Should houses be required to have an energy audit before being put on the market?

Senator Downing of Massachusetts sponsored a bill requiring that home owners have a free energy audit of their house before putting it on the market for sale. The results of that audit are to be disclosed to potential home buyers. The rate of auditing shall be tracked. A rating system shall be developed.

I think this is a great idea.

Audit: There is precedent in residential sales that shows that this type of legislation encourages changes in our housing stock. The most obvious one is about fire alarm installation. Whenever a residential property is sold, the municipal fire department is called in to supply certification (for a fee) that the correct alarms are in place. Owners who did not pay attention to their fire alarms must bring them to code before selling. Through the years, thousands of houses have been brought up to code in regard to fire and carbon monoxide protection. I credit the at-sale certification requirements for improvement in safety.

Similarly, requiring an energy audit will cause more owners to avail themselves of this energy-saving (free) service. If someone is planning to sell, it might encourage them to do an audit earlier. It might move them to improve their efficiency while living there. If nothing else, it will provide information on where the houses or condo is wasting energy.

Disclosure: The cost of owning a property is affected by more than the sale price. The monthly cost varies widely due to variations in municipal tax, insurance, and operating expenses. Heating is one of those expenses. Just as sellers are required to accurately disclose the municipal tax bill and whether a house or condo is required to pay additional flood insurance, it is a material (monetary) concern to buyers how well the house will hold the heat next winter.

Our housing stock is old. Our heating expenses are high. The actual cost of heating a house is affected by the efficiency of the house and the previous owner’s use of heat. (People who are home all day will keep the house warmer than those who are away 9-5 and use programmed thermostats to lower the temperature.) Knowing the relative efficiency of the house is part of the economic decision of owning and operating a home.

Tracking: Knowing how many houses and condos have been audited (and insulated) can help the government plan regarding the energy needs of the Commonwealth.

Rating: Giving a rating to properties will help buyers make decisions about the cost of caring for a new purchase. Disclosure of a costly deficit in a property does not change buyer behavior. There is a parallel here: lead paint. Every property built before 1978 could have lead paint. Buyers are informed, when they are making an offer, whether the property has been tested. The vast majority have not. This should be stigmatizing, since de-leading can cost tens of thousands of dollars. But, in my experience, it is not. Properties are bought and sold with lead paint (and no test) every day. Buyers do not get a price break because there may be lead paint in a house or condo.

My clients are smart people. They know that older houses were not built with energy efficiency in mind. They know that there are ways to improve it. Some will pay top dollar for new construction built to high efficiency standards. Getting a rating will not “stigmatize” a property any more than knowing it was built before 1978 and could have lead paint does.

My professional association is spending money testifying against this. Their opinion, which I got in a recent email:

Pre-Listing Mandate on Residential Property
On June 30th GBREB testified before the Joint Committee on Telecommunications Utilities and Energy in strong opposition to a bill sponsored by Senator Ben Downing (D-Pittsfield) mandating that every home, condominium and multifamily apartment with fewer than five units complete an energy audit before it can be listed for sale. The bill would also put new requirements on seller’s agents to disclose the results of the audit and establish a home energy labeling system for residential property by December of 2105. In testimony before the Committee, GBREB argued that the proposed bill would stigmatize property, delay transactions and impact home values. Under current state law home inspectors are required to provide consumers information regarding home energy audits. Consumers currently pay a surcharge on their utility bill for energy audits they can have performed at no additional cost. GBREB supports a homeowner’s right to voluntarily request an energy audit without incurring additional costs or impeding their ability to list and sell their home. Several legislators have agreed to co-sponsor S.1761 which is currently pending before committee.