Consider utility bills carefully before you buy
By Erik J. Martin
Before purchasing, home shoppers scrutinize many financial factors that affect affordability – including the cost to finance and insure the residence, property taxes and expected upkeep. But a new study by Trulia and UtilityScore indicates they often underestimate a crucial metric that can have huge long-term repercussions on homeowner economics: utility bills for services like electric, natural gas or oil, and water.
Among the key findings of the study (details at trulia.com/blog/trends/covert-costs-utilities):
• single-family home dwellers spend a median of $2,715 a year ($226 monthly) on utilities, equating to 1.4 percent of the median value of that home or $1.68 per square foot;
• climate is not an accurate predicting factor for how much median utilities will cost at the metro or zip code level;
• nearly all of the top 20 most expensive zip codes by median annual utilities are located in Arizona and coastal California metro areas;
• owners of detached homes living in areas with lower home values, like Detroit and Pittsburgh, may be paying just as much for utilities (on average) as they do for their mortgage.
“Utility bills represent 25 percent of housing costs, on average, in the U.S. and are often more than property taxes and insurance combined,” says Brian Gitt, founder/CEO of UtilityScore in Oakland, California. “It is dangerous to overlook the cost of utility bills when house hunting because these bills can have a significant impact on your budget.”
Felipe Chacon, housing data analyst for San Francisco-based Trulia, says he was most surprised by the aforementioned study’s lack of correlation between climate and what people pay for utilities – places that are much warmer or cooler on average than what most people consider “comfortable” actually don’t pay consistently higher bills, often because the local utility provider(s) in that area charge lower rates than other areas of the country.
“If you purchase in an area with fairly low home values and fairly high utility rates, you could be unpleasantly surprised to find that what you thought was a financially responsible move in purchasing that home may actually push you beyond what is comfortable,” Chacon says.
First-time buyers who previously rented and buyers coming from attached homes need to pay extra close attention to utility costs before purchasing.
“Utilities in apartments and multi-family homes are often lower because the units themselves are smaller and they share walls with others who are also heating or cooling their spaces,” Chacon adds.
To prevent buyer’s remorse caused by utility bill sticker-shock, be proactive prior to purchasing, experts advise.
“If you are moving into a home in a lower-cost metro, make sure to talk to your real estate agent about what kind of utilities to expect. They should be able to give you a rough idea,” notes Chacon.
Denise Supplee, Realtor with Long and Foster Real Estate in Doylestown, Pennsylvania, recommends contacting the electric company and water and heating providers for your desired address “to request monthly bill estimates on the home you are considering, most companies will do that for you.”
Gitt suggests visiting myutilityscore.com to get instant free energy and water bill estimates for your prospective property as well as customized recommendations for home improvements that can reduce your future utility bills.
Additionally, it’s smart to have a thorough home inspection conducted that carefully assesses features and components that affect energy and water usage.
“Be sure the home inspector checks the heating and cooling systems, windows for efficiency, attics, crawl spaces and basements for drafts, and the overall home for proper insulation,” says Supplee, who is a strong proponent of purchasing a home warranty to cover mechanical breakdowns and maintenance issues.
Jeff Wilson, HGTV host and author of “The Greened House Effect,” suggests taking it even a step further.
“Having a whole-home energy audit performed by a building science professional can give a full report of a home’s weaknesses,” Wilson says. “The price of a super-inefficient home could potentially be negotiated down and the savings put toward renovations to improve efficiency and comfort.”
© CTW Features