The COST of a House is More Than The Price

I find that home buyers are putting the emphasis on value based on the wrong factors.  Times are changing and in the long run the buyer needs to consider the COST of ownership.  This includes a few different points.

• One is the AGE OF THE UTILITIES.  Newer furnaces/boilers, AC compressors, roofs and most critically septic systems are currently not getting the VALUE they deserve.
• Another is the CONDITION of the home.  Even without shiny new kitchen and baths, has the house been consistently well maintained?
• Third is the QUALITY OF THE LANDSCAPING.  Are trees trimmed or will they come down during the next storm?  Is the driveway is good condition?  How expensive will it be to plow the snow and care for the yard?

That being said, it is my opinion that the next BIG item on the horizon that will impact value will be the ENERGY EFFICIENCY of the home. How much does it cost to LIVE in the house?  What are the costs associated with the heat and AC?  I currently have a home listed that has geothermal heating, superior insulation, high end siding and windows cutting the heat expense to almost nothing. It should have a higher VALUE than a home without these features yetbuyers, to date, do not understand the savings. Solar, pellet stoves, geothermal, extra insulation, caulking and air sealing, good windows are all ways to cut costs and should be evaluated when buying a home.

Energy efficiency is already being rated in other areas of the country and the value documented by sales. Trends in real estate and building tend to start on the west coast and move east. One would think that with our extreme weather that we would be the first not the last to equate value with energy efficiency.  The US Department of Energy (DOE), the CT Department of Energy and Environmental Protection (DEEP) and even  our local utility companies are among the many organizations getting serious about educating homeowners.  All homeowners are now paying several extra dollars each month on their electric bill which goes in to the CT Energy Efficiency Fund.  Through the HES (Home Energy Solutions) Program, homeowners can contact an approved contractor to do an “Energy Audit”.  Subsidized by this Fund, the homeowner will pay either $75 or $99 depending on fuel type.  There is also an income eligible option for qualifying households that can further reduce or even eliminate the homeowner co-pay and cost of upgrades.

During a HES assessment, the contractor performs diagnostic testing that reveals where the home is leaking air that can contribute to added heating and cooling costs as well as comfort issues in the home.  Areas identified usually include electrical outlets, recessed lighting fixtures, attic hatches, sill plates, windows and
doors.  The result is that the company will typically spend between 4-8 hours in the home sealing up those leaks through caulking and other air sealing measures.  The contractors are reimbursed from the CT Energy Efficiency Fund based on the amount of air leakage reduction they can produce, so they are MOTIVATED to do as much work as they can while in a home to improve the overall energy efficiency of the home.. If not subsidized by this Fund, this type of assessment could cost most homeowners $700 or more.  If the home warrants it, the contractor will also make recommendations for additional energy savings improvements, such as added insulation or replacing old HVAC and water heating systems, and explain the payback period and all available rebates the homeowners may be eligible to receive. Since many of these improvements are being subsidized through rebates, tax credits and special financing options, there hasn’t been a better time to act.  For example, a homeowner can now receive a rebate of $1.00 off per sq ft of insulation, up to 50% of the total cost of the job. However, to qualify for many of these great rebates, the homeowner must first start by having the HES assessment done. Most homeowners are realizing annual savings of several hundred dollars per year just from the HES assessment alone, but don’t dismiss recommendations given for improving insulation or replacing old HVAC equipment, because that is typically where homeowners will realize the greatest savings in their utility costs. For more information about the Home Energy Solutions program, including rebate and financing information, visit: http://energizect.com/.

In an effort to offer greater visibility into a home’s overall energy performance, the US Department of Energy has implemented a new program called Home Energy Score (a.k.a – HEScore). A HEScore is similar to a vehicle’s mpg, and provides a quick (typically performed in about an hour) assessment of a home’s insulation, HVAC systems and other components that can affect the heating and cooling load on a home. This is not a diagnostic assessment and no improvements are made during the visit, but it provides the homeowner with insight into how their home ranks against others within the region. At the end of the assessment, the homeowner receives a report that includes the home’s current score within a 1 – 10 range, details on the home, and recommendations, including estimates on annual savings, for improvements that can be made to lower utility expenses. Additionally, the tool identifies what score the home can achieve if the recommended improvements are made, and a home can be rescored as many times as the homeowner chooses. This is a fairly new program and is not yet available in all areas, since HEScores can only by performed by DOE approved Qualified Assessors. However, we are already seeing homes scored prior to being listed for sale in other parts of the country, and I think that within a short period of time every home will have an energy score associated with it and that score will affect PRICE and VALUE.

To summarize, one of the LAST things a buyer should consider is price per square foot.  The utility of the floor plan, setting, location, condition and more importantly the true COST of living in the home should be the benchmarks. 
If you can save $225/month in utility and maintenance costs….it equates to about $50,000 of mortgage.  Stop looking at just PRICE and SIZE.  Factor
in cost of ownership into the equation of VALUE.

Homeowners should take energy efficiency seriously and have their heating and AC  systems cleaned annually, install programmable thermostats and take advantage of the HES Energy Audit.

My thanks go to John Hamlin of Sherwood Inspection Servicesfor much of this information.  He is passionate about Energy Conservation and is, in fact, the first Home Inspector in CT approved by the DOE as a Home Energy Score Qualified Assessor. In addition to his home inspection work, John also works for a CT-based nonprofit called the Neighbor to Neighbor Energy Challenge, and is actively scoring homes throughout the state that have had HES assessments and follow-up improvements to ensure homeowners are receiving quality upgrades and have a nationally recognized score to showcase the efficiency of their homes. We both see a time in the near future where all home sellers will be requesting this service prior to listing.  In that case the cost of the service will likely be in the range of $250 dollars. For more information on the DOE’s HEScore, please visit: http://www1.eere.energy.gov/buildings/residential/hes_index.html