houses and cars

Heard a radio spot promoting fuel efficient offerings from one of the big three automakers--that's hardly a reasonable label anymore. At any rate, some pretty remarkable mileage ratings are coming out--even for fast, sporty cars--new Mustang V6 gets over 30 mpg on highway.

As a listened, I wondered again why cars (and refrigerators, water heaters, etc, etc) are moving in a more energy efficient direction and houses are trailing behind. It's true, that houses built today are much more energy efficient that those built 20 or 30 years ago. Are they as energy efficient as they could be or anywhere close? Is the public generally well informed about the factors that determine how energy efficient a house is so that they can make informed decisions about size, location, landscaping and the major systems of the house?Nope.

Even with new houses, it difficult to know much about energy use before you buy--they meet current Title 24 requirements, but how much energy will a particular 2200 sqft new house use, as opposed to another new house that's 2300 sqft on the other side of town? What if one of the houses exceeds Title 24 standards? It's not like comparing refrigerators or automobiles. With older homes, decisions are more difficult than ever, because it's not just about current energy use, it's also about how to improve energy efficiency in the most cost effective manner.

What if there were a home energy rating system that would generate a report of the existing home and it's systems detailing present performance that ALSO included recommendations for future upgrades, repairs and maintenance to increase energy efficiency and decrease monthly houses expenses? Sound pretty cool? Those reports are available and have been for some time. They are not widely used for several reasons, none of them very convincing.

Cost is a factor---home energy reports can cost $300-$500+ depending on size of house etc. In our example above, the Buyer would need a home energy rating on BOTH houses--if either Seller would even let the Buyer order a rating before being under contract. Why wouldn't they? If the Seller has knowledge of such a report (and hasn't seen it), but doesn't disclose the existence to another Buyer, is that a problem for the Seller? It's not his or her report, but the contents is likely to represent a  material fact to a Buyer. If the Buyer knows about a report being done, the next question is "lemme see it!" Complicated, but lets look at it another way. A Buyer is making a purchase that may be in the $500K-$700K range, even now. The $400, plus or minus, cost  for a home energy report doesn't represent a huge expense considering the difference in energy use might total that much in the first few months of what could be decades of occupancy. Does that make sense, given the amount of real estate commissions on houses in that price range, seller profits (not always much these days) and Buyer satisfaction with the process and results (the later may not be a large factor). Well, it makes sense to the real estate trade organizations, who block so much as a vague suggestion of point of sale requirements for reports or work. Broker profitability, liability and the Seller's private property rights to unload the consequences of their ownership to a new Buyer with as much impunity as possible, come FIRST AND FOREMOST. The interests of the Buyer (who doesn't have private property right just yet), the health of the planet and plain common sense aren't high on the list. of priorities.

What the real estate industry perpetually ignores is that the government will step in to impose regulations where private enterprise fails to perform in a reasonable way. Wall Street got regulations, the auto makers got regulations, appliances manufacturers got regulations. If organized real estate fails to take the major role they could take in increasing the energy efficiency in new and existing housing stock, there WILL be regulation. As is usually the case with government regulation, it will not be overly effective for any of the stakeholders. Regulation never goes away, it just gets more restrictive. Nonetheless, the trade organizations are convinced they have enough political clout to lobby for a world where real estate sales transactions are carved out from any effort to address excessive energy use by houses.

Fortunately, the trade organizations have little direct control over the public or the agents, who have a fiduciary duty to represent the best interests of their clients. How is it in the best interests of Buyers to purchase a home with no information about the energy efficiency or potential future upgrades? The Buyers and the Buyers agents

What's different with automobiles? Well, federal fuel efficiency standards and gas guzzler taxes played a big role, but as it turns out, the public evidently became interested in fuel efficiency, largely because of advertising by the auto makers. There's now a certain mystique about Hybrids--they're good for the planet and the pocket book and they offer prestige to the owners. Lots of people paid extra for Hybrids and there are more and more models all the time, although real estate agents still seem to prefer large SUVs. There are even hybrid SUVs now too. The automakers wouldn't be advertising fuel efficiency if it didn't resonate with prospective purchasers. They perform thorough advertising studies and analyze metrics in the process of spending millions on advertising campaigns that both sell cars and educate the public.

Have the housing and real estate industries extended similar efforts in extolling the virtues of energy efficient homes? Not really. Houses, unlike cars, have a potential lifespan of 40-60 years, or more. SO, if they're energy hogs, they can devour a lot of energy for decades. Improving energy efficiency may be as easy as replacing system components at or near the end of their life anyhow. Even doing deferred maintenance can make a big difference. What's the incentive? At present, reduced utility costs, potential rebates and tax savings, plus the good karma of helping the planet. Not many people are swept away with an urge to go green with their houses. BUT if they consider selling the house, things take on a new perspective, or at least they should.

Next post will look at the sale of houses and their energy efficiency from the perspective of the major stakeholders in the process.