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Blog :: 02-2011

Proposed Bill Requiring Sellers to Get Energy Audits

A bill was recently introduced in the Vermont Legislature which would dramatically change the requirements for selling a home in Vermont. Under the bill, sellers of a home in Vermont would have to hire a professional to perform an energy audit of their home. The seller would have to pay for this audit. The seller would be required to provide the results of the audit to every prospective buyer of their home. The audit will contain a scoring system based upon the home's efficiency relative to other homes in Vermont. The audit will also contain a list of recommended improvements to make the home more efficient.

While well intentioned, this bill would actually impose a penalty on owning a home in Vermont.

Here is an example of the average transaction in Burlington, Vermont and how this bill constitutes a penalty on existing homeowners:

A young couple owns a small ranch house in Burlington that was built in the 1950's. It is their first home and they bought it in 2006 during the peak of the market for $220,000. Because an energy audit was not required or the routine practice when buying a home in 2006, the owners did not have an energy audit at the time they purchased.

The young couple has a child who is 3 years old and are expecting their second child in a few months. They determine that their new family will need more space and decide to sell their home.

If this bill is adopted, they will have to conduct an energy audit. Their home will likely receive a low score because their home will be compared to new homes in Vermont rather than being compared to other homes in their neighborhood.

The owners now have to provide the low score to prospective buyers. The buyers will require that the recommended energy improvements found in the audit be made by the seller before the closing. The owner will have no choice but to acquiesce if they want to sell their home.

The home ultimately sells for $205,000 because of the decline in the market over the past 5 years. In addition to getting $20,000 less than they paid, the buyers spend an additional $7,000 to make the home energy efficient. Thus, their total loss is $22,000 or 10% of their initial investment.

The buyers now have an energy efficient house at the sole cost of the esellers. The buyers benefit because they happen to be the first purchasers of the home after the law was adopted. The seller is the only loser because they happened to be the owners of the property at the time the law went into effect.

Why should current property owners bear the entire burden of making existing homes more energy efficient? Property owners have already paid a transfer tax to the State for purchasing the home. Property owners have already paid annual property taxes to the City to help fund the City's services. Property owners have already stimulated the economy by purchasing the home and paying third parties in Vermont for appraisals, inspections, legal advice, brokerage advice, title insurance, bank fees and other fees associated with purchasing a home. Instead of rewarding homeowners for their commitment to Vermont, this bill would penalize for it.

The Legislature should allow the free market system to work here. Homeowners will make an energy improvement to a home if the cost of the improvement justifies the savings that will be achieved. Why should a property owner have to spend $7,000 in energy improvements if the savings will be $5 per month? It would take almost 12 years (without factoring for inflation) for the improvement to pay for itself.

In Burlington there is currently an Ordinance that requires apartment owners to have an energy audit performed in buildings where the tenants pay the heat prior to the sale of the property. The City can require energy improvements to be made. However, the property owner is not required to make more than $1,300 per unit in improvements and does not need to do any improvement if the savings achieved per year is less than 10% of the total cost of the improvement.

While I do not think that any bill should be adopted for existing single family homes, at a minimum, the State should look at a program like the one Burlington has for apartment buildings. At least then property owners would know the maximum cost and there would be equality when selling a home.

If this bill is adopted, owners of older homes will see their values plummet even further. This is not the time nor place for this type of legislation.

Feel free to contact Flat Fee at anytime, here.

Comments

  1. Park city ut real estate on

    Hi, The introduction of mandatory energy audits marks a government intrusion into the free marketplace, which is unprecedented in Canadian history. Thanks, Perk.
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      Burlington VT Real Estate

      FlatFee RealEstate is headquartered inBurlington, Vermont along the shores of Lake Champlain. Its founder,Rob Foley, is also a resident of Burlington,Vermont.Rob and his wife also attended the University of Vermont inBurlington.

      Because of these ties, FlatFee RealEstate has a great wealth of knowledge about Burlington real estate and the real estate in surrounding communities.

      Burlington has a population of approximately 42,000 according to the most recent census data. While theCensus data shows that Burlington's population's increased by 7% over the past decade, it appears that much of the growth may be due in large part to increases in enrollment at the University of Vermont and ChamplainCollege.

      For those looking to make a move, Burlington represents a great alternative to larger metro areas like Boston. While it does not have all of the amenities that you will find in a large City,Burlington has many of the key amenities found in larger cities.

      First and most importantly, Burlington has an InternationalAirport. BurlingtonInternationalAiport is served by major airlines, including JetBlue, US Air and Delta.

      Second, Burlington has a prominent teaching hospital,Fletcher AllenHealthcare. Burlington is probably one of the only cities inAmerica with less than 50,000 residents that is served by such a high class medical facility.

      Third, Burlington is home to several educational institutions, including the University of Vermont and ChamplainCollege. Thanks to the stability of employment created by these institutions, Burlington's current unemployment rate is less than 1/2 the national average and lower than the average in the rest of Vermont.

      Fourth,for a small City, Burlington has the cultural resources of a larger city. Burlington was recently named one of 10 cities inAmerica for "foodies" to visit. Burlington also has musical and theatrical venues such as the FlynnTheater and Higher Ground.

      Finally, because it is located on the shores of the 120 mile long Lake Champlain, the outdoor activities rival that of any City located along the eastern or western seaboard.

      In addition to having the amenities of larger cities, Burlington has attributes that make living inBurlington better than living in a major City. First, Burlington's real estate market is more stable than many large metro areas. The stability of its institutional employers, such as UVM, and its size help ensure that Burlington real estate will not suffer the major swings that we see in other more volatile areas.

      Second, Burlington has a better quality of life for raising families.In Boston, many parents endure average commutes of 1 to 2 hours. In Burlington, your average commute will likely be less than 10 minutes. Also, there is a lower crime rate and cleaner air than in larger metro areas.

      Third, travel is easier. Whether by car or plane, it is easier to escape a smaller City like Burlington than a large metro area such as Boston.

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      To learn more about Flat Fee and Vermont real estate, contact us anytime.

      Buyer Representation Rights

      Under Vermont law, real estate agents must provide a State of Vermont Consumer Disclosure form to buyers and sellers. The State of Vermont Consumer Disclosure informs buyers of their right to retain separate representation from a real estate agent. Pursuant to the law, buyers must be presented this disclosure BEFORE A SHOWING.

      From a practical perspective many real estate agents wait until they meet the buyer in person at a showing before presenting the disclosure. The problem with this is that if it is the seller's agent that is meeting the buyer to show them the home, the buyer had no opportunity to be informed of their right to separate representation before the showing as required.

      Some real estate agents mistakenly believe that by simply showing the property to a prospective buyer they become the procuring cause under Vermont law. This is problematic in light of the practice mentioned above.

      The procuring cause of the a real estate transaction is entitled to a commission under Vermont law. There can be two procuring causes of a transaction but only one on the buyer's side and one on the seller's side. In the scenario above, where a seller's agent claims that they are the procuring cause, they are essentially arguing that if the buyer seeks the services of a buyer agent subsequent to the initial showing that the buyer will need to compensate the agent out of the buyer's own pocket because they were not the procuring cause of the sale.

      As you can see, the buyer is essentially denied the protections afforded by the law because they are not informed of their right of separate representation until it is too late. If the buyer seeks representation after the initial showing, it is possible that no real estate agent will be willing to represent them because there will be a dispute regarding payment for their services down the line.

      It seems to me there should be a brighter line rule adopted. Why not have a rule that says a buyer may seek separate represenation from a buyer's agent even after initial contact with a seller's representative and the buyer's agent will be allowed to be considered the procuring cause so long as the the buyer sought the agent's representation within 7 days of the initial showing or prior to an offer being submitted by the buyer. That way the buyer would have an opportunity to seek the advice of a real estate of their own without being disadvantaged.

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