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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.

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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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