How to Buy an Energy-Efficient Home

Home buyers make thousands of big and small decisions during the house hunting process.

Some decisions are based on practical needs, some on personal taste, and some on "a feeling." But for most people, one over-riding factor plays a role in each of these decisions: money. Can I buy this house and live within my budget?

When answering this critical question, people generally calculate the home's monthly mortgage payment and remember to add in the escrow costs (taxes and insurance). But, they often overlook one key cost element: the house's utility bills. Often, this monthly payment can make or break a budget.

Smart home shoppers evaluate each prospective home's energy costs during the decision-making process. In fact, you can make an educated "guess" at these costs during your first walkthrough of a house. How? By making some important observations and asking some simple questions. If you like what you see (and hear), then you can ask to review the home's utility bills for the past year. This up-front evaluation will save you money in the long run.

"New" Doesn't Always Mean "Better"

In general, new homes are probably more energy-efficient than older ones. New heating, ventilating, and air-conditioning systems are generally more energy-efficient than older ones. And, new homes can be built using energy-efficient materials such as better insulation, roofing materials, and windows. But, you cannot automatically assume these facts. If you are looking at both new and old homes and comparing your options, do your homework.

When examining new homes, ask the developer very specific questions. While energy-efficient products cost only a small percentage more than conventional materials and offer such valuable long-term benefits, some home builders still do things the old-fashioned way. They may save a little money up front, but, you will spend more in the long run.

Many 20 or 30-year old homes can actually be more energy efficient than a poorly built new one. How? Their previous owners made smart retrofit decisions. They replaced old systems with new, highly efficient ones. They installed efficient windows and doors and added more insulation to ceiling and basement areas. And, chances are, older homes are surrounded by mature, shade-providing landscaping.

Easy Ways to Identify an Energy-Efficient House During a Walk-Through

You do not have to be an energy expert to evaluate a home's energy efficiency. You just need to ask the realtor or homeowner some key questions and make a few observations on your own. Remember, the more efficient the home, the lower the utility bills! Key Questions to Ask:

• How old is the furnace and what fuel does it use? The older the furnace, the lower its energy efficiency level. Newer furnaces range from moderately efficient to highly efficient. If a home's furnace is over 12 years old, you will probably want to consider replacing it within a few years, simply because new highly efficient models will save you 25% to 40% on your heating bills. In general, fuel-powered furnaces (natural gas and propane) cost less annually to heat a home. (Although the Winter of 2000-2001 may prove this generally-accepted fact wrong, given the spike in natural gas prices.)
• How old is the air conditioner? Newer units are much more energy efficient than older ones and will cool your home at a lower cost.
• How old is the water heater and piping? Hot water often represents the second highest energy-related cost in a home, after the heating and air conditioning costs. Newer units heat water more efficiently. In addition, if you are considering an older home, old piping can contribute to substantial heat loss as the hot water travels through the house. Many homeowners replace old piping in areas where it is exposed and easy to reach such as in the basement. If not replaced, these pipes and the water heater should be insulated.

  Basic Observations:

• Check the roof's condition and age. The roof provides protection from the weather but it also acts as the top layer of insulation. So, a home with an old black roof is much less energy-efficient (and probably more leaky) than a home with a newer, lighter-colored roof of composite materials. Many of these new products provide substantial insulation values. The lighter colors also reflect the sun's rays and reduce heat absorption during the summer.
• Examine the home's windows. Old single-pane windows are poor insulators from both hot and cold weather. Newer double and even triple pane units have better insulating capabilities and contain special coatings on the glass to block the sun's rays.
• If the appliances are "included" in the sale, examine them closely. Depending on their age, you may not want to pay a dime for them, because they will definitely cost you more money than new models in the long run. For example, a 15-year old refrigerator will cost $35 to $70 a year more to run than a newer, energy-efficient model. It would be smarter to "take a credit" for the appliances and use this money to buy new ones.

  Final Thoughts

  These recommendations will help you make quick assessments as you compare homes during the house hunting process. You should always ask to see old utility bills; if a homeowner cannot provide them, many local utilities will give this information to prospective home buyers.

  If you find an older home that needs energy efficiency upgrades, consider using an Energy Efficient Mortgage (EEM) to finance both the home purchase and the upgrades. An EEM is a typical home loan with a unique twist: you can "roll" the costs of energy efficiency improvements into your home mortgage. In fact, EEMs are now available when you are buying, selling, refinancing, or remodeling your home. For more information, contact your local utility or the Energy Star Mortgage Program at 1-888-782-7937.

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