Why not point-of-sale?

We pay a premium to live in our city. At $184,700, Austin has the second-highest median home-sales price in Texas (behind only Collin County) and a mandatory point-of-sale ordinance would only make Austin homes less affordable.

Read on to find out who these fees impact most, how expensive they could be (even with proposed spending caps in place) and how many people could be prevented from buying a home in Austin if they took effect.

Negative effects of mandated, point-of-sale energy upgrades
Adding mandated energy-upgrades to the cost of buying a home in Austin will make it even more difficult for many people to afford a home in our city, hitting hardest those who can afford it least.

• Point-of-sale fees like this are highly regressive, meaning higher burdens for low-income people.
• Young, growing families and seniors on fixed incomes would also be heavily affected.
• If the City of Austin mandates costly energy upgrades, some buyers will choose to, or be forced to, buy homes outside the city limits.

Small percentages add up to a lot
City of Austin documents state that “… the task force is considering capping total required expenditures at no more than 0.5% of the home price in early years ..., rising to 1% in later years.” The percentage may be small, but based on a purchase so large, it can have significant financial consequences.

• One percent of the current Austin median price is $1,847.
• One-half of one percent would be $923.
• If paid at or near the point-of-sale, these fees are hitting at precisely the wrong time, making an already expensive purchase that much harder to afford.

Impact of out-of-pocket expenses
Closing costs are one of the biggest constraints first-time and low-income buyers face when trying to buy a home. A few years ago when the National Association of REALTORS® researched the effect a 0.5% point-of-sale/transfer fee on a $125,000 home price, the research pointed to 16,000 Texas families every year that would be prevented from buying a home. While that study was done on a statewide basis, it points out how even a 0.5% mandated fee can price a significant number of people out of buying a home.

Some proponents of the proposal have suggested the cost of improvements simply be rolled into the home mortgage. Title companies have said that is not an option, but even if it were, it would make the energy improvements more costly. Rolling the costs into the mortgage sounds like an easy solution, but comes with its own set of problems.

• A homebuyer is being forced to finance energy upgrades for as long as 30 years.
• Consider $923 of energy upgrades included in a 30-year fixed-rate mortgage. After 10 years, a homeowner will still owe $779 on that $923 part of the loan, despite having already paid $664 of loan payments toward it.

Other negative aspects of mandated energy upgrades tied to the sale of a home:

• Additional inspections cost money, and that cost will have to be paid by the buyer, seller (or both), or come out of city funds that could better be spent elsewhere.
• Scheduling more inspections can slow down the transaction, delay closings, and may jeopardize some buyers’ mortgage-rate locks.

Energy efficiency for Austin homes is a great goal, but a mandate is simply the wrong approach.