1. The Home Energy Score Peter Rusin April 7, 2016

2. The CEO’s vision is to help Coloradans live more prosperous and healthy lives by promoting innovative energy production and efficient energy consumption practices that are beneficial to the economic and environmental health of the state. DEPARTMENT VISION MISSION STATEMENT The CEO’s mission is to improve the effective use of all of Colorado's energy resources and the efficient consumption of energy in all economic sectors, through providing technical guidance, financial support, policy advocacy and public communications. The Colorado Energy Office

3. The presentation will be broken up into two parts: The first part will review the Home Energy Score, market trends, and how and your local resource. The second part of the class will review how you can use the Home Energy Score as a selling or buying tool. What I hope you take away: A basic understanding of how the Home Energy Score and how to leverage the tool for your clients Where to find additional local resources… you do not need to be an expert in energy efficiency. Program Overview

4. What is the Green MLS  The Real Estate Transaction Initiative aims to increase energy efficiency and the use of renewable energy at the time of sale and is centered around the Green MLS.  The effort can be broken into three overlapping phases: Implementing the fields, Increasing Use / Retrofits, and Maintaining the Market.  The ability to value high performing homes will increase market penetration of high performing homes. Appraiser Has tools to value EE, but local data needed to reflect market value Appraiser Has tools to value EE, but local data needed to reflect market value Buyer Lack of information prevents EE from becoming a decision point in purchases Buyer Lack of information prevents EE from becoming a decision point in purchases Lender Lack of data and secondary markets prevents EE from factoring in lending decisions Lender Lack of data and secondary markets prevents EE from factoring in lending decisions Builder/Remodeler Few incentives for promoting EE in new/existing construction without known market Builder/Remodeler Few incentives for promoting EE in new/existing construction without known market Green MLS

5. Searchable Certifications

6. Working with Appraisers  The CEO has conducted three valuation studies that have been peer reviewed by professional appraisers with key results: Owned Solar PV has a positive market impact and the study home has a premium range of value for the systems $1.45 per watt to $2.57 per watt; none sold for less. Energy efficiency’s impact is market specific, but appraiser’s need more reliable and accessible energy efficiency information is needed (ties HEScore effort) In the northwest Denver market non-labeled new homes have the same efficiency levels of ENERGY STAR New Homes, showing market adopting of energy efficiency as a feature. The studies confirm that listing energy efficiency, renewable energy (solar), and “green” should be done when listing properties.

7. What About Existing Homes?  REALTORS® need a low cost tool that can provide reliable data for their clients to continue to show national leadership.  Link REALTORs® to resources for that can help clients sell or buy an inefficient home  Continue to conduct valuation studies with profession appraisal organizations and solicit feedback from the REALTOR® community How the CEO has moved forward

8. The Home Energy Score: Why? Source: DOE  Appraisers can value energy efficiency, but need access better data.  REALTORs® provided feedback that to recommend an asset score costs need to be below $200, ideally less than $100.  Most utility energy auditing and home performance programs use BPI as the base standard.

9. What is the Home Energy Score? A score from 1- 10 that one can use to compare the energy use of homes. The scale is set to local conditions, where a 5 is the average home in each location. Does not include any information on renewable energy New homes will typically score 9 or 10 on the scale. Source: Dept. of Energy

10. How Does Information Flow? Home Assessment Qualified local energy auditor Help with selecting measures Home Assessment Qualified local energy auditor Help with selecting measures Loan Options Unsecured low interest loan Not tied to mortgage, no delay Loan Options Unsecured low interest loan Not tied to mortgage, no delay  The home is a good candidate for a retrofit at point of sale, but it won’t happen unless…  The real estate agent or home inspector provides a link to a network  The network provides an “energy concierge” service for most clients  The process must not delay mortgage closings Qualified Contractor List Provide help with bidding process Ease the home buyer’s stress Qualified Contractor List Provide help with bidding process Ease the home buyer’s stress Verify Work Home buyer can concentrate on moving into the home, less stress Verify Work Home buyer can concentrate on moving into the home, less stress

11. What is the Home Energy Score? A score from 1- 10 that one can use to compare the energy use of homes. The scale is set to local conditions, where a 5 is the average home in each location. Does not include any information on renewable energy New homes will typically score 9 or 10 on the scale. Source: Dept. of Energy

12. 12 Home Energy Score Basics Colorado Energy Office | www.colorado.gov/energy © 2011 State of Colorado What Homes Qualify for the Home Energy Score? Only single family homes (including attached), triplexes, and town homes can use the Home Energy Score 92% of all owner occupied homes in Colorado meet this definition. What to Expect: A stand along score will take about an hour for a BPI Rater to walk through the home and gather data. When combined with a typical home inspection the inspector will need 15-20 extra minutes The BPI Rater will present a waiver on the CEO to use the score. The CEO will not publish an address level data without permission (from home owner). The score maybe immediately available or come within the standard home inspection report.

13. 13Colorado Energy Office | www.colorado.gov/energy © 2011 State of Colorado Page 1 of the Colorado Home Energy Score

14. 14Colorado Energy Office | www.colorado.gov/energy © 2011 State of Colorado Page 2 of the Colorado Home Energy Score

15. Are Consumers Interested in the Score? The CEO hired Amelie to conduct two focus groups and a home buyer survey (consisted of almost 200 participants). Below are the survey results showing everyone was interested in getting a Home Energy Score

16. REALTOR® OPPORTUNITY  NAR’s D.A.N.G.E.R report analyzed emerging trends that could have an negative impact on today’s REALTOR®, MLS vendors, and local boards.  Danger 5 of 10, the decline in relevancy in agents due to failure to change or respond to changing consumer demands.  NAR’s estimated probability of this Danger happening is 100% in the next 3 to 5 years.

17. Changing Buyer Preferences Source: NAR

18. Changing Buyer Preferences Source: NAR

19. Working with the State Association Colorado Association of REALTORS® CEO, Tyrone Adams “Until now, a home’s energy efficiency benefits were difficult to quantify and compare. A Home Energy Score provides homebuyers a chance to evaluate a home’s efficiency features before they buy so they can make the most knowledgeable decision on one of the biggest investments in their life.”

20. How Do I Know if a Home is Efficient? The easiest way is to have a home that has been scored or labeled:  New Homes are very easy in Colorado, just ask the builder for the various building code checklists.  Do you want to advise your buyer of an existing home on the efficiency of a home or look at the efficiency rating of your sellers home to include in your broker remarks? The Home Energy Score can help:  Provide 3 rd party reliable data that you can incorporate into marketing a highly efficient property  Help your clients see behind walls and truly know how the house performs and keeps you from guessing or putting yourself in a liable position.

21. Home Energy Score

22. If Your Seller has an Efficient Home Three Things You Should Do: 1. If you know the home your selling has efficiency features recommend that your client get a Home Energy Score and highlight features in marketing materials. Utilize the idea of form, function, and performance 2. Check the EE boxes on the MLS data input form and/ or add information to your remarks: “ENERGY STAR Appliances” 3.Provide all documentation to the appraiser.

23. MLS Data Input

24. Gorgeous Ashbrook model by Lennar Homes in Incredible Orchard Farms location! The main floor consists of Engineered 5" plank Steel Hardwood flooring through the study, family room & kitchen area. You'll love dining in w/ inclusions such as Slab Granite countertops w/ a Tumbled Stone Tiled Backsplash & Maple Chiffon Cabinets! The large center island is perfect for entertaining guests! You'll notice the Granite countertops in the 5 piece master bath. Enjoy the perks of owning an energy efficient home w/ features such as Solar & double pane windows! Visit Orchard Farms today to see plans for the open space & trail areas! Great location near shopping & dining. Cabelas is nearby as is I-25, E-470 & quick access to DIA. This home is being constructed w/ expected completion date in October. Move in before Halloween! Be sure to stop by the sales office to check out this unbelievable value! Photos are of model home. 24 Other Ideas for listing… Colorado Energy Office | www.colorado.gov/energy © 2011 State of Colorado Form, Function, and Performance Form: Hardwoods in living area Granite in kitchen Stainless Steel Appliances Function: Square Footage Number of Bedrooms Garage Spaces Finished Basement Performance: How much energy or water does this property use? Is it close to amenities Does it have healthy indoor air quality? Function 4 bed | 4 full bath | 3707 sqft | Single Family 16067 ELIZABETH STREET | THORNTON, CO 80602 Keith Alba phone: 303-325-7687 mobile: 303-478-7246 $427,350

25. This airy and open contemporary remodel in the Cherry Creek School District is a must see! Located within quiet Ptarmigan Park on a corner lot, this spacious home with vaulted ceilings and THREE brick fireplaces and a fully finished basement has updates galore! The kitchen will delight any cook with its's new corian counters, under mount sink, tile back splash and convection oven. New carpet and gorgeous hardwood flooring throughout plus brand new lighting in kitchen, living and dining areas. Many exterior updates as well including brand new front fence and gate, and new driveway, paths and concrete patio. You'll have peace of mind knowing the A/C, furnace, roof and energy efficient triple pane windows and sliding glass doors are all less than 8 years old. Tons of storage and close to highways and light rail. Get you buyers in while you can - this is a hot one! 25 Other Ideas for listing… Colorado Energy Office | www.colorado.gov/energy © 2011 State of Colorado Function Performance Matthew Leigh Keller Williams Realty Success matthew.leigh@kw.com (720) 236-2373

26. FHA’s Fall Announcement  The new FHA SFH Handbook released in fall of 2015 incorporated two major changes:  Homes that Score 6 or higher on the Home Energy Score will be eligible to increase their qualifying income ratio by 2%.  Existing Homes no longer need a HERS Index Rating for the Energy Efficient Mortgage.

27.  Colorado Median Household Income is almost $60,000 Typically this household would qualify for $240,000 at 4% interest rate With stretch ratio the same household can afford at least $15,000 more home. What does the stretch ratio mean :

28. Home Buyers and Energy Information Appraiser Has tools to value EE, but local data needed to reflect market value Appraiser Has tools to value EE, but local data needed to reflect market value Buyer Lack of information prevents EE from becoming a decision point in purchases Buyer Lack of information prevents EE from becoming a decision point in purchases Lender Lack of data and secondary markets prevents EE from factoring in lending decisions Lender Lack of data and secondary markets prevents EE from factoring in lending decisions Builder/Remodeler Few incentives for promoting EE in new/existing construction without known market Builder/Remodeler Few incentives for promoting EE in new/existing construction without known market Green MLS Buyer Needs: Provide low cost information to make choices Loan Products that do not hold up the real estate transaction How is the CEO meeting these needs? Qualified raters can help fill the information gap by providing a basic information and connecting to Energy Smart type programs that offer energy advising, aka energy concierge. The goal is with every furnace or hot water heater replacement that is part of the contract, having the inspector call out ENERGY STAR equipment, not just replacement. Leveraging Home Inspectors and Current Utility Programs to offer Home Energy Score

29. What Consumer Would Expect to Pay

30. www.BetterBuildingsCO.com

32. How Can I Help My Home Buyer Client  A good place to start is www.BetterBuildingsCO.com  Provide a welcome gift of CFL or LED light bulbs even just for one floor or room.  If a furnace or hot water heater replacement is part of the contract, ask for ENERGY STAR equipment  Talk with your local FHA/VA approved broker or your conventional Fannie Mae lenders about the Energy Efficient Mortgage feature or renovation loan products  Know where to send your clients… a local energy coach sponsored by many utilities in the state.

33. The Colorado Energy Office asked participants why the would be interested in getting a Home Energy Score. Almost 1/3 of all respondents stated they would like an energy coach or advisor as part of the score. Why Work with YVSC

34. Point of Purchase Improvements Inspection calls for heating equipment or hot water heater replacement Request ENERGY STAR Replacement For the Heating Equipment, make sure insulation levels are adequate before new equipment is installed or sized. (Use one of the following paths to upgrade insulation) Inspection doesn’t call for replacement… but still want to upgrade or add Solar? FHA or VA Mortgage Use EEM option, it’s easy! stretch If inspection call for heating replacement, use EEM Option to upgrade insulation before new furnace and stretch the savings Conventional Mortgage Many different ways to make upgrades with available low interest products:  EnergySmart loans (Denver/Boulder/Eagle/Pitkin/Gunnison)  FCU On-bill financing (Ft. Collins)  Colorado Energy Office developing program to fill in State program gaps

35. What Services are Offered for Homeowners? Low Cost Home Assessment(includes Home Energy Score*)  Safety Checks & free energy saving installs  Energy Saving Analysis  Recommendations Free Energy Coaching – make smart energy saving decisions! Contractor Referrals and Assist with Bid Evaluation Maximize all utility and local program rebates

36. How Does Information Flow? Home Assessment Qualified local energy auditor Help with selecting measures Home Assessment Qualified local energy auditor Help with selecting measures Loan Options Unsecured low interest loan Not tied to mortgage, no delay Loan Options Unsecured low interest loan Not tied to mortgage, no delay  The home is a good candidate for a retrofit at point of sale, but it won’t happen unless…  The real estate agent or home inspector provides a link to a network  The network provides an “energy concierge” service for most clients  The process must not delay mortgage closings Qualified Contractor List Provide help with bidding process Ease the home buyer’s stress Qualified Contractor List Provide help with bidding process Ease the home buyer’s stress Verify Work Home buyer can concentrate on moving into the home, less stress Verify Work Home buyer can concentrate on moving into the home, less stress

37. Energy Coaching Map* To obtain a Home Energy Score in these areas the utilities have provided subsidizes which reduce the cost between $65 - $100. * Some Counties shaded only have 80% coverage of homes within counties

38. What is an Energy Efficient Mortgage? What is it:  It is a loan feature not an actual product.  It allows the home buyer or refinancer to add in the cost of many common energy improvements into the mortgage.  All FHA and VA loans can use the features, but VA requires a HERS Index Rating. Furnace issues Attic issues...

39. FHA’s Energy Efficient Mortgage (EEM) Attic issues...  The max EEM loan amount = the lesser of… The Value x 5%, i.e. $12,250 for a $245,000 home 115% of the Median area price for County ($435,000) x 5%, or 150% of Freddie’s Conforming limit ($625,500) x 5% Quick highlights:  Any FHA lender can offer the EEM  No second appraisal is needed or additional down payment funds  Contractors and bids DO NOT have to be in place prior to closing Easy Calculation to know the maximum amount :

40. Financial Benefit Energy Saving Mortgage Calculation Base Loan Amount: $245,000 + Improvement Costs: +$11,000 - CEO Credit: -$1,500 - Utility Rebates: -$1,000 New Loan Amount: $253,500 Energy Costs (annually): $1,782 Broken Down Monthly Mortgage (Principal & Interest): $1361 Monthly Energy Costs: $148 Total $1,509 per month Traditional Calculation Mortgage (lifetime of loan): $245,000 Energy Costs (annually): $2,916 Broken Down Monthly Mortgage (Principal & Interest): $1315 Monthly Energy Costs: $243 Total: $1,558 per month

41. Steps in an FHA EEM 1.Your client completes an energy report that includes cost estimate and effectiveness.  Lender inputs three pieces of information into the EEM calculator in FHA Connect. 2. Lender fills out two forms of HUD Form 92900-LT 3.Lender setups up escrow using HUD Form 92300 which starts the 90 clock for your client to complete the improvements In most cases home will close after Step 3 4.Rater or Mortgagee completes HUD Form 92051, Compliance Inspection Report, and the loan is closed.  Lenders has 30 days in FHA Connect to fill out escrow close out screen

42. The Importance of FHA Mortgage Options The Colorado Energy Office asked participants how likely they would be to get a Home Energy Score if the cost of improvements could be included in ones mortgage. Almost 75% had a favorable reaction!

43. Opportunities in Listings  Any home built before 2006  In 2015, 59 FHA Single Family Home loans were originated in Routt County (includes 25 in Steamboat and 13 in Oak Creek)  Maximum mortgage limit for the Routt County is $625,500 (also 150% of Freddie’s conforming limit)  115% of median area price would be approximately $435,000 or $21,750 to complete cost effective measures.

44. Contact Information For more information, please contact: Peter Rusin, Residential Program Manager Colorado Energy Office 303.866.2343 peter.rusin@state.co.us