How often does the buyer you represent inquire about a home’s monthly operating costs?

  • Almost never. (72%, 28 Votes)
  • About half the time. (23%, 9 Votes)
  • Almost always. (5%, 2 Votes)

Total Voters: 39

Of the 4.5 million existing home sales in 2011, a diminutive 12,000 Home Energy Rating System (HERS) audits were performed (that’s 0.3% of home sales, for anyone who’s counting).

Though the program has yet to experience the widespread adoption it will eventually achieve, a HERS audit gives a home an all important numerical energy rating. The HERS rating is based on how a home’s energy consumption compares to a similar new home meeting the current industry standards for home energy efficiency. As a standard new home receives an energy rating of 100, a home with above standard energy features which uses 70% of the new home’s energy receives a score of 70. An outdated home using 130% of the new home’s energy receives a score of 130.

The advantages for a prospective buyer receiving an energy audit before going under contract are clear; initially it’s the comparative pricing test. In the process, they also get a good idea of the home’s energy consumption costs as compared to other homes, which:

  • alerts them to energy guzzlers needing a price adjustment; and
  • motivates them to add energy efficient measures into the home, saving money over time by reducing their ongoing operating costs.

A seller can benefit from energy audits, too. One especially rewarding example recalls the seller of an 87-year-old home who ordered an energy audit to find out how he could make his home more attractive than other outdated homes for sale in his neighborhood. His repairs included updating the insulation, replacing some windows, upgrading lighting and replacing the more inefficient appliances. The pay off? A $50,000 increase in the purchase price compared to the non-energy audited homes down the street.

first tuesday take

Seller’s agents: recommend sellers order an energy audit and offer its findings to potential buyers as part of your marketing package handed to buyers before they go under contract.

Early disclosure of an advantageous home energy rating sets the home apart from the competition, especially if others do not have one, making it more attractive to the limited current population of homebuyers.

Simply, a lower energy audit report rating translates to lower operating costs for the buyer – a savings which the seller’s agent as good practice will ensure the buyer is fully aware. Thus, the justifiable price of the property is greater than the price of comparable properties after adjustments for differences in efficiency levels.

Buyer’s agents: recommend buyers order an energy audit along with their regular home inspection if the seller has not previously ordered one. With the report, along with a due diligence review of the seller’s operating expenses under an operating costs contingency provision, the potential buyer is given a basis for estimating their operating expenses as the owner of the property. Also, the audit gives the buyer information about crucial energy improvements needed which they may consider when setting the offer price.

Alternatively, and certainly preferable, buyers can make their offer contingent on the seller providing an energy audit, no differently than providing for the seller to furnish a structural pest control report and clearance. Visible improvements like peeling paint are easy for the buyer to observe and consider, but it’s difficult to notice a power-sucking air conditioning unit or improperly insulated doors, windows or exterior walls and ceilings unless an energy audit is performed.

Related articles:

A property’s energy demands: an evolving factor in marketing

Energy-efficiency in the home: Not just for hippies

first tuesday’s purchase agreement includes a checkbox provision which, if checked, calls for the seller to furnish an energy audit report after acceptance, with a specified maximum energy threshold as the contingency allowing for cancellation if exceeded in the audit. An early adaptor of forward-looking real estate practice in forms, this provision has been in place since 2010.

In notable contrast, the California Association of Realtor (CAR) purchase agreement, a seller-biased contract, does not include any such energy audit or HERS inspection provision. Nor does its supplementary buyer inspection form include mention of an energy audit. These omissions limit disclosure to the buyer and thus interfere with a buyer’s ability to request such a report to be best informed about the property and its value – unless the buyer’s agent comes to his rescue. [See first tuesday Form 150, §11h]

Re: Energy audit can alert home buyer to problems that could be costly in the long run from the Washington Post