Utility Bills with Home Ownership: The Home Buyer’s Energy Efficiency Checklist

Reading time: 6 minutes

6 minutes read

Category: Home Utilities
Posted on: 01/08/2019
overhead view of a calculator and red pen on top of various gas and electricity bills on a table

Buying a home has become more expensive. The median US home price jumped 7.7% to $222,800 in 2018, according to Zillow. Many homeowners, however, completely overlook the cost of utility bills when buying a new home. If you turned down that French provincial split-level on the quiet cul-de-sac because of high local electricity rates, an energy efficiency assessment may change the overall cost of ownership.

By asking the right questions, you can re-evaluate the cost of a home purchase; the new home you‘re looking at may be too pricey after all, or, with energy efficiency retrofits, it could be a bargain.

Home Energy Efficiency Audit

Before buying your new home, an energy efficiency audit is recommended. You may conduct your own audit, bring in a professional assessor or the home may already have an energy efficiency rating (find out more about the HERS® Index, Home Energy Score™ and Energy Star home energy ratings below).

You won’t only want to consider the current energy efficiency of the home but also ways you can improve energy efficiency performance. The US Department of Energy recommends a “whole-house approach" to an audit, encompassing:

  1. Space heating and cooling – furnaces, boilers, heat pumps, central air conditioning, ceiling fans, solar panels/collectors

  2. Water heating – heating efficiency and losses in heating systems and boilers

  3. Appliances and home electronics – energy efficiency, including smart functions to improve energy efficiency

  4. Lighting and daylights – energy efficient lighting, skylights and other natural lighting sources

  5. Windows, doors and skylights – window frame, door and duct leakage

  6. Insulation and air sealing – air leaks and heat loss through ceilings, floors and walls; proper ventilation

The Home Energy Efficiency Checklist

You’ve found the home of your dreams, but how do you go about assessing the many energy systems and appliances and their energy efficiency? Following is a checklist to help you evaluate your new home's energy costs and potential energy efficiency upgrades when real estate hunting.

How much are the monthly/seasonal utility bills - electricity, gas and water? Assess the seasonal costs of your home energy systems. How do they compare to those of homes in the neighborhood? In the region?

Determine the energy efficiency ratios for items 1–4 (heating systems/appliances/lighting). Key ratios include:

  • Coefficient of performance (COP) - measures power output to power input in kilowatt hours (kWh) (space heating and cooling systems)

  • Energy efficiency ratio (EER) - measures cooling output to energy input (Btu/Wh) (air conditioners)

  • Seasonal energy-efficient ratio (SEER) - measures cooling output to energy input (Btu/Wh) over a season (heat pumps/air conditioners)

  • Annual fuel utilization efficiency (AFUE) - measures how efficiently your heating system uses fuel by measuring energy input to energy output over a season. For example, the AFUE ratio of a gas furnace would be (Btu/Btu) (heating systems/furnaces)

  • Lumens per watt (LPW) - measures Lumens to energy input (lm/W) (light bulbs)

Now, how do these energy efficiency ratios compare to those recommended by energy efficiency standards?

  1. What energy efficient appliances are used in the household? Which appliances will be sold with the house? How much does each appliance contribute to the energy bill? If a smart meter is installed in the house, you may be able to see the daily/monthly energy use breakdown by energy system and appliance.

  2. Is a smart meter installed? If, yes, ask to see the energy usage reports for the home. This report will tell you the cost of energy at different times of day, monthly and so on. It may also break down energy costs by lighting, appliances, etc. A very useful feature, if offered, is a comparison of your energy usage and costs versus those of other households in your and surrounding regions.

  3. If natural gas is used in the home, does the local utility provide annual house audits? Rebates or other incentives? Are carbon monoxide detectors installed?

The home may already have one of the following energy efficiency assessments and ratings:

  • HERS® Index Score – the HERS Index was designed as a tool to help home sellers rate the energy efficiency of the home. This handy metric is appearing in more real estate listings. The lower the HERS score, the more energy efficient the home is

  • Home Energy Score™ – this score determines the energy efficiency of your house's energy assets and annual costs. It allows you to compare your home's score to those of others in the housing market - a useful analysis for a home buyer. The audit assesses the home structure; and the heating, cooling and water systems. The structure includes the house frame and roofing. Does the home have a cool roof reflecting sunlight in the summer and absorbing it in the winter? If you don’t know the Home Energy Score, consider bringing in an assessor

  • Home Energy Star certificationEnergy Star homes have energy efficient lighting, appliances and ceiling fans that meet the standards of this government program

All of the above energy efficiency programs provide lists of energy efficiency assessors certified to provide a detailed home energy efficiency audit applying their respective metrics. They also provide guidance on steps you can take to make your home more energy efficient

Home Energy Efficiency Upgrade Assessment

If the house scored low on the energy efficiency audit, it doesn’t necessarily rule out the purchase. With an energy efficiency upgrade, the utility bills could be reduced, and these cost savings could even help make the monthly payments on your new mortgage.

  1. Compare the energy efficiency ratios and costs you calculated in the home energy efficiency audit to those of the most energy efficient home energy technologies. Here, you’ll also want to consider installation costs, together with energy costs, over the lifetime of your new energy system.

  2. Evaluate the cost and viability of installing renewable energy. Consult the Database of State Incentives for Renewables & Efficiency® to find out what renewable energy and energy efficiency incentives are offered in your state. Research what energy efficient rebates and incentives are offered at the utility, city, county, state and national level. For example, homeowners can receive a 30 percent tax credit on geothermal heating pumps - which can achieve up to 98% efficiency by drawing from the natural hot springs you may enjoy in your leisure to heat steam to power an electricity generator - until December 2019, and this credit can be applied to systems installed since 2017.

  3. Determine what benefits would be derived from converting to lower cost natural gas. Is the local utility offering rebates to natural gas homes?

  4. Assess the cost of upgrading to more energy efficient appliances.

  5. Survey what water-saving technologies could lower your water costs - toilets, faucets, washers, shower heads and so on. A toilet that uses one versus two gallons of water per flush could save several hundred dollars a year.

  6. Upgrade to a smart home by connecting smart home energy systems and appliances to a smart energy meter to monitor real time energy usage. This device can reduce costs and CO2 emissions by adjusting heating, cooling, lighting and appliance energy usage during peak and off-peak energy pricing periods while promoting energy efficient behavior. A UK study found that 86 percent of smart meter owners engaged in energy saving behaviors such as switching to more energy efficient light bulbs.

A home energy efficiency audit may be one of the best investments you make in your home. Though only half of US homes have smart meters and less than two million have solar panels installed, the costs of energy efficient and renewable energy technologies continue to fall as demand increases. These greening trends reveal that the utility bills of most homes could be reduced with an energy efficiency upgrade.

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