This is not a secret and is accessible to any lender, there are standard guidelines through FHA, Fannie Mae and Freddy Mac.
Energy efficiency (EE) is a great selling point.
There is strong consumer demand nationwide, from the National Association of Realators, Time Magazine, and the buyers. Everyone asks about energy efficiency from buyers to tenants. In 2010 apartments.com did a survey have found that 89% preferred a green apartment community and more than 25% would pay higher rent. Green also includes low VOC homes and use of recycled content in buildings.
So how as sellers and contractors do we differentiate ourselves? The answer is energy efficiency. EE homes sell for more and at a higher prices. Homeowners want lower utility bills and EE delivers.
An EE home also means fewer buyer inspections with a HERS report already done which can help close a home quickly.
Seattle, Portland and California have all shown an 8.5 to 12% premium for EE homes.
For buyers you can have the dream kitchen you've always wanted plus energy efficient appliances. Plus Energy efficiency mortgages gives better income ratios which means buyers qualify for higher mortgage amounts. Sometimes the air conditioner will get up and walk away during the middle of the night and an EEM will cover the cost of that built into the mortgage.
Plus there are rebates from APS and SRP... up to $1000 is available to put more insulation, duct and air seal a home and shade screens.
An energy audit should be as important as a home warranty or home inspection for all homes. If a homeowner gets a $500 summer bill their first month in their home is not a pleasant surprise for a new homeowner.
- a bigger AC is better
- an Energy Efficient Home means a homeowner has to go solar
- underwater homes cannot be refinanced (you can refiance without a new appraisal through a new Energy Efficiency Mortgage)
- buyers cannot qualify (more buying power to make the appraisal work in some cases, the more information the better and can be the tipping point)
There are two designations for green realtors.
1. NAR green (how to run a green business)
2. Eco broker (more technical)
If you are not doing green mortgage or energy efficiency mortgage you are leaving money on the table.
FYI- a 203k loan can let you do the kitchen remodel with 5% of the appraised value available
From a real estate perspective, there are two types of energy audits.
1. BPI is required for the utility company
2. RESNET is critical to the mortgage
Real estate agents and loan officers can recommend a HERS rater. The lender will typically have an approved list of contractors.
Builders can use a HERS Index to also differient a builder in the marketplace.
What to look for in an energy efficient home?
A home energy audit is:
- Looking at how the energy is being consumed in the house
- duct leakage test
- combustion safety test
- lighting and appliances
- attic inspection and insulation inspection and quality and quantity
- how the house performs as a system
- measurements of the building dimensions and geometry
- report, HERS Index, improvement analysis report
The lender will check that the EEM premium is greater than the installed cost or the improvements are cash flow positive. This is required for the energy efficiency mortgage can proceed. The certificate of completion is signed by the loan Officier, HERS rater, and contractor. The lender will then release the funds.
It has to be cost efficient to be approved by the loan officer. All parties have to work well together.
What's available out there?
HUD energy action plan
Weatherization- add up to $2000 to any FHA Loan without a value determination on the property. There is no rating, all you need is a contractor and a bid. For the consumer the loan Officier will add it to the sales price. This can be done in every single loan
EEM energy efficient mortgage
FHA is 5% of the value of the property. Energy efficient components to a home and finance right into the main mortgage. No additional appraisal is required.
Fannie Mae- has to have an appraisal
VA - can do up to $6000 out right
Solar package - cost of solar maybe added directly to the base loan amount
Renovation loans (203k) - full renovation options for making several upgrades to improve quality of a home
Weatherization only applied to existing homes.
We can combine an EEM and Wearherization.
What upgrades can be done
- AC replacement
- water heaters
- pool pumps
This stuff with everyday expenses. If this is done right APS and SRP rebates can be included and the homeowner will recieve a nice rebate check to offset the initial costs of purchasing or refinancing a home.
Education is key and good expectations should be set, an initial audit is essential (any home built pre 2003 are good candatiates)
After the energy audit contractors will be obtained and the upgrades will be deemed cost effective or not. $5000 can go very fast and different upgrades need to be worked out between the contractor, lender and the homeowner. A $99 APS and SRP energy audit is a good first step to find out what is needed. Usually a good relationship between lenders and HERS raters helps if any of this falls through. It is also a good idea for the homeowner to have some skin in the game. An actual HERS index will cost between $250-$500. A 45 day close to escrow can be done and all this stuff can be done in parallel to what's happening in an energy efficient mortgage.
The improvements need to be completed between 30 and 90 days.
The biggest hurdle is industry professional not knowing about these but we hope that changes.
Appraisers can try to justify value, they cannot create value and these upgrades provide the justification for kWH savings.
www.dsireusa.org is an excellent resource for rebates.
Disclosure: Green ID is both BPI and RESNET certified and performs HERS Indexes and is a certified contractor with APS and SRP's Home Performance With Energy Star's national program and a Phoenix home energy auditor.
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