Energy efficiency is a highly desirable quality for residential properties. If your home has energy efficient upgrades, you could sell it for a higher price. If you’re planning to buy a home, choosing one with efficient systems and appliances has a number of benefits.
Efficiency ratings can tell you how energy efficient a property is, how much money is being saved on energy bills, and what future upgrades would be useful to help the home perform even better. Anyone entering the real estate market should understand how energy efficiency ratings work and how they can influence the process of buying or selling a house.
Types of Rating Systems
There are several different efficiency rating systems that are frequently used in the United States. Each has slightly different criteria, but all measure how much energy a property uses and how it compares to other homes.
Here are five of the most common energy rating systems:
Home Energy Score
Created by the Department of Energy, the Home Energy Score rates your home’s efficiency on a scale of one to 10 with 10 being the most efficient. The system uses about 50 different metrics to calculate your score, including the insulation, windows, and heating and cooling systems.
Home Energy Scores are completed by trained assessors during an energy audit or home inspection. In addition to receiving a score, you’ll also receive a report with an estimate of your home’s energy usage, the cost of the energy usage, recommendations for improvements, and the estimated cost savings from those improvements.
Home Energy Rating System
The Home Energy Rating System (HERS) was developed by the Residential Energy Services Network (RESNET). To receive a rating, a certified rater will visit your home for an assessment.
Scores range from zero to 150 with lower scores indicating more energy efficiency. Homes are compared against a standard home built exactly to code, which receives a score of 100. If your home receives a score of 70, it’s 30 percent more efficient than the reference home. If it scores 130, it’s 30 percent less efficient. A score of 60 or below is considered very efficient.
RESNET also keeps a public database of homes they’ve rated, so you can search by address for HERS ratings. This is especially helpful if you’re in the real estate market as a buyer.
ENERGY STAR Certified Homes
ENERGY STAR is a program run jointly by the Department of Energy and the Environmental Protection Agency. They offer a number of incentives and certificates for homes, commercial businesses, and products.
Over two million homes in the U.S. have received an ENERGY STAR certification. ENERGY STAR Certified New Homes are at least 10 percent more energy efficient than standard homes built to code. On average, certified homes are 20 percent more efficient than standard homes.
This certification applies only to new constructions. A certified rater will consider the sealing and insulation, windows, heating and cooling system, indoor air quality, and water management when assessing the home. Installing ENERGY STAR certified appliances can also improve your score.
Leadership in Energy and Environmental Design Homes
Established by the U.S. Green Building Council, the Leadership in Energy and Environmental Design (LEED) program is a framework for sustainable development. It’s one of the most commonly used rating systems in the country and can be applied to houses, neighborhoods, and entire cities.
The rating system considers the property’s landscaping, water efficiency, materials and resources, energy efficiency, and indoor environmental quality. The more points your home receives in each category, the higher its rating will be.
The minimum requirements to receive LEED certification are equivalent to the requirements for ENERGY STAR certification. Like ENERGY STAR certification, the LEED system also applies only to new constructions. The rating is based on how the home is built, not on how it operates over time. To receive certification, you must work with a Green Rater from the beginning of your construction project.
Living Building Challenge Homes
The Living Building Challenge system is very rigorous and is less frequently used than the other rating systems. However, earning this certification indicates that your home is completely sustainable, so it’s a great standard to strive for. The Living Building Challenge program currently has about 800 certified projects.
This program outlines seven performance areas called “petals.” To earn the energy petal, your home must produce 105 percent of its energy onsite with renewable sources, which typically involves solar power. The other petals include water, minerals, equity, health and happiness, place, and beauty.
How to Use Energy Ratings to Market Your Home
You can use energy ratings to your advantage if you’re planning to sell your home. Homes with good energy ratings have better resale value, so it’s important to communicate this information to potential buyers.
If your home already has one or more credentials, highlight them in the listing and explain their value. For example, a high Home Energy Score indicates that your home uses less energy, which cuts down your utility costs. You could even offer your recent utility bills to prospective buyers to show them how economical the home is.
If you’ve never gotten an energy rating or certification but believe your home is energy efficient, you could pursue a rating before putting the property on the market. Contact a rater or assessor for one of these programs to schedule an audit.
An energy audit will also reveal what upgrades you could make to improve your rating. If a few simple and inexpensive improvements will increase your score, it may be worth pursuing those upgrades before listing your home.
How to Use Energy Ratings to Inform Your Decisions as a Buyer
Not only are energy efficient homes better for the environment, but they’re also better for your wallet. Efficient homes tend to have much lower utility bills, which could save you thousands of dollars over time. Appliances and systems can last longer, too, because they don’t have to work as hard to meet your home’s needs.
You also may be able to use an Energy Efficient Mortgage (EEM) to purchase an efficient home. Buyers can get approved for larger loans with an EEM because the lender takes into consideration the ongoing cost savings from living in an energy efficient home. You can apply for a conventional, FHA, or VA EEM.
Most programs offer a full energy report in addition to a numerical score. This information is extremely valuable to you as a buyer because it can reveal which upgrades or improvements you should prioritize when you purchase the home.
All energy efficiency rating systems differ, but they all serve the same purpose. Receiving a high rating or a certification can make your home much more competitive among buyers. If you’re looking for a new home, understanding a property’s energy rating can help you make a more informed decision. For both buyers and sellers, these rating systems provide valuable information.
