A Corvallis ordinance requiring home sellers to list an energy score could have pros and cons, according to some real estate experts.
The scores will give buyers an idea of what it will cost to power a home via an assessment, making it easier to compare potential purchases across the housing market.
The home energy score law takes effect April 1 next year, giving time for public education and for energy assessors to get certified.
The potential for energy scores to be taken out of context is among the concerns in the real estate industry. Michael Krasilovsky, principal broker with Team K Realty at RE/MAX Integrity, questioned whether a lower score might turn off potential buyers, despite relatively simple fixes that would improve the rating.
Disclosure is another issue he raised. Krasilovsky said a seller could be required to share an assessment they don’t feel was accurate or done well. And he wondered about assessments conducted by individuals hoping to drum up business for their preferred contractors.
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“I’ve seen situations where whole home inspections end up causing major disclosure issues because the inspector was a bozo,” Krasilovsky said.
While he very much likes the intentions behind the program, Krasilovsky said he sees a number of ways it could get “messy” in practical application, leaving real estate agents responsible to figure out solutions.
Not likely to affect prices
He said the overall impact will be additional pressure on sellers to make their homes more energy efficient, but it probably won’t cause major changes in the real estate market. He said Corvallis is a slow-growth city with tight constraints on expansion and development, creating a much-loved sense of neighborhood communities.
“That’s also a fancy way of saying we have a lot of old homes that need better energy efficiency,” he said. “Because slow growth means you have older stuff.”
There’s two sides to buying homes in Corvallis, Krasilovsky said: It’s highly desirable for its feel of livability, but supply and demand are skewed because it’s a slow-growth community. Buyers end up weighing older homes in the city that need costly work against newer, better-priced homes in the surrounding areas.
“That’s something only an individual buyer can decide,” he said. “It’s not that one is better than the other.”
Listing agents will have to be diligent about educating homeowners on the effects of the energy scores, said Hong Wolfe, principal broker with Windermere Real Estate Willamette Valley and owner of Wolfe Investment Services. She said some home values may go up or down because of energy scores.
“Market pricing is going to depend on the economy in general,” Wolfe said. “But I think being more energy-efficient is going to favor certain homes because of the high education level of this town. Homes with more ‘bells and whistles’ always sell higher.”
A possible ancillary benefit from the energy score mandate will be more business for companies involved in home improvements, such as insulation or solar power, as homeowners seek to raise their scores, Wolfe said. She also said Corvallis could become more attractive to buyers than cities without such a program.
Advantage: newer homes
The energy scores may also favor smaller homes and newer construction, Wolfe said, noting that both have inherent energy efficiency. She points out Corvallis has been a consistent draw for retirees who are often seeking smaller living spaces and keeping tight budgets.
“I think in general it’s a positive thing for the market,” she said. “It’s a great thing the city is doing.”
Given the high demand for home improvement contractors in the current market, Wolfe suggested anyone considering energy efficiency renovations might want to act sooner rather than later, particularly as the energy score mandate could further strain worker availability.
Educating buyers and sellers on the home energy score mandate will primarily fall on Realtors, said Don Robertson, co-chair of the Willamette Association of Realtors Government Affairs Committee. He said that’s somewhat concerning because the listings in Corvallis come from all around the area.
“If those agents from out of the area are not really up to speed on that Corvallis code, they could potentially steer the seller wrong or just not inform them,” Robertson said, “which then would be an issue for the seller.”
The home energy score will be the only mandate required for sellers prior to listing, Robertson said, although with the current market demand, he doesn’t see it making much difference in whether a home sells or not. But in a different market it might, he said.
The effect on lower income home sellers also has Robertson concerned. It may not be a big deal in the current local market, but if demand lessens the mandate could hurt those who are less able to invest in home energy improvements or who need to sell on short notice.
Robertson said he’ll be watching closely for confusion created across the regional market by the unique new code in Corvallis, even at the local level between city and county jurisdictions. He suggested a uniform code could help with that, but he’s not in favor of mandated programs.
“That kind of thing makes it more difficult for a homeowner, and that’s where I have a problem,” he said.
On a 5-4 split vote, the Corvallis City Council approved the ordinance requiring home sellers to list an energy score at its June 21 meeting. Research shows mandatory energy efficiency disclosures increase the likelihood home sellers or buyers will make related upgrades to their homes, according to a city document.
A typical home energy assessment costs from $150 to $200 and is conducted by a certified home assessor, with a score that’s good for eight years, according to the document.
How it will work
Crafted as a complaint-driven program, the city will act when notified about real estate listings that lack a home energy score. The city would also notify the property’s listing agent of the violation.
Certain listings would be exempt, the city document states, including sales classified as a transfer of title pursuant to inheritance, involuntary transfer of title resulting from default on an obligation secured by real property, a change of title pursuant to marriage or divorce. Manufactured homes are exempt from the ordinance.
Enforcement would begin with a written warning notice giving the violator 15 days to comply, according to a draft of the ordinance. Violations could bring a penalty of up to $500, and another up to $500 for each subsequent 90-day violation period.
Technically, the mandate is not set in stone. Because the vote was not unanimous, the council will conduct a second reading of the ordinance and vote again at its July 5 meeting.
Cody Mann covers Benton County and the cities of Corvallis and Philomath. He can be contacted at 541-812-6113 or [email protected]. Follow him on Twitter via @News_Mann_.