Buying an Energy-Efficient Home: A Financially Bright Idea
Whether you give a hoot about the environment or not, it could pay to think about energy efficiency when shopping for a home.
Newer houses certified by Energy Star — the federal government’s energy-efficiency rating program — use an average of 20% less energy than homes built to the 2009 International Energy Conservation Code, according to the U.S. Environmental Protection Agency, which oversees the system.But using less energy is just the beginning. Green certification programs like the National Green Building Standard (NGBS) or Leadership in Energy & Environmental Design (LEED) go even further, with strict standards for indoor air quality, greenhouse gas emissions and water conservation, among other things.
Although energy conservation might not sound as exciting as a luxury bathroom or backyard patio, improving health and comfort while reducing energy bills could help turn your house into a true dream home.
Benefits of an energy-efficient home
Thirty percent of homeowners say their monthly housing costs, including utilities, are expensive, according to a 2018 NerdWallet study. The cost to heat, cool and illuminate an entire house can be especially shocking for first-time home buyers who may be more accustomed to fewer square feet.
Buying a home that’s built to conserve resources can help you avoid those breathtaking bills, but it may require a slightly bigger mortgage.
Energy Star homes cost around $2,500 more to build on average, the EPA told NerdWallet in an email. And LEED certification can add an extra 2.4% to the total cost of building a home, on average.
Home buyers can recoup the added investment in several ways, however. In addition to lowering utility bills, energy-efficient homes often sell faster and at a higher price than noncertified homes, studies have shown.
If you buy a certified efficient house, it could give you an advantage should you ever sell. Energy-efficient homes bring in around $5,000 more than standard homes, a 2019 National Association of Home Builders study concluded.
What makes an energy-efficient home different?
Certification rules vary, but in general, you can expect region-specific design, high-efficiency features and appliances, and rigorous performance evaluations. But the house isn’t the only thing held to a higher standard.
For a home to qualify for Energy Star certification, for example, the builder, HVAC contractor and energy rater must have proper credentials, and in some cases, EPA training.
NGBS or LEED certification involves close inspection of the home’s location and lot design, sustainability of building materials, and even access to alternative transportation to meet minimum standards.
How to find an energy-efficient home
Demand for energy-efficient homes helps explain why millions have been built in the U.S. since 1995, with more being added each year. Use these tips to help you find one.
1. Look for ‘green’ keywords in listings
Building codes address safety and structural integrity, but they generally don’t deal with energy efficiency, comfort or indoor air quality, says Jeff Bogard, president of R.E.A Homes LLC, a custom home building company in St. Louis, Missouri.
For clues to high performance in those areas, watch for listings that mention a third-party green certification, a recent energy audit or energy-efficient upgrades.
But not all certifications will appear in listings, because not all sellers think to include them, says James W. Mitchell, founder of Renewablue, a home energy consulting firm in Fort Collins, Colorado. If energy efficiency is on your wish list, always ask the seller or listing agent about a particular house.
2. Consider an eco-savvy agent
When hiring an agent, ask if he or she has experience with energy-efficient homes or relevant credentials. The EcoBroker designation or the National Association of Realtors (NAR) Green Designation are two options.
NAR Green designees are educated about what makes a home healthier and more efficient. This allows them to “provide opportunities, guidance and hopefully vendors that understand green-building science,” says Melisa Camp, a member of NAR’s Green Resource Council Advisory Board.
3. Request past utility bills from the seller
You can ask for utility data during the shopping stage or as a provision in the sales contract. Past bills will help you understand the actual cost of ownership.
4. Consider an energy-efficient mortgage
Some homes are less efficient simply because today’s energy standards didn’t exist when they were built. If the house you fall in love with is an energy hog, an energy-efficient mortgage, or EEM, can help.
Available as a conventional, FHA or VA loan, an EEM “wraps the expense of energy-efficient improvements into the homeowner’s mortgage payment,” Mitchell says. It’s probably the only time borrowing more saves you money, he says. In time, the energy savings could completely offset the extra cost. Not all lenders offer EEMs, so ask about availability when shopping for a mortgage.