Whether you're buying a home through a home builder or through the real estate market, the greatest opportunity to reduce the carbon footprint of your residence occurs when you first purchase your home: Rather than abusive or ill-advised home mortgage terms, you can use this credit to finance the long-term benefits of renewable energy sources. Tax credits aimed at stimulating the housing market can be used to invest in reducing your home's energy consumption and monthly utility. Plus, it's still a buyer's market out there, and you shouldn't close on a house without an evaluation of the home's overall energy-efficiency. Here's a rundown of the most commonly missed opportunities, each of which should be looked at before you finalize your home purchase.
Add Cost of Renewable Energies to the Mortgage and Start Saving on Day 1
For home buyers with a solid credit rating, a standard 2.5kW solar-powered electric system might add between $100-$115/month to your mortgage. Meanwhile, you might easily save this money or more each month by reducing your electric bill. The cost and rewards for geothermal systems can be even more wide-ranging with some estimates suggesting the added cost to your mortgage might be as low as $20-$30/month and generate savings up to $75-$100/month. Naturally, these figures do not apply to every home, otherwise conventional heating and cooling systems would be nearly dead by now, but many homes and homeowners do have this potential and fail to realize it.
Retrofits and Refinancing
As a corollary to adding these renewable energy sources to the terms of a home mortgage, many people are currently refinancing their homes, presenting yet another opening to finance the cost of these projects and exponentially reduce monthly bills. Although the cost of retrofitting either solar panels or geothermal systems tends to be higher than new construction, the truth is between the design of your home, your property's terrain, your local climate and energy prices, a 30 percent refund in tax credits from the federal government, and the limited pool of experienced contractors for these systems, it's impossible to know the feasibility and overall financial savings without getting estimates. Plus, too many homeowners visualize solar power as an all-or-nothing renovation. You may not be able to justify retrofitting your home with a comprehensive photovoltaic system, but even solar water heating can make a significant impact with a fraction of the installation cost. A conventional water heater can emit 2 tons of carbon dioxide, twice that of the average automobile. Yet, the cost of the average solar water heater is about $2,500 and takes only 3-6 years to pay off the upfront costs.
Apply the $8,000 Tax Credit to Shore up Problem Areas
As much as the first-time, home-buyer tax credit has been publicized, the Internal Revenue Service announcement on Feb. 25th that homeowners who closed on a house in the beginning of 2009 could claim the tax credit on last year's return. It makes sense for the IRS to allow homeowners earlier access to the money, as the tax credit becomes both incentive to buy a home and a sort of indirect economic stimulus. Indeed, rather than simply saving the money, you could make a further investment in your new home, help economic growth, and green your home, by using this money on new energy-efficient appliances, windows, insulation, roofingıwhatever your new home's greatest need is. Chances are you'll be entitled to a green tax credit next year for your decision to contribute to sustainable constructionıand you can save, spend, or invest that money.
Homeowners who are taking advantage of the depressed housing market should also realize that "green" improvements add property value even during times of recession. Rather than an arbitrary value homeowners place on an extra bathroom or granite countertops, these projects have demonstrable value to home-buyers and homeowners of all stripes: For every $1 in annual energy savings, an average of $20.73 is added to a home's resale value, according to the Green Building Appraisal Journal.
Negotiate Renovations with the Seller
On the other hand, these insanely discounted asking prices are driving down prices throughout the housing market, increasing your leverage with homeowners trying to attract their own buyers. Indeed, the ability to ask these private owners to renovate certain areas of the home is one solid reason to eschew the foreclosure market. That said, you should keep in mind that while you'll probably be able to find a good price on a new home for the next couple yearsıthrough foreclosure or private homeownersıthe ferocious level of buyers' leverage probably won't linger must past this year. In fact, with the news from the Commerce Department that housing starts soared 22.2 percent in February to a seasonally adjusted annual rate of 583,000 units, the buyer's market sentiment may already be showing some signs of erosion.
Current Opportunities Must Lead to Long-Term Investments
With home values tanking, there has, arguably, never been a better time to be a prospective home-buyer. The S&P Case-Shiller National Home Price Index reported that prices sank a record 18.2 percent during the last three months of 2008, compared with the same period in 2007. To say the least it's a buyer's market, but much of this marketplace reality is fueled by foreclosures, so you have to recognize your audience: Banks sell properties as is, use fire-sale asking prices to attract several buyers, and then drive hard bargains the rest of the way.
Whether you're considering economic gain or sustainable energy policies, the recession offers a slew of opportunities to anybody with the credit or capital to invest. In no place are these opportunities greater than the housing market. Rather than be enticed solely by undervalued home prices, using these opportunities to invest in long-term economic benefits will insulate your home from future economic uncertainty ranging from the plummeting home values of recession to the skyrocketing cost of gas and electricity during boon times.
