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Profiting from Energy
EfficiencyRick Williams
April 2014
Introduction
Rick Williams• Realtor Outreach Campaign, Santa Clara County
Energy Upgrade CA
• Mortgage Loan Originator for a mortgage banker
• American Pacific Mortgage
• USGBC & Build It Green
• CBPCA “How to Finance without PACE” webinar leader
• Efficiency First Finance & Real Estate Committees
• Skyline & Ohlone College Instructor: Energy Efficiency
Opportunities for Realtors and Mortgage Professionals
Class Objectives
• Why Energy Efficiency / Green Building?
• Energy Assessments & Upgrades
• Green MLS: Listing & Buying
• Available renovation financing
• Commercial Energy Use Disclosure Law
• Net Zero and Passive Homes
• How to profit with Energy Efficiency
Who are the Players in Energy Efficiency?
• PG&E, Edison, SDG&E
– All investor owned utilities, IOUs, collect funds from ratepayers that serve as rebates for energy efficiency
• CPUC, (California Public Utilities Commission) regulates the IOU utilities
• CEC (California Energy Commission) sets the energy targets and regulations
– Title 24 New version July 1st
– CalGreen
Why Energy Efficiency?
Save Money
NAR’s May 2011 study • 88% of homebuyers thought heating and
cooling were important
Poor duct sealing can lose 20% of conditioned air Proper insulation reduces heating and cooling costs
Improve Home Comfort
• Energy efficient windows can make homes quieter and more attractive at the same time
• Seal air leaks to reduce drafts and keeps warm air from escaping during the winter and cool air in the summer
• Proper HVAC ducting provides comfort in all rooms
Create a Healthier Home
• Combustion safety tests ensure all gas appliances are venting correctly – providing home owners peace of mind
• Sealing vents and ducts saves energy and improves air quality
Crawlspace Cleaned & Air Sealed
Green Labeled Homes add 9% Premium
• Study of 1.6 million homes in CA
• UCLA and UC Berkeley researchers
• Green Labeled homes sell for 9% more
– LEED for Homes
– EnergyStar
– GreenPoint Rated
• Most important in hotter climates
CA Home Energy Rating Disclosure
• California Civil Code 2079.10
• Realtors and Brokers must inform buyers in each transaction & sign
• HERS Whole House Audit option
• Demonstrate energy value of home
• Suggest energy assessment for potential energy upgrade before move in
Why do we need to renovate buildings?
• Homes built before 1974 (Title 24) had no energy efficiency standards
– Drafty 70% of CA stock
– Unhealthy
– High energy costs
• Energy costs increase 4 to 5% each year
• Plug loads continue to increase
Government Mandates
• California’s Goals
– Reduce energy consumption by 20% for 130,000 homes by 2013
– Energy Upgrade California
– New construction to be Zero Net Energy by 2020 Residential & 2030 Commercial
• Berkeley RECO
– Prescriptive list of energy & water conservation at time of sale or remodel
• Energy Audits at time of sale??? Someday.
• AB1103 Energy Use Disclosure in effect
SAVE ACT
• In the Senate
• Update National Underwriting
• Principal & Interest & Tax & Insurance
• PITI + E E = Energy Costs
• Energy costs > tax or insurance
• Make EE homes more accessible
Summary Why EE and Green Building?
• Save money …. Energy costs inc. 4 to 5%
• Healthier .. Indoor Air Quality
• Sell homes faster and for more $
• Government Mandates increasing
• Home Energy Rating Disclosure
Energy Assessments& Upgrades
What is an Energy Upgrade?
An Energy Upgrade comprehensive, whole-house approach to improving energy efficiency and home comfort, while helping to protect the environment.
• Moisture leaks
• Potential air leaks
• Hidden attic bypasses
• Crushed, ineffective ductwork
Proper inspections can reveal:
Why Get an Energy Assessment?
• A blower door test to determine
your home’s air leakage which contributes to higher energy costs
• Thermographic camera tests
that use infrared images to assess the effectiveness of your home’s insulation
• Combustion and safety testing to detect carbon monoxide
and gas leaks
What Is a Home Energy Assessment?
A Home Energy Assessment is a series of advanced, diagnostics tests performed to understand what energy efficiency investments can reduce your energy use:
• Inadequate attic insulation
• Improper insulation
• Important thermal issues
Why Get an Energy Assessment?
Proper inspections can reveal:
Who Should Get an Assessment?
• Homeowners who want to save money
on energy bills/stop wasting energy
• Those who are in in the market for new
homes or home improvements
• When HVAC goes down or PV goes up on
roof
• (HVAC repair, solar panels)
• With home comfort issues (drafty rooms,
leaky windows, etc.)
Prescriptive vs. Performance Rebates
• Prescriptive
– Checklist Does it Exist?
– No inspection and valuation
– Proof of purchase
• Performance
– Energy Assessment required
– Test In What are original conditions?
– Test Out After the work is done
– Achieve computer modeled improvements
Building ScienceWhat’s Really Happening
In Our Homes?
Impact Energy, Inc.22
Home Performance Contractors
Retrofitting Loading Order
& Cost Effectiveness
Impact Energy, Inc.23
Loading Order 1. Air Sealing
2. Thermostat set points
3. Insulation / Ventilation
4. Heating & Cooling
5. Water Heating
6. Lighting
7. Old Appliances
8. Windows & DoorsSolar Panels
Impact Energy, Inc.24
Benefits of an Energy Upgrade
• Improved comfort
• Improved efficiency
• Cost savings
• Greener living
Energy Upgrade California Rebates
• Rebates per decrease percentage of energy modeled
» 20% $2,000
» 30% $3,000
» 45% $4,500
• For more information: energyupgradeca.org
• Must use a Participating Contractor for rebates
• Energy Upgrade California offers Whole Home rebates to reward for energy efficiency needs as a system instead of piece by piece.
Energy Upgrade Steps to Rebate
1. Find Participating Contractor
2. Complete Home Energy Assessment
3. Review Findings & Recommendations
4. Review & Sign Contract
5. Secure Financing if needed
6. Install Energy Efficient Improvements
7. Work is inspected
8. Rebates to homeowners
Energy Upgrades as Part of Sale
• Look at the Disclosure you sign
• Whole House Sale
• What are the utility bills for 12 months?
• Obvious improvements
– Old furnace & ducting
– Insulation
– Windows
– Appliances
• Seller credit or suggestion for buyer budget
Timing for Renovation or Energy Upgrade
• Before move in
• Funding with first mortgage
– 203K, HomeStyle, Homepath Renovation
– Buyer’s extra cash
• Second Mortgage
– Home Equity Line
– Title One
– PowerSaver
Green MLS: Distinguish
your listings
Green MLS @ MLSlistings
• Green / energy fields exist now
• MLSlistings to expand Green MLS
• Energy upgrade items listed
• Sellers: Distinguish your listings
• Buyers: eco conscious clients
Seller’s Green Staging Advantage
• “Green certified homes sold for 30% more
– and sold 21% faster” GET HERS RATING
• Provide an Energy Assessment to buyers
– Complete disclosure
– Demonstrate path to energy efficiency with the contractor recommendations
• Install CFL light bulbs & LED• Install Programmable thermostat
• Provide 12 months utility bills
• Show EnergyStar labels on new appliances
Buyer’s Search for best home
• Establish buyer’s priorities
– Energy costs, air quality, health
• Define key criteria to search MLS
– Programmable thermostat
– Insulation
– Sealed crawlspace
• Provide energy upgrade pathway with
renovation funding
– Insulation
– Air sealing etc.
KB Homes Energy Efficiency
SHEA XERO ZERO NET ENERGY
• SOLAR POWER SYSTEM
• DUAL-PANE, LOW-E VINYL WINDOWS
• JENN-AIR® ENERGY STAR® APPLIANCES
• BLOWN-IN WALL INSULATION
• INSULATED GARAGE DOORS
• DIGITAL PROGRAMMABLE THERMOSTAT
• CFL BULBS
• OCCUPANCY SENSOR SWITCHES
Green Ratings and Green Labels
What is HERS ?
Home Energy Rating System administered by the California Energy Commission (CEC)
• Estimates and compares home energy efficiency
• Identifies energy-saving improvements
• Reduces risk by providing full disclosure of energy usage
• Completed by a HERS Rater or Auditor
• Required for Energy Efficient Mortgage EEM
40
Sample HERS Rating Certificate
41
Home Energy Rating Score
Energy Efficiency Levels of Rated
Features
Energy Consumption and Operating Costs
Other Green Labels
• LEED for Homes
– High end rating from USGBC
• GreenPointRated
—Rating system used by most CA municipalities BuildItGreen
• EnergyStar
—EPA standard
New Home Builders Feature Energy Efficiency
RESNET works with new home
builders in promoting HERS
2013 rated homes >> 218,864Average score was 64 of 100
KB Homes provides energy ratings
for all homes.
Shea Homes builds net zero homes
Available Financing
Financing Considerations
• What is the Client’s Urgency?
• Reactive ..”No furnace in January”
• Line of Credit,
• Unsecured loan to $25,000
• Proactive .. “Home Renovation”
• Refinance
• Purchase
Unsecured Loans
• Up to $25,000
• No Income documentation
• No appraisal
• Shorter loan term & higher monthly payments
• Contractors manage the application
• Same day approval
Energy Loan
• Viewtech Financial Services, Anaheim
• 14.99% with 720 FICO• 16.99% to 680 FICO• Unsecured $5,000 to $20,000• Fast 1 hour approvals online
Pete Schouten 530-753-1603
Instant In-Home Approvals 24-hours a day with simple 1 page loan document
5.99%, 7.99%, 9.99%,11.99% & 13.99% Fixed For Life APRs
(one time buy down cost)
Loan Amounts from $5,000 - $25,000
Unsecured loan… no lien on property
Contractor Direct Funding within 48 hours of completion
FHA Title One Home Improvement
• Secured loans to $25,000
• Unsecured to $7,500
• Manufactured home on land $17,500
• Full documentation, yet no appraisal nor equity requirement
• Term between 5 & 20 years
• Interest 6.95% to 11.95%
• 50% Funding before work starts
• Contractor program 24 x 7Admirals Bank
401-248-7317
PowerSaver Attributes
• Title One Loans
• 50% up front to contractor
• Up to $25,000 and 100% CLTV
• 14 day funding
• 15 year term for energy upgrades
• 20 year term for renewable
• Interest 7.25% on 15 year term
Secured Financing Options
• Conventional Mortgage Cash Out Refinance
• FHA 203K Renovation Loans
• FHA Title One Home Improvement Loans
• FHA PowerSaver
• Energy Efficient Mortgages, EEMs
• Line of Credit
FHA 203K Renovation Loan
• Purchase distressed properties
─ 3.5% down/ 30 year financing
─ gift funds OK
─ Non resident borrower OK
─ Assumable mortgage on resale
• Refinance also with 2.5% equity
• New homeowners get rebates
• Loan limits to $625,000 in Bay Area
• The 203K is a First Mortgage
Energy Efficient Mortgage, EEM
• Up to 5% of appraised value for cost effective energy solutions ONLY
• Added to new first mortgage
• Requires HERS test (energy audit)
• Combine with 203K for serious rehab
• For ex.: on a $400,000 appraised home
– 5% EEM = $20,000
– 203K = $35,000
– Total: $55,000 for rehab - all in 30-year fixed loan
• Best to use a Facilitator
203K Rehabilitation.. Standard 203K
Renovation First Mortgages
HomestyleFHA 203K
StreamlineFHA 203KStandard
Renovation Money
up to 50% of
appraised finished value
$35K No Cap
Down payment
Owner 5% 3.5% 3.5%
Investor 25% Not Available Not Available
Loan
Maximum$625K $625K $625K
Mortgage Insurance
MGIC only 1.125% 1.125%
Securing Appraised
Green Value
Will this increase my home value?
• Comfort, health &
– reduced energy cost
• Key Aspects
– Green MLS
– Green certification
– Lower Utility bills
• Study shows 9%
increase in price
CA Study shows 9% Premium for Green Labeled Home
• UCLA / Berkeley Study
• 1.6 million homes
• Green labeled home
– Sells for 9% more
• Work with Sellers on getting the labels
Energy Efficiency in Appraisal Form
Appraisal Institute Green Addendum
Securing Appraisal Value
• Presenting documentation to appraiser– Energy Assessment– Invoice Furnace– Showing insulation
• Green Certification attached to MLS
• Green documentation for all features
– This avoids GreenWashing
• Providing Utility Bills
AB1103 ENERGY DISCLOSURE LAW
• Effective January 1, 2014
• Sale, Lease or Refi of ENTIRE BUILDING
• Non Residential Buildings > 10,000 Sq Ft.
• Building Types exempt:
– Industrial, Multi-Residential
• Failure to provide disclosures creates liability
Portfolio Manager
• Building Owners must provide 12 months utility data
• Complete Benchmarking with Portfolio Manager software
• Submit to Counterparty and to the CEC
• Score from comparison to like buildings
• EnergyStar Award available with 75 score
Net Zero Energy
• California Law• All new Construction to be Net Zero
Residential 2020
Commercial 2030
• Very efficient system design
– HVAC, Windows, Insulation
• Renewable power needed
Certified Net Zero Home in Willow Glen
3,200 sf comfort w/ no energy costs
Mercury News 3.27.14
What is Net Zero Home?
• Whatever energy is used is offset by renewable power
• Key aspects of the design
– Thick insulation
– Triple Pane windows
– PV on the roof to offset use
– Heat Recovery Ventilators
Passive House Basics
Green Building Resources
• Build It Green
• ElevateEnergy.org
• NetZero
• Passive House
• Energy Upgrade CA
• CHERP.org
Selling Energy Efficiency & Profiting
• Stay Ahead of the Curve
• Build client rapport with “green” knowledge
Utility costs + Comfort + Health
• Sell homes quicker and for more $
