfort defects I'd be really irratated at YOU for not suggesting it BEFORE it closed.

So again my suggestion is to educate Realtor, Seller and Buyer about the importance of investigating and mitigating defects before the home goes under contract.

Thanks for your efforts here, Laura.   

Comment by Melissa Baldridge on May 24, 2012 at 7:23am

Thanks for this, Laura.  Ahhh, if all Realtors were as enlightened as you are.  'Coupla things ....

  1. NAHB DOES, in fact, have a green certification on remodels (built before 1980).  It captures energy savings and assigns a certification level for that.  There are green remodelers around the country doing that.
  2. What we notice with our real estate company (GreenSpot Real Estate) and most of the Realtors they work with is a complete disconnect with "green."  I've even met Realtors WHO LIST GREEN PROPERTIES, and they don't get how to capitalize on what the builder is investing in the property, much less how to market that.

We're partnered with the MLS provider here in Denver to help Realtors understand the "green-field addendum" and green checkboxes on the MLS.  And more importantly, how to market a property based on that info.  Anything ANY of us can do to bring this to the attention of mainstream media and the people who dial into that will help drive the real estate industry.  If enough buyers and sellers are asking about this, Realtors will get on board.

Comment by Jeffrey Gephart on May 17, 2012 at 8:04am
In teaching an energy code course for realtors I ask them if they've ever suggested that a seller have their house painted before listing it.  They all have.  I then suggest that they might consider having an energy audit done where concerns exist about a homes efficiency, comfort, health and safety, etc.  My slide says:

Home Performance with ENERGY STAR®

 Sellers might want to:

  • know how energy-efficient their home is
  • do some simple upgrades in advance of sale particularly if incentives are available & 3rd party documentation can help but buyer’s mind at ease

 Buyers should want to:

  • know what cost-effective improvements could be made in order to include them in their mortgage financing
I also discuss PACE as a means for sellers to proactively address an energy-efficiency improvement need.
Comment by Laura Reedy Stukel on May 13, 2012 at 8:56pm

Tom, I think we are getting there.  Certainly the builders get it. 

On the existing home side there is not a remodeling standard yet established like you see with LEED and NAHB.  I could see some sellers using HERS as an alternative until such a standard emerges.  So the early adopters of home performance improvements will also be the early ones to need a promotion tool when they go to sell.  HERS would fill that need.

Having listed the first "LEED inspired" home in my town (it never did achieve certification...) I can speak first-hand to the fact it is much harder to promote a home with a concept you have to educate consumers on first!  So I'm not sure how much impact a HERS score will have at first.

On the bright side we have a great precedent with expanded photos.  About 10 years ago technology only allowed for one external photo. Then photo uploads came along and you could add one per room.  Some listing agents were used to one and stuck to one. But buyers loved the internal photos they did see and almost overnight you heard them say, "That house doesn't have any photos. It must be ugly so I am not going to go see it." 

Well...everybody adds internal photos today!

You will see the same thing with a HERS score or maybe something like HES.  If you get the early adopters using it, consumers will love the transparency and will expect it which will bring everyone else along.

Great questions.  Thanks!

Comment by Tom White on May 11, 2012 at 10:48am

Thanks Laura for the update.  Do you see a role for HERS ratings in the inspection or sales process?  I understand it might not be a closing dependency or requirement for the buyer, but how often do you see sellers using it as a positioning tool? 

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