Important Considerations for HERE Model
The HERE Model is a unique opportunity to leverage resources and efforts that creates an alliance among a few different professions. It allows Contractors, Realtors, Loan Officers, HERS Raters, Facilitators, Utilities, and others to all work together in a unique and symbiotic structure. If properly executed, those who are part of this alliance will benefit themselves by supporting the interests of their strategic partners.
The HERE Model holds the key to creating a serious urgency and demand for the energy retrofitting programs currently available. It does this in a way that leverages these resources and creates momentum for opportunities that have been available for years and will be available well into the future. This will ensure that energy retrofitting will continue once the incentives are no longer available. This is something that not only creates jobs and promotes retrofitting measures but actually guarantees that both the jobs and the energy reduction process will continue after the ARRA funding has been exhausted. This is a very significant advantage over any of the approaches that have been attempted so far.
The real beauty of this approach is that it is a classic example of a multiple-benefits solution. That is, the solution to promoting these energy retro-fitting opportunities is actually achieved by using this opportunity to solve another problem. It is a case where 1 plus 1 equals much more than 2.
Energy retrofit rebates associated with the financing of energy upgrades into home purchases provide a significant incentive to purchase a house. That alone will unleash an enthusiastic sales force promoting energy retrofitting of around 175,000 Realtors in this state.
The HERE Model uses current guidelines and available programs. In other words, almost everything we need to do this is HERE now. The only parts missing are:
1) The recognition of these opportunities; and
2) A legitimate resource for the Loan Officers and Realtors to obtain accurate information to effectively support the financing programs that allow energy retrofitting to be incorporated into the purchase loan.
We are addressing both of the above points. I am also providing specific scenarios that many buyers will be able to use to structure energy retrofit financing in combination with homebuyer programs, resulting in more net financial incentive than the $8,000 Federal Stimulus Home Buyer Credit provided. Note that this is not limited to first time buyers either.
One of the keys to effectively making this work, however, is a clear understanding among the Contractors, Lenders, and Realtors of the special considerations that must be accommodated when energy financing is incorporated into the home purchase process.
I have successfully closed many loans that incorporated both energy upgrade financing and other repair and rehab funds into the purchase loan. It is crucial that the Contractors understand that escrow timelines are critical to Buyers, Realtors, and Loan Officers. The Contractor’s bids are not needed to close a loan. These bids are needed before most of the functions that need to be completed within the Escrow timeline can even be started. Depending on the circumstances, there may be 15 to 30 days or even more of process that cannot even start without those bids. When buyers employ a Contractor I do not know, I now require that the Buyer, Contractor, and the Buyer’s Realtor sign an acknowledgment of required timelines. I make it very clear to all parties that if we surpass those timelines early in the process, a delay in closing will occur. I have found that this is also very helpful to the Contractor since often the bid delay is the result of a buyer being indecisive.
There is a little more flexibility when it comes to actually doing the work because it occurs after escrow closes, but the bids must be returned very quickly as the whole process is delayed without them. There is a great opportunity here for Contractors to get considerable work based on the Realtors promoting this opportunity. The one sure-fire way to sabotage this is to cause the Escrow’s to be delayed or even fall apart because of issues caused by bids not being returned quickly.
Also, the Contractors need to understand that there is a finite and defined amount of money available under these programs and the work that is in the bid is the work that must be done. There can be no change orders or additions. The scope of work that is in the bid is what must be completed when the Appraiser or HERS II Rater goes out to re-inspect. If the client wants you to do additional work that they are going to pay for in some other way, it must be started after the confirmation of work completed under the EEM, 203K, or Streamline 203K.
The Realtors and Loan Officers must be very clear with the buyers that the exact amount they will realize in rebates will not be fully determined until the work is performed and the “Measure Out” Audit has been completed by the Contractor. It is very important that this is made vividly clear to everyone.
When a HERS II rating is also done, such as in cases where an Energy Efficient Mortgage is being used for the financing, ONLY the contractor’s Whole-Home Assessment from the measure in and measure out processes will be given any consideration. However, The HERS II is still required for the EEM. It is very important that this is made vividly clear to everyone.
If a HERS II rating is done and it includes blower door or duct testing, it is crucial that the buyers appreciate that there are many factors that can affect those results, including air temperature and wind speed. If the Contractor gets different results when they conduct these tests, the buyers need to understand that this may very well be due to different conditions at the time of testing. Since this can affect the amount of rebate the buyer will receive, it is essential that we ensure that they do not draw unfair conclusions regarding the integrity of the Contractor’s test results based on factors outside of the Contractor’s control. There is no benefit to the Contractor to intentionally reduce the Buyer’s rebate. The money for these rebates does not come out of the Contractors pocket.
Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674
