Costs of Owning a Home Include Utility Bills

Sales price of a property is not all there is to consider in a home purchase -- there are maintenance, insurance, property taxes, and utility bills. Utility bills may include water, central air and heat, phone and internet services, and keeping up the heat for the swimming pool if there is one. If your property is a condo or single family home in an HOA, monthly assessments may include some services, or not -- so a buyer should be sure to check on those items.

With the topic of climate change, heating and cooling costs have particularly come to owners' attention. But according to a survey by Payless Power, only about 47% of homeowners said they considered cost of electricity when purchasing their home. While this can vary widely according to living in a cold winter blast area, or the hot summer deserts of Arizona and California, agencies have increased their utility charges. 

To conserve costs, consider using off-peak hours (check with your utility company, usually later in the evening), using energy efficient appliances and unplug them while you're on vacation, and sealing the house as cracks and gaps can account for a 40% loss of heat--dual paned windows are not inexpensive but can be worth the cost.

The graphic by Payless Power illustrates some of their findings on costs related to age of home, size and type.

 

Julia Huntsman, REALTOR, Broker | http://www.abodes.realestate | 562-896-2609 | California Lic. #01188996

Saving Money with Sustainable Home Upgrades

1970s photo of an 1865 house

Property owners of both residential and commercial properties know that it's becoming more critical to understand "green" features during a time of rising utility costs and changing weather conditions. When the house at the right was built, there was no electricity, no indoor plumbing for bathrooms, no telephones, maybe a water pump in the kitchen. By the time my great aunt and uncle bought it in the 1950s, there was indoor plumbing and electricity -- people had to keep up with the times and what was current then. Now, 70-plus years later, there are new features, but still, not all homes that were new in the 1950s have the most current features of a new "smart" home completed today.

Buyers want to know what cost-saving features a new home may have -- in a high-cost environment they also want economic efficiency. Many agents say their clients are evaluating environmental risk during the purpose process.

Realtors are faced with evaluating such features when assisting a seller determine a list and sale price for a property.

The National Association of Realtors 2023 REALTORS® and Sustainability Report is based on a REALTOR member survey about sustainability issues facing the industry, click on the link for a summary of that Report.

Included in the Report are what clients found important: "home features that clients listed to their agent or broker as very important included windows, doors, and siding, proximity to frequently visited places, and comfortable living space."  An important thing to know for buyers and sellers is whether or not the MLS listing a property features categories for "green" features -- in my case in Southern California and beyond, the local MLS (CRMLS) does have such categories, and are listed as: energy generation, energy efficiency, sustainability, water conservation, and walk score, power production, and green energy verification. Such features may lessen the environmental footprint and reduce monthly energy costs.

Green Home Features List for Clients in NAR 2023 Report

"The NAR survey shows that 17% of REALTORS® say a high-performance home—one with improvements made to increase health, operational efficiency and durability—saw an increase from 1% to 10% of the dollar value offered compared to a similar, non-performance home. That could equate to thousands of dollars." "What’s more, energy-efficient home projects could save homeowners up to $2,500 a year on their energy bills, according to a recent survey of 1,000 consumers conducted by Thumbtack, a home services website. For example, installing energy-efficient lighting or smart thermostats could trim yearly energy bills by up to $200 and $100, respectively, the report shows." Article by Melissa Dittman Tracy, NAR REALTOR Magazine, It's Becoming More Critical to Understand Green Features, May 3, 2023. Go to Title 24 link for more information about  energy efficiency standards in California. For more information on the features in your home, please contact me via text, email or phone!

Julia Huntsman, REALTOR, Broker | http://www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

Financing Energy Efficient Property Improvements via the HERO Program (aka PACE)

The clue to how these programs work when purchasing qualifying energy efficient improvements is in the name:  Property Assessed Clean Energy (PACE).  These particular programs are NOT loans or leases, they are County-approved financing programs whereby a bond is issued to the lender for projects permanently affixed to a property, repaid through property taxes.  Homeowners repay financing annually through an assessment on their property tax bill.  The projects could be solar panels, windows, doors, air conditioning and heating, to name a few.

While the attraction is in the no-money down for specific residential improvements (there are commercial programs as well),  the prospective customer should read the fine print before purchasing.  Under these HERO/PACE programs, the are liens placed on the homeowner's real estate tax bill which, because it's a property tax assessment, takes priority over a home loan. Should the homeowner wish to sell or re-finance, be aware that FNMA and Freddie Mac--source of most conventional mortgages--are prohibited by the Federal Housing Finance Agency from purchasing a mortgage loan on that property until the entire lien is paid off or does not have priority over a first mortgage lien.  (FYI:  most mortgages are sold to those entities.)   Here are additional words of warning from Kevin Nunn, a lender in the Sacramento area:

If the system is owned make sure it is not financed through one of the PACE programs that are being promoted right now. Homeowners are led to believe these “assessments” will just transfer over to a new buyer. Fannie Mae and Freddie Mac have been very clear that they will not purchase a loan with these “assessments” in place. It often comes as a very big surprise to owners and Realtors that the PACE must be paid off or they may only be able to sell to a cash buyer.

 On a Los Angeles County property tax bill, the lien assessment would be located under "Direct Assessments" section.  Some examples of how the assessment will appear are WRCOG Hero, LACEP RES PACE, LACEP RES 2016, LACEP COMM or California Hero to name a few.

If the homeowner stops making property tax payments, the assessment becomes a priority lien in front of a new first trust deed.  Also, when selling, the seller under California Association of Realtors purchase contracts, is required to make a disclosure to the buyer during escrow of any type of lien or lease of equipment on the property.  As an involuntary lien, it will also show up on a preliminary title report passed to the buyer during escrow, at which point the buyer may decided he/she doesn't want to pay an annual $3000.00 assessment in addition to regular property taxes.  

The seller or buyer may pay off the lien before close of escrow  (assuming the buyer is willing and able), or the amount may be split between them.  

While these programs have been most popular in the Inland Empire, they are now approved in Los Angeles County and almost all cities in  LA County, including Long Beach.  

However, there are other owned or leased equipment programs which are in place based on different criteria, and may be less complicated than those under HERO/PACE programs, so be sure to check the difference.

Have You Heard of PACE for Energy/Water Savings?

Keeping Cool

The Property Assessed Clean Energy Program, or PACE, makes it possible for an owner to finance certain improvements and pay for them via an assessment on the owner's property.
There are a wide range of conservation improvements allowed and which vary by program, but most PACE programs include  improvements such as solar panels, energy star rated core plumbing systems, duct replacement, electric vehicle plug-in stations, pool circulating pumps, water heaters, and furnace.  They work in conjunction with a local public agency, and are available for both residential and commercial properties.

To be eligible, the homeowner must be current on property taxes, with no judgment liens or federal or state tax liens, not in bankruptcy, can't be delinquent on any mortgages or late on property taxes (some exceptions), and there are limits based on the mortgage percentage value of the property.


Property tax liens associated with the homes underlying the security, which are meant to fund energy-savings measures, are senior to all other liens - including mortgages on the properties financed by Fannie Mae and Freddie Mac (which currently finance close to 90% of US mortgages).  Read more at Reuters.  Since they don't like not being in first lien position, the Federal Housing Finance Agency (FHFA) ordered Fannie and Freddie to avoid financing mortgages on homes with PACE liens already on them,  Generally, all loans following FHFA guidelines must obtain consent before being allowed to enter into a PACE program, or the lender may declare the loan in default if owner does not pay off the lien. These conditions also affect refinancing as well, especially if the loan was obtained after July, 2010.

Homeowners who may find that PACE works well for them are:

• Those who have sufficient equity or whose improvements are not that costly and therefore, would not have difficulty paying off the lien if they need to sell or refinance their home
•  Those who intend to remain in their homes for the duration of the assessment and do not plan to refinance 
•  Those whose PACE program will offer to subordinate the PACE lien in circumstances beneficial to the homeowner.

HERO

Certain PACE programs, such as the HERO PACE program are now offering to subordinate their liens in certain instances, generally for a fee.  If the PACE lien is subordinated the buyer may be able to enter into a PACE agreement and obtain consent from a conventional lender.  Homeowners in areas with HERO PACE programs should inquire with the entity. Not all cities have approved this program; according to their site, HERO programs are locally available in the cities of Carson, Bellflower, City of Industry, Hawthorne, Lomita, Garden Grove, Huntington Beach, Fountain Valley, Stanton, Westminster, Cypress, to name several.  Long Beach, Los Angeles, or Lakewood are not included at this time. 

California FIRST

This program  appears to cover Long Beach and other areas, but an address must be entered in order to find out. Their criteria and financing terms are available on the site.

FHA

Energy Efficient Mortgages have been around since the 1990s, and may work for the owner with an FHA loan. Contact an FHA lender for more information. 

Secondary Financing

Another alternative is a home equity line of credit, for people with enough home equity, which may provide some tax advantages, including lower interest rates than the PACE programs. This type of loan would automatically be paid off in sale of a home.

Similar to solar panels, any PACE lien must be disclosed to a prospective buyer and will most likely be found in the preliminary title report given to a buyer. The seller may be in the position of having to pay off the lien in order to sell, depending on the circumstances involved.

And, a property owner should always first consult with a tax advisor regarding their own circumstances before accepting any of these loans. Interest paid on PACE liens may not be tax deductible but there may be a capital gains benefit based on the improvements.

Water Heaters Are About to Cost Much More

If you need a new water heater, consider buying one in the next three weeks.

Effective April 16, 2015, water heater replacement rules will go into effect.  A new amendment to the National Appliance Energy Conservation Act will require higher energy ratings on all new residential gas, electric, oil and tankless gas water heaters.  The changes will impact how they are designed, manufactured, tested, distributed and installed, as many will be taller, wider and heavier than your current installation.  Because of the potential increase in size, the homeowner may have an additional cost of housing the new heater in a larger cabinet.

 According to  the U.S. Department of Energy, "Standards mandatory in 2015 will save approximately 3.3 quads of energy and result in approximately $63 billion in energy bill savings for products shipped from 2015-2044. The standard will avoid about 172.5 million metric tons of carbon dioxide emissions, equivalent to the annual greenhouse gas emissions of about 33.8 million automobiles."  For water heaters under 50 gal., this greater efficiency is achieved by adding more insulation (making it bigger).  For larger water heaters, heat pumps will be required, and some larger water heater may be discontinued because they cannot meet the standard.  In the end, there will be less energy consumed, but not before the consumer pays more up front.  Also, the self-help install program will just not work, licensed plumbers will be a fact of life.  

And according to EnergyStar.gov site at least 30% of a home's energy is spent on heating and cooling:

According to the Bradford White website "It is important for contractors to understand that products manufactured before April 16, 2015, can be bought and installed after the changeover date."  However, since production of the new standard units started some time ago, some stores have been stocking up for some time, so older manufacture dates may be harder to find.

To extend the life of your current water heater, drain it yearly, and if possible, add a water softener to decrease sediments.   For more information go to http://www.energy.gov/search/site/water%20heater.

Energy-Efficiency Upgrades and Residential Energy Tax Credits for 2014

If you made your home more energy efficient in 2014, you might qualify for the residential energy tax credit.

Tax credits are especially valuable because they let you offset what you owe the IRS dollar for dollar for up to 10% of the amount you spent on certain home energy-efficiency upgrades. 

The credit carries a lifetime cap of $500 (less for some products), so if you’ve used it in years past, you’ll have to subtract prior tax credits from that $500 limit. Lucky for you, there’s no cap on how much you’ll save on utility bills thanks to your energy-efficiency upgrades.

Among the upgrades that might qualify for the credit:

• Biomass stoves

• Heating, ventilation, and air conditioning

• Insulation

• Roofs (metal and asphalt)

• Water heaters (non-solar)

• Windows, doors, and skylights

To claim the credit, file IRS Form 5695 with your return, the 2014 version may be found at their website with the instructions.

Cut Your Electric Bills with Solar Energy -- Is It For You?

Solar energy panels may warm your water, which can lower your water heating costs, or cut your overall cost of electricity.  Solar panels collect solar radiation from the sun and convert that energy to electricity. At first blush, the panels sound great, but look further--buying them outright would be a pretty big investment for most homeowners, and then there's the leasing option, which cuts upfront costs but has other features.

the City of Los Angeles is starting up its rebate program again tomorrow, which will cover about 30% of the total cost, down from the earlier 50% coverage.  Per a recent Los Angeles Times article, a 5-kilowatt system costs about $35,000--with a 30% rebate, the owner will recoup the cost in 13-15 years.

Leasing agreements account for about half of the California market, and California accounts for about half of the country solar installations.  The lowered rebates, however, have also caused upfront costs for leases to increase to $4000 and $5000, so it's not so attractive for many potential customers. To reduce that upfront cost, leasing companies would have to increase their leasing fees, which will have the total effect of a monthly increase in montly electric bills, not a decrease. Solar panel leasing companies have a less exciting outlook in some cases.

Over time more companies in the business in California selling more panels will eventually make costs lower--already the panels are less expensive than in 2010, but labor costs have not come down from 2010.

Another option are thin-film solar panels which generate half the electricity and cost abouty 10% more than the standard flat panels, but have the advantage of being lighter and being more flexible in shape.

For now, research the sources offering solar panels and program costs. Going Green is good for the environment, but it does have costs attached.

Rebates - City of Long Beach for solar water heat
                City of Los Angeles for solar panels
Southern California Edison also offers a program for its customers for home or business use.
For additional federal tax credits and additional savings, see the information at U.S. Department of Energy.

Going Green: Recycle Your California Appliances

Is your refrigerator getting more expensive to run? I think mine is because it's now 10 years old, and my electricity usage is going up (but cleaning the coils can also lower electrical usage too). If you're going to replace them, don't dump your old appliances or have them hauled away before you check this program first. The California Energy Commission is behind the Cash4Appliances program. Click on the link for more information.

Don't dump your old appliances, instead, recycle them, and/or get a rebate through the listed partners if you bought from them. This includes Best Buy, Home Depot, Fry's, Howard's, Lowe's, and other major chains.  I unfortunately do not see Sears on this list (where I bought my refrigerator). This program applies to residential occupants, and landlords and tenants of residential properties.

This program started in April, 2010, and will continue until funds are gone. Per their website today, there is over $11,000,000 available in funds. This program includes your refrigerator, clothes washer, room air conditioner, freezers, dishwashers, certain water heaters, and certain furnaces. As of July 28, eligible energy efficient appliances and rebate amounts available are: refrigerators $200, clothes washers $100, and room air conditioners up to $50. California Cash for Appliance PLUS rebates include: dishwashers $100, freezers $50, water heaters $300-$750, and HVAC systems: $500-$1000.

Another source for recycling refrigerators is through Southern California Edison, which will remove your working refrigerator and pay $35.

Thinking Green: Using Light Colored Roofing and Paint

In a visit with one of my past clients today (who painted his roof white after his house closed escrow over 10 years ago), it came as a revelation that California has passed a law effective July 1, 2009, that residential roofs on new construction, both flat and sloping, must be re-roofed with a white or light material. Actually, the law for a white flat roof has been in effect since 2005. See this article provided through the California Energy Commission.

The argument is of course for energy savings, and reflects a practice long used in ancient societies that populate hot climates where light or white clothing is standard practice, and whitewash is used on all structures. The cooling effect has long term energy savings implications, especially for the Western states, and especially for California where energy conservation is fast becoming an outright demand. A California Energy Commission board member states that it has long been known that white-roofed buildings stay cooler in hotter weather:

"painting urban surfaces in warm parts of the world white or a light color could offset the carbon emissions of all 600 million of the world's cars for 18 to 20 years — at a savings equivalent to at least $1 trillion worth of CO2 reductions."

"It turns out that they cool the air outside of their walls, too. On a typical summer day, Los Angeles is 5 degrees warmer than surrounding areas, and studies have consistently shown that by far the largest factor in this discrepancy is the absorption of solar heat by dark roofs and pavement — a phenomenon known as the "urban heat island" effect."

So far, this law affects new construction, but doesn't it make sense to apply these principles to existing structures wherever possible? Rethinking guidelines for historic homes might be in order.

Saving Energy Saves Money in Your Home

Just recently I was in our local Belmont Shore shopping zone and kept walking by a large sidewalk bin of CFL (compact fluorescent light) light bulbs. Somehow, it gradually dawned on me that at $.99 each, these were a real bargain and far below the going price of $5.00+ in most retail stores.

According to flexyourpower.org, replacing standard incandescent light bulbs with compact fluorescent light bulbs savs 75% of lighting costs. If you live in household of several people where the lights may be on as much as half the day, or you live in a condominium building requiring public lighting, this can be a tremendous savings in a year. Not only is it a savings to you, it's a savings for everyone. "If all Californians replaced five bulbs with CFLs, it would be like taking 275,000 cars off the road. "

So I bought a lot more than 5 bulbs, well worth it at $1.00 each--not only are they energy saving, but a 23 watt CFL bulb equals a 100 watt incandescent bulb, and the CFL will burn up to 10,000 hours.

HINT: After trying out different brands, you'll find the right tone for you.

I used the "warm white" from MaxLite, but the end result also depends on the lamp shade or other globe the light will be shining through.

Go to FlexYourPower.org and check out the many other energy saving tips. You really can't lose.

And if you are in Belmont Shore soon, Billings Hardware has a great supply of CFLs.

More on Tax Credits and Tax Savings for the Energy Efficient

Follow the link to this article for more about tax credits in the Stimulus Bill for being energy efficient, i.e., tankless and solar water heaters!