Putting the HERS Score into Perspective: Using a Home's Energy Rating to Determine Added Value

 written by Dr. Lee Ball

One of the barriers to the widespread adoption of high performance building practices is the lack of quantifiable data that can be used to demonstrate added value to residential appraisals. Our last blog discussed numerous approaches to green home appraisal methods. This blog will discuss how a home’s energy rating can be used to determine increased value.  The Home Energy Rating System (HERS) Index is the industry standard by which a home’s energy efficiency is measured (www.resnet.us).

A typical resale home has a HERS score of 130. This may vary somewhat depending on climate zone and the type of HVAC systems in a home. The original HERS national reference standard new home had a HERS score of 100 based on the 2006 International Energy Conservation Code (IECC), but this changed after the 2009 IECC was passed. Today the standard reference home has a HERS score of around 85. After the passing of the 2012 North Carolina Energy Conservation Code,   a new home’s HERS score in the Tarheel state is around 82. A typical ENERGY STAR Version 3 home can have a HERS score anywhere between 60 -70 depending on HVAC types and climate zone. Finally to make things even more confusing, a home built to the North Carolina High Efficiency Residential Option (HERO) code, which is an optional part of the 2012 North Carolina Energy Conservation Code, will have a HERS score somewhere around 78.

Figure 1: NC and Surrounding States Issued a HERS Score in 2013

Now with all of that said, what in the heck does it mean? Are we comparing apples to apples or are we comparing apples to oranges? Originally when the index first emerged, we used the 2006 IECC reference new home with the HERS 100 score to demonstrate that it was 30% more efficient than the standard existing home with a score of 130, and a home with an 85 HERS score was 15% more efficient that the reference home with a score of 100. One thing is for certain, the lower the HERS score the better.  Many in the industry visualize a net zero energy target with a HERS score of “0” to be the eventual goal. However, in order to accomplish this one must almost certainly use some type of renewable energy such as photovoltaics (PV). In the meantime, we are seeing builders achieve HERS scores in the 40’s, 50’s, and even the 30’s. These low numbers can only be achieved by thoughtful attention to detailed insulation and air sealing, an integrated design approach, and very efficient HVAC systems.

So, how can we use this information to demonstrate added value on an appraisal? We have seen people use a home’s score in formulas they have derived in an attempt to quality energy savings compared to typical comps built to code, but a more accurate method is to reference the Energy Cost and Feature Report that the Residential Energy Analysis and Rating Software (REM/Rate) provides. REM/Rate is what energy raters use to generate a home’s HERS score in the first place. The Energy Cost and Feature Report  summarizes the annual utility costs that take into account heating, cooling, water heating, lights, appliance costs and the major energy design features of the home.  The report also gives monthly savings compared to the HERS 100 2006 IECC reference home. These numbers can be used by appraisers to quantify total annual energy costs and/or monthly savings compared to other standard code built homes. The Appraisal Institute’s Residential Green and Energy Efficient Addendum (http://www.appraisalinstitute.org/assets/1/7/ai-residential-green-energy-effecient-addendum-2.pdf) also includes line items for this information. Residential Energy Services Network (RESNET) is currently working with the Appraisal Institute to streamline the process of populating the data on the Residential Green and Energy Efficient Addendum by integrating it into the REM/Rate software package.

Building professionals can help this process by getting this information into the hands of the appraiser. This can be accomplished by including it on the MLS, by actually giving it to the appraiser, and through more education. Our next blog will highlight high performance building market data in North Carolina and its surrounding states.