Home Affordability: Total Cost of Ownership

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As a green real estate agent, I think energy efficiency features are important.  But not for the obvious reasons.  I appreciate them because I think buyers who understand energy efficiency make for happier home owners – it helps you manage your home costs better.

For years, mortgage lenders have trained us to focus on PITI.  We figure out how much home you should buy based on Principal, Interest, Taxes and Insurance.  But that is only part of the picture.  For example, the Institute for Market Transformation notes that energy costs are a significantly larger aspect of a family’s monthly budget – much bigger than the taxes and insurance we base mortgage calculations on. 

So how can you make better choices and get more control over your monthly budget?  It’s time to start thinking about the Total Cost of Ownership.  Total Cost of Ownership means you factor in your mortgage, plus Transportation, Utilities and Maintenance costs. 

Today there’s no one-stop resource for evaluating Total Cost of Ownership.  But the resources are evolving fast.  Here’s a list of the best Total Cost of Ownership resources right now:

Transportation

  • Abogo (as in “abode” + go) helps you see the transportation costs associated with one address vs. another
  • Look for the Walkscore badge on more and more listings for sale; or, visit the site to enter an address and see how walkable it is and what the public transit options look like

Utilities

  • A home energy makeover, like the retrofits GreenHomes America is known for, is a great investment that will cut your monthly costs
  • If you are shopping for a home, ask for the utility bills over the past 13 months and background details on retrofit work done, and the results of any before and after testing

Maintenance

  • Condo associations have performed Reserves Studies for years.  Homeowners can use the same approach.  A reserve study considers how old the key systems in your home are, how long you can expect them to last, and helps you budget funds to proactively replace or update them as needed.
  • A good home inspection, combined with a home energy assessment is a great tool to create your own home maintenance plan. 

So start thinking about  Total Cost of Ownership for a better way to enjoy your home and manage your family budget.

Laura Reedy Stukel is an EcoBroker Certified real estate agent and nationally recognized consultant, writer and speaker on home energy efficiency.  She is a market transformation expert, focused at accelerating home retrofits at key real estate leverage points.  Her work is unique, focused on energy efficiency projects fueled by the power of consumer choiceSM.

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One Response to “Home Affordability: Total Cost of Ownership”

  1. Mike Says:

    Thanks for this post, I couldn’t agree more, see my response here:
    http://www.demandsidesolutions.com/2011/01/disclosure-as-total-cost-of-ownership/

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