Long Beach, Ca. As you may be aware, last week on Friday, the House passed by a 219-212 vote and energy bill commonly referred to as "Cap and Trade" because it puts "caps" on the carbon emissions from every U.S. company and industry and imposes trade limits and tariffs on imports. Proving no industry is immune from the hand of the Federal government and global climate activism, the Cap and Trade bill has some provisions that are very detrimental to the real estate industry, and especially in Southern California where real estate short sales consist of over 50% of closings and many sellers simply do not have the funds to bring their properties up to the standards required by the new law if it passes through the Senate and is signed into by Obama.
As part of the legislation every existing home sold in the United States using FHA financing will require an energy audit, paid for by the seller. The audit will cover all appliances, water, gas, heat, cooling; all energy systems will be audited to see if they meet federal standards. If any system or appliance fails to meet the standards the house cannot be sold until it is retrofitted to meet the new standards. The standards are being set to achieve a 20% improvement in energy usage.
You list a home built in 1960 with elderly owners who have lived in the home since 1988 and have not retrofitted the home since purchasing the home almost 21 years ago. What are the chances the home will meet the new federal standards? If the buyer is not an FHA buyer they may not need to worry about it but the market is now limited to mostly FHA buyers because conventional loans require a minimum of 10% down wherein FHA only requires 3.5% down. What if you have a qualified buyer, but they are only qualified using FHA financing? Many sellers may not take their offer because they do not want to go through the energy audit and retrofit. Many banks may wait until a conventional loan offer comes in; thus, shutting out many sales opportunities in an already hurting industry.
The Cap and Trade bill as passed by Congress is discriminatory against FHA buyers and sellers--typically the lower income and first time buyers in our market. Our current market in Long Beach, Californis and indeed; the nation is still reeling from a devastating period. Fortunately because of FHA financing we have increased sales, Cap and Trade will kill much of this market.
The real estate industry needs to fight this bill and specifically this provision before it gets adapted by the Senate. Please contact CAR, NAR and Senator Feinstein and Boxer, plus encourage your colleagues to do the same to kill this bill before it goes any further.
Kirk Mulhearn, a Long Beach Real Estate Broker co-manages Prudential California Realty, "The Bixby Knolls Office," and a Net Branch of, GEM Mortgage, a direct lender specializing in FHA, VA, and Conventional financing. Contact him at: 562-989-4608 ext. 110
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