The Gardner Group Blog

FROM THE DESK OF STEVE GARDNER

I want you to be informed about a new city-mandated "point of sale" requirement that will financially affect you when you sell or buy a house.  The city is planning to pass an ordinance that will make it mandatory for your house to be energy retrofitted before you can close the sale.  We are all in agreement that we need to keep Austin beautiful and affordable at the same time.  The mayor is proposing this program to conserve energy for our city. The concept is a good one.   We now have a non-mandatory program where the city will come out and do an energy audit, but neither the audit nor the recommended changes are required. You can read a lot of details by going to www.keepaustinaffordable.org, which is published by the Austin Board of Realtors. 

In a nutshell, my take is that we are going too fast with this ordinance and the city is too concerned with getting it passed quickly before considering all the alternatives and the ramifications for the consumer.  I asked the mayor on live radio if he would support removing the June 10, 2008 mandated date for the committee he appointed to have a recommendation for City Council to consider passing, and he said he doubted it would happen that quickly. However, he never said he would NOT SUPPORT the ordinance if the Council wanted to move forward.  This project is widely known to be his special project, and he has been orchestrating it from the beginning.  He has considerable influence over the project's time frame.

There needs to be more input from city residents before a few people decide something of this magnitude for everyone.   There are approximately 26,000 sales in Austin per year that would have to be inspected before closing by a city inspector, and that could easily be 35,000 to 40,000 if you take into account that every house will not pass inspection the first time.  The city currently has about 17 inspectors who do new-home and other types of inspection.  WE ARE MOVING TOO FAST WITHOUT A TRUE PROGRAM IN PLACE.  We need more details and input on this subject.  Call your City Council members after reading the Keep Austin Affordable Web site and checking the city's Web site for details.

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How much would it cost to rebuild your home at today's prices?

Consider this...
You're talking with your insurance agent, who explains the coverage available under your homeowners policy. You're surprised to find out that the estimated replacement cost of your home is different from its purchase value. Why? Here is an explanation.

Purchase price vs. replacement cost

The appraisal industry bases its valuations on the availability of comparables to select the appropriate costs.  Appraisal-based cost data reflect typical labor efficiency, the cost of money, fees and many other items, which are not included in the basic costs of labor and materials.  They are designed to give accurate present-day costs that will form a sound foundation for the cost approach to valuation. Within the appraisal industry, the term "replacement cost" means the replacement cost of a building as the total cost of construction required to replace the subject building with a substitute of like or equal utility using current standards of materials and design. In the insurance industry, replacement cost and reconstruction cost mean the total cost of construction required to replace the building with one of like kind and quality, as quickly as possible, at an existing site.  The replacement cost of your home can be 30 percent to 40 percent higher than the cost of new construction. The difference is due to:

• No economies of scale
• Limited site access due to existing structure
• Increased wages for a labor force skilled in reconstruction
• Lost productivity from working within an existing site
• Replacing the home with the same materials and style that existed prior to loss

Farmers Computerized Dwelling Replacement Cost (CDRC) program

In the past, the most commonly used replacement cost methodology was the square foot method.  This method takes the measurements of the home, garage, and basement area, and then multiplies each by a specific amount (e.g., $50 x first floor square footage plus $35 x Garage Square Footage plus $20 x basement square footage = estimated minimum replacement cost for the dwelling).  It was designed when average home styles and features were more common and consistent.  More recently, companies, including Farmers, began using component-based systems to calculate the replacement costs of dwellings.  Instead of assuming that all homes of the same size and age require the same amount to rebuild, a component based system incorporates the actual features of an insured dwelling in the replacement-cost estimate.  Farmers contracted with Marshall & Swift to provide the core labor and material costs used by our Computerized Dwelling Replacement Cost (CDRC) program to calculate the minimum estimated replacement cost for your home.  Currently, Marshall & Swift monitors 2,621 locations in the United States. The labor and material cost information it provides helps estimate the cost to rebuild a house on its existing lot, as opposed to other systems that calculate the cost to build a new house on a vacant lot.

Determine the adequate amount of insurance for your property

As already mentioned, Farmers agents use the CDRC program to calculate the replacement cost
of your property. You advise your agent about the features/and components of your house, and he or she then inputs this information into the CDRC program. The program determines a replacement cost based on labor/and material costs for the features of your property.  It is very important that you provide accurate information about your property so that our CDRC program can calculate an adequate replacement cost estimate for your property. Once the replacement cost estimate is established, you can use it as a reference to determine the amount of insurance you need. 

I will be glad to speak with you at your convenience to discuss the construction details of your home and share with you the benefits of allowing Farmers to provide you with homeowners insurance.  If this sounds good to you, please give me a call at 1-866-380-9088 ext. 705 and I will give you - without obligation - a free comprehensive replacement estimate on your home.

Alycen Delrie
Agent

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Steve and David discuss the city's proposal to retrofit Austin homes at point of sale on AM1370 - Saturday, May 3, 2008 at 1pm. Joining them on the show will be members from the Austin City Council, Mayor Will Wynn, and representatives from the Austin Board of Realtors.

Please post your comments on this topic! All comments will be printed and sent to every Austin City Council Person.

This is an excerpt of an email from ABOR: 

The City of Austin is introducing an ordinance to mandate energy efficiency retrofits for all types of properties in Austin, including single family owner-occupied homes. This is ordinance is being looked at as part of Mayor Will Wynn's Climate Protection Plan.

They intend to enforce it at the point of sale.  In other words, prior to the sale of any single family owner-occupied home, a certificate of compliance proving the required efficiency retrofits have been done must be done prior to closing.

WHAT THIS MEANS TO OUR HOMEOWNERS

Without a Certificate of Compliance filed of record prior to closing or at point of sale, a single family home cannot be legally sold in Austin.

Delays in the time from escrow of a purchase agreement to closing due to the compliance and inspection process could exceed, by days or weeks, the typical 30 to 45 day time frame in a sales transaction today.

Immediately upon the effective date of the ordinance, the city will have to implement methods and processes to meet the demand created by the sale of some 25,000 homes per year. That's 25,000 inspections, assuming the first inspection results in the issuance of a certificate of compliance. City inspectors say that at least 50% of all inspections result in a subsequent inspection to correct problems found. That's an additional 12,500 inspections, at a minimum, or some 37,500 new inspections in a typical year to determine if single family owner-occupied properties comply with the new proposed ordinance. Who will pay?

Homeowners will bear the expense of retrofits to obtain the certificate of compliance. These expenses will vary from home to home, but the range could be anywhere from $1,500 to $10,000 per home.

Expect delays in acquiring another home as homeowners scramble to comply with the new ordinance, especially if that homeowner needs to sell his or her existing home prior to closing on a new one.

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Each of our agents lives, works and plays in Austin, and as a local real estate professional, each agent is ready to answer all your questions on Austin living. If you look around on the Internet, you will see Austin is consistently rated a great place to live. The city combines passionate artists, prominent politicians, cutting-edge business and new college students every year. It was rated here as one of the ‘Smartest' cities back in 2006, and Austin continues to attract new business, new jobs and new ideas as the city grows.

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The Gardner Group is a team that has a very diverse background. Steve and Brandon Gardner have years of experience in real estate and have brought together a team that has a passion for real estate and a commitment to great personal service. But each agent has a unique personality and story that brought them to The Gardner Group. Visit Our Agents page and learn more about the person who can help you fulfill your real estate goals today.

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