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DOE Challenge Home Better Business for Builders Webinar (Text Version)

Below is a text version of the webinar titled "DOE Challenge Home: Better Business for Builders," originally presented in May 2012. In addition to this text version of the audio, you can access the presentation slides and a recording of the webinar (video).

Jamie Lyons: 
Slide 1: Welcome to the DOE Challenge Home orientation webinar. We're glad you could join us today. My name is Jamie Lyons. I support the DOE Challenge Home program. Today's webinar is an annual training that's mandatory for our partners to participate in. Just before we get started I wanted to offer up a few logistical announcements. First of all, we have a large group, so given that, we'll keep the participants on mute. You still may ask a question, however, at any time during today's webinar by using the question menu on the webinar software. We won't answer the questions via text, however I'll answer them live to the extent that we have time. We'll do this halfway through the session, and then we'll also grab some questions near the end of the session, time permitted. We'll do our best to answer as many questions as possible, but if we don't get to them we will get back to you with written responses. If you'd like a copy of today's slides, please email us at DOE Challenge Home, and you'll see that email address later on in the presentation, at the very end. There's also a short true-false quiz at the end of the webinar, just so we can make sure that you got some of the most basic points about the program, or that we've done our job to get them across to you. So to get started, I'd like to introduce Sam Rashkin. Sam is chief architect for DOE's Building Technologies Program, and he's the program manager for the DOE Challenge Home. Sam?

Sam Rashkin:
Thank-you, Jamie, and welcome, everyone, to the webinar. We really appreciate your time, and hopefully this will be a great overview for what we think's a very important labeling program for the housing industry. Let's move to the next slide, Jamie.

Slide 1: And in saying it's a very important program for the housing industry, what we recognize, of course, is that you do have lots of choices. There are just a plethora of names out there in terms of labels that you can use and ways you can recognize your homes. And if you hit the slide again, Jamie, you'll see that this is where we are today, we're at Challenge Home, which is what we think is one of the preeminent, high-performance, ultra-efficient labels in the marketplace. We'll explain why over the course of the seminar.

Slide 2: But what we'd like to do is congratulate you for thinking about this program and joining the program, because we think it's going to benefit you as a builder and benefit your customers. By constructing Challenge Homes, first of all, it puts you in a very select group of builders. What we promote right now is only the top 1 percent of builders in the industry are able to meet the extraordinary guidelines for comfort, health, safety, durability, quality, affordability, built into each and every Challenge Home. The other reason why we think we're so glad to have you on board is the value that's part of the equation here. Your customers start off with immediate energy savings, 40-50 percent above 2006 IECC, and it's so efficient it will be easy to adapt zero-net-energy performance with a small renewable energy system. So there's a distinct product positioning here in the marketplace. You have code homes, which gets you to an important basic level of energy efficiency, then you have ENERGY STAR, which is above code, and then you have Challenge Home, which takes you to this net-zero performance level. Then finally, we think the marketplace demands this kind of value consideration by the housing industry. About 12 in 13 homes sold nationwide are "used" homes. And it's often impossible for homebuilders to even construct homes for the cost that those homes are selling for. In addition, the majority of new homes are constructed to minimum code, which is well below the performance levels we can achieve with the Challenge Home level. So based on the comprehensive home performance we get with the building science that's part of ENERGY STAR qualified homes or certified homes v.3, and then the layering of all these new innovations coming in like DOE's Building America program, we think we're providing a very, very strong path to constructing net-zero-energy-ready homes that none of their competition we think can compete with. And we'll go through these details, I explain this strong market position. But congratulations, you're part of this program. It'll help as we go through this webinar, at least to move forward with a test drive or even taking as part of your specifications. So go to the next slide.

Slide 3: Let's go through the purpose of today's orientation. All partners are required to complete this training, and for our purposes, nothing would be worse than for our builder partners to feel this is an obligation that's not useful to their time. This training is, at each step of the way, intended to provide information that can make you much more effective working with this program. Initial orientation, of course, is giving you the overview of the program. Each year there'll be lots of developments and insights that we want to bring forward as your partnership moves along. And so, we'll take about one and a half hours today, and the first thing we want to do is communicate the value proposition to homebuyers. Why will your product at this level of performance (go back) ... Why will your product at this level of performance add so much extra value to offer to each buyer? And then your roles and responsibilities and the benefits you get for being part of the Challenge Home. And third, the process for qualifying your homes, which you see is very closely aligned with ENERGY STAR for Homes. And that's of course intentional. And lastly, we'll go through the specifications, not in gory detail, but enough to kinda explain how specifications deliver all the substantial performance that we're promising to the consumers. So this is what we're doing today. And the way it lays out, and the next slide ...

Slide 4: ... is the first section would be under Value Proposition. The second, Roles, Responsibilities and Process, and third, we'll go through requirements. And we mentioned the questions will come up at the end of the course. 

Slide 5: So let's begin with the business case.

Slide 6: What's in it for the builder to think about working with the DOE Challenge Home? And it's best to begin by recognizing that the market has changed dramatically. The old concepts that were out in the marketplace were that you could buy a home and you're guaranteed very, very impressive appreciation that people weren't thinking about home performance or any energy efficient or green aspects. That's no longer the case. The number of buyers has shrunk dramatically. The compelling reasons to buy a home are being rethought by many buyers as the appreciation factor is being compromised. It's just a different world. And to try to just say I'm going to minimize cost, we think is not a very effective way to succeed in this type of marketplace. NAHB promotes that for every $1,000 increase in sales price, nearly a quarter million buyers will fail to qualify for a mortgage. While that is an important statistic, that probably needs to be factored into many, many requirements that get layered onto the code process, for sure. We think in terms of the value of homes, that if you just think about cost, a lot is lost. In fact, we think the new business model is that you have to focus on maximizing value. That's the next slide.

Slide 7: And so, the idea is that if 95 percent of the competition is the used home. It's the home that's built to very old codes and standards, that has a plethora of issues around comfort, air quality, future value. We think you have to bring a whole new set of proposition to the table to attract buyers. There needs to be a reason for homebuyers to think about homebuying in this very difficult market. 

Slide 8: So let's look at some examples of why innovation makes sense in any industry. An example I always like to use is the music recording industry. Why did we go from a cassette to CDs? Were consumers running into the record stores saying, "I'm tired of analog sound; I need digital sound"? And the answer is no. Innovation doesn't come from the consumer. Innovation comes from the manufacturer, the provider of the technology. That's where innovation comes from. In the case of the music industry, they realized with a CD, that it was incredibly better sound, you can get any track you want at any time, versus philandering through the tape trying to find the song you want. It lasts longer, at high quality. It was an amazing improvement in value. The way it works in the marketplace is that you look at the price of a cassette versus a CD, a CD is actually a fraction of the cost. It costs pennies to make this. They're cheap to stamp out. Cassette parts and assembly requirements cost many, many-fold more than to make a CD. Now you attach on top of this your basic profit margin, and you get the price for the cassette. But in the case of CD, because it's so innovative, it has so much extra value, it's what I call an innovation/value premium. That also gets added to the final price. And what we're suggesting is that if you do include innovation and value, any industry and any product that you're involved with, that this innovation/value premium is a very sweet spot to be at. It's the place where you get the best business outcome. And the music industry gets twice the price for a product that costs a fraction of the cost to make. A CD normally is about 14, 15 dollars compared to a cassette, seven dollars, when we had those two competing in the marketplace. Now, of course, you can't even get cassettes. But the point here is how important it is to integrate innovation and value in your product.

Slide 9: So let's take this to the world of housing. And so we can compare a standard code home to a DOE Challenge Home. And if you look at the cost involved, without question the hard cost, the framing, lumber, all the materials it costs to build the home, will be higher for the DOE Challenge Home. There's more insulation, there's more attention to detail, there's higher-efficient equipment components. So we do know we have a higher cost for the DOE Challenge Home than the standard home. But that's not the entire cost equation. If you look at the experience of builders who are building at this level in the marketplace, and I gather all the experience and feedback I get, albeit anecdotally, the callback experience is almost nonexistent for the Challenge Home level of construction compared to the callback experience of builders of the standard home level of construction. And then there's a marketing cost, and the marketing costs, I would submit, are so much lower for homes that are very innovative. They experience a tremendous amount of coverage in the marketplace, much more so than if you're just building a basic product.

Slide 10: A good example would be KB Homes had its CEO Jeff Metzker speak at the RESNET conference last year, and he mentioned that just by having the energy performance guide HERS rating on every home, they got 140 million dollars worth of marketing costs coverage in the media. So innovation often attracts much lower marketing costs, not to mention if buyer satisfaction and excitement about the product is great, the word of mouth and referral rates is much greater. So that's why we ... (go back, Jamie, to the last slide)

Slide 9: That's why the marketing cost is an opportunity also to be substantially lower. And what I want you to take away here is an effective look at the real costs -- not just the hard costs but also the business cost, servicing homes, for marketing the homes -- in the end, in fact, the DOE Challenge Home is no more costly to the builder than to construct a standard home. That's a very important concept that we want to get across here, is that if you look at all your costs, then you have a level playing field. And we think it's very competitive to build a Challenge Home. Just leave it on a cost basis.

Slide 10: Now moving beyond just the cost, there's then the profit. And we think again there's a baseline profit in the industry of 8, to 15, 20 percent, but in the case of the Challenge Home, what we'll submit is now we think, just like with the cassette and the CD, you have an innovation/value premium that we think provides an opportunity for higher margins and a better business outcome for builder partners. So let's look at what drives this value premium.

Slide 11: Why will consumers want to have this kind of home? What does it offer to sell these homes? Now what I'm going to show you is a mockup of our consumer messaging tool that we're developing. As a builder, when you become a partner, what we're trying to set up is that within minutes after you become a builder or a partner for the Challenge Home, this marketing brochure comes back with your name on it and your information, as I'll show you in a few minutes. But the idea is to get a consistent, compelling value proposition story across to all the Challenge Home homebuyers. So this becomes a part of your business. What we understand, of course with ENERGY STAR, this message has to be about the builder, not about a DOE program, which is why it's so critical that these kinds of brochures are customized with a builder's information. But what we would intend is that every builder would be able to tell the Challenge Home story, and it revolves around eight critical value propositions.

Slide 12: So Proposition No. 1 is that by buying a Challenge Home you're buying a home that's incredibly exclusive. Think of the extra confidence in going to a doctor in the top 1 percent of his or her field. Similarly, it's only the top 1 percent of builders in the country who meet these kinds of extraordinary levels of excellence, the quality being specified by the DOE Challenge Home guidelines. We think, as a key second point here, you should feel great knowing you chose a home offered by a select group of leading builders. There's this challenge for homebuyers to truly understand whom they're buying a home from, the largest purchase of a lifetime. Wtih this label and this level of exclusivity, what we feel you can communicate is its peace-of-mind kind of comfort that you're choosing a very special builder. And that's a very important value proposition. People do care who's building a dream home of their lifetime. And that's message No. 1.

Slide 13: Message No. 2 is that particularly in a world where every consumer is confronted with the importance of technology in their day-to-day life every single day, whether it's with their smart phones, computers, cars, their tablets, whatever they do, people understand how important technology is to their life. So Proposition No. 2 is these homes are tech-savvy. And where it begins is that every Challenge Home starts with a solid foundation of building science from ENERGY STAR for Homes, and then each labeled home puts on top of that an amazing array of advanced technologies and practices from DOE Building America's world-class research program. The best innovations, the best practices, come from leading experts and have it take housing and make it incredibly high-performance are being integrated into this program. What you can do, in effect, is look for the most effective and proven innovations by buying a Challenge Home offered by Acme Homes. OK, next proposition ...

Slide 14: ... is that these homes are forward-looking. Why is that important? Well, every Challenge Home actually embraces a unique opportunity that only presents itself during design and construction. If you don't build these kinds of improvements into a home during that time, it's often cost-prohibitive to go back. And what this is, is an opportunity when you build the home to meet and exceed a forthcoming code of requirements. That's a pretty powerful proposition. What we won't say in writing, because some builders won't begin Challenge Home across all their product, but if you think about it, whether I buy a code home or even an ENERGY STAR home, it won't be legal to build that home in three or four years. When the 2012 IECC moves across the country over the next three to four years, these other basic minimum-code homes, or even just the above-code programs like ENERGY STAR, won't even be legal to build at that juncture, because they're based on the 2009 current code. In contrast, the DOE Challenge Home is based on the 2012 IECC, or for markets with more aggressive codes, it's based on the next code above where that code states currently resides. So very, very powerful thing. Your home will stand the test of time. And in addition, important details that can save thousands of dollars, like installing a solar system down the road, have been integrated or offered in every Challenge Home. So it's great peace of mind knowing the largest investment of a lifetime will actually meet future expectations. It's like you can go into a car dealership today and instead of buying the 2012 model, buy the 2015 model car. Just like you can add a special connection that can get you the technology of tomorrow. And the fact that we can do that so simply in housing and make this value proposition today we think is very powerful. Next message.

Slide 15: Every single Challenge Home is ultra-efficient. And simply said, every home is so efficient, a small solar system can offset most or all of your utility bills. We call this zero-net-energy-ready. In other words, every home is ready to effectively have a zero energy bill. Enjoy never having to worry about rapidly increasing utility costs. Utility costs are the second highest costs of ownership with new homes. First is the mortgage, the second is your utility bills, next highest monthly cost is taxes, and on down the line. So taking the second highest cost of home ownership and almost virtually being able to eliminate it, again, we think, is a very powerful consumer value proposition.

Slide 16. OK, next slide. The next value proposition is, we're going beyond comfort. We're going to a state of luxury that's probably a new territory for every homeowner. Whatever experience you've had as a homebuyer, the Challenge Home is bringing new levels of comfort that have not really been seen in housing. It's based on extraordinary attention to detail controlling air, heat, and moisture flow in every home. The result is you're surrounded with even temperatures, low humidity, and quiet in every room and every floor. It's just time to expect outstanding performance. I think as homeowners particularly in existing homes, you don't even begin to understand just how good homes can be. So this is going to be a very exciting lifestyle improvement for homeowners.

Slide 17: The next value proposition is that these homes are healthful. The same way we want nutritious food on our plates, and we spend 40 billion dollars a year for organic food, we want a healthy indoor environment. Every DOE Challenge Home has a comprehensive package of measures that control dangerous pollutants, provide continuous fresh air, and effectively filter the air you breathe, every day. So effectively you can experience a healthier home for your family. And again, health is a very undersold value proposition. I just think more and more households are experiencing family members who have respiratory illnesses and other challenges, so we think is an undersold value proposition.

Slide 18: Next value proposition is quality construction and quality-built. Advanced construction practices and technologies are specified for every DOE Challenge Home, but that's not good enough. Their inclusion and proper installation are enforced by independent verifiers who rigorously implement detailed checklists, inspections, and advanced diagnostics. It's just time to hold a home to a higher standard. I think there's a lot of perception in the marketplace that homes could be built to a higher quality level. We're able to make that claim because of all these detailed systems that are being applied and being verified in the construction process.

Slide 19: And then the last value proposition that we want to put forward is just this enduring value you get with every home. And in effect this is a summary value proposition. The advanced levels of affordability, comfort, quiet, health, durability, quality, and future performance delivered in every home are too compelling to ignore. That's why DOE believes this is where all housing is headed. This is why DOE believes your best position to get the highest resale value with your homes when you address this kind of compelling value, now you can feel truly confident in making one of life's largest purchase decisions. Isn't that where every consumer wants to be when they want to buy a home, in order to be truly confident? So the end is, again, on the last page of the brochure will be a reaffirmation of the builder's name (next slide, Jamie) ...

Slide 20: ... Reaffirmation that Challenge Home is being brought to you by this special builder, their location, their contact, phone number, their website. It's all about getting the buyer to the builder who offers this kind of value. And that's what this consumer message is all about. So Challenge Home is really in effect a whole new way to sell a very, very ultra-high-performance home. Next slide.

Slide 21: OK, so I've taken you through a little bit of the business case, you know, is it time to adopt innovation, if you adopt innovation, look at this incredible place you are in the marketplace, what you can offer consumers. I'm going to let Jamie take you through the next sections, and I'll come back and answer any questions that we have. The only thing I'm wondering, Jamie, is if we want to do the questions on the business case and the propositions now or wait until the end. What do you think?

Jamie Lyons:
Thanks, Sam. I was just taking a look at the questions, and I think we have time, given our schedule, to field a few of them. The first one might be a clarification type of question. A question/comment stating that it sounds like an ENERGY STAR home cannot be built under the 2012 IECC. Can you please expand on this?

Sam Rashkin:
Not at all. All we're saying is that there are minimum requirements for each program that's in the marketplace, and there's a plethora of programs. In the case of ENERGY STAR, it requires a 2009 IECC level of insulation and windows as a minimum. In contrast, what we're saying is a program like Challenge Home that's aspiring to be as zero-net-energy-ready as any home is pushing further, it's requiring the codes that are coming down the road. In our case, 2012 is the baseline, and often builders will exceed that. So you're meeting or exceeding the future code, in contrast other programs,  programs like ENERGY STAR, that start with 2009. Now, it's not to say that you can't do 2012. Many builders in those programs, programs like ENERGY STAR, may elect to go there. But the difference is with Challenge Home, it can be a brand promise. Since the minimum entry to the Challenge Home program starts at 2012, and again, in states that have more rigorous codes, you go to the next level of codes, so some states that are doing 2012s, like Maryland, you'd start using 2015 as soon as that code is ready and published. So we can make a brand promise that this program's about being ready for future codes, which is a unique value proposition.

Jamie Lyons:
Thanks, Sam. There's another good question or comment stating that utility bills cannot be entirely zeroed out. It mentioned that TV covers electric consumption, however, there's still costs for water and sewer and even some utility costs for paying for electric distribution charges on the utility.

Sam Rashkin:
That's a fair statement, but I would submit that when you explain this value proposition that Challenge Homes are so efficient a small renewable energy system can offset most or all of your energy use or utility bills, it's implied and implicitly understood by I would think a vast majority of consumers that we're talking about the energy bills. I feel comfortable people aren't expecting their sewer bills and their water bills to be part of that equation. The way it's set and cast, I'm pretty confident that message won't confuse people. But we'll take that to heart, we'll look at it and make sure our wording doesn't overstate what we're promising. Our matra is always to underpromise and overdeliver, so we certainly want to be respectful of that kind of concern.

Jamie Lyons:
And you know, Sam, one other item to add to that response would be that a part of the Challenge Home technical specs do address water use in the home, and we'll see that here as we move ahead. There's requirements for very efficient hot water distribution, and one of the benefits of that provision is a lot less wasted water. Hundreds of thousands of gallons of saved water that otherwise would go down the drain while waiting for hot water in fixtures.

Sam Rashkin:
And that's a good example where I love to be in a position of underpromising and overdelivering. So we're not even going to begin to imply that we're going to eliminate your water bill, when in fact, because of requirements over water efficient or efficient hot water distribution, you do wind up in a position to save up to five or six thousand gallons of water a year going down your drain. It saves on the water bill as well as your energy bill.

Jamie Lyons:
Great. One last question I'll address and then jump ahead to the next section, two. A question about downloading the slides. They're not yet posted on the Challenge Home website. We are working on a section of that website which will have archive training material, however, for the time being if you're interested in obtaining slides, we're happy to share them. Simply send an email request to the address that we'll show you here at the end of the presentation.

Sam Rashkin:
And we'll be posting these webinars, as well.

Jamie Lyons:
OK, so jumping into the sort of the program operation side of things, section two, this is Jamie Lyons again, and I'll cover that.

Slide 22: So we'll start with roles, responsibilities, and process. And again, we want to make sure that we make our partners in this program effective participants, so, that's the purpose behind this information. So there are partner responsibilities, which are documented in a partner agreement, which is available online. Some of those responsibilities include providing a DOE Challenge Home certificate, adhering to brand identity guidelines, building or verifying at least one qualified home per year, taking orientation training -- you can give yourself a pat on the back, you're doing that right now -- and then renewing our training each year. The program will continue to grow and expand, and we want to keep our partners up to speed with all the changes. Then acknowledging responsibilities of inactivity in the program. So the, as I said, the partnership is an online agreement. You can sign it electronically so it's fairly streamlined for you to review and if you choose to, sign online.

Slide 23: Your account, once you are a partner you have an online account. Some of the basic responsibilities there: ensure up-to-date information. That greatly aids the process of keeping you up-to-date with program info, helping you to qualify homes, helping you to get credit for qualified homes on the website and so on. So there's tools that allow you to do that, just like any other online account you might have. And there's user name and password access for your account.

Slide 24: So as you go through the registration process: it's strictly online, so it's accessible anytime day or night. You also have the opportunity to review the technical guidelines. They're all posted online, all the technical specs and supporting literature. And then review the terms of the partnership agreement. Electronically register and sign the agreement. And then there's the menu of optional commitments that we see here; we have icons for them. Let me run through these really quick. There's five different icons signify partners who have elected to commit to some optional requirements. The first one is 100 percent commitment, meaning that a partner is committed to constructing 100 percent of their homes to the U.S. DOE's Challenge Home requirements. This is a very noteworthy commitment, obviously. Partners with this distinction are sort of brought to the top of the builder locator tool. They're recognized and they sorta stand out from the crowd, given this distinction. The next one we see is WaterSense, meaning that the partner is committed to meeting EPA's WaterSense guidelines to reduce water consumption inside and outside homes.(noise) ... separate some of the WaterSense materials but not all. So we encourage partners really interested in showcasing water efficiency to opt in for that WaterSense commitment. Along the same lines, "FH" is "Fortified Homes" for the Fortified for Safer Living guidelines. These homes are built so well with respect to indoor building moisture management, indoor air quality, and certainly energy efficiency, to look past disaster resistance can be a little shortsighted, so we want these homes to last hundreds of years, so it can make sense to go beyond code disaster resistance specs. So we point partners toward the Fortified program. It's a voluntary option that partners can elect to follow, and if they do so, they get recognized with this icon for Fortified Homes. Likewise, homes built this well really go hand in hand with strong quality management practices and protocols from the builder and the entire building team. Therefore, DOE has the Challenge Home Quality Management Program, a short list of general guidelines governing QM practices that builders and partners can elect to follow and voluntarily commit to. So the Quality Management icon here recognizes those partners. And lastly, we see "IAP," which is an acronym for EPA's Indoor airPlus to signify that partners are fully meeting all of the Indoor airPlus specifications. As we'll see in a few minutes, Challenge Home incorporates nearly all of the IAP specs, not quite all, but DOE does encourage partners to consider full qualification under IAP. If they do so, then there's this icon to recognize that participation.

Slide 25: OK. Sort of an overview of the process here. We talked about some of the elements. We have the registration and training. And I should mention for the training aspect, this orientation has been rolling out periodically. It's been monthly for the last four months or so. We do have additional training in the hopper that will dig into more detail on some of the technical, some of the how-to behind technical requirements, such as how to effectively position ducts in conditioned spaces, and other technical trainings of that nature. So look for more on that. Plan evaluation: Just as an ENERGY STAR home's plan would undergo plan review with the rater and builder collaborating, that's a very essential step to qualifying homes for DOE Challenge Home. Construction: Obviously the builder constructs the home to meet the design specs, which are then evaluated to determine that the specs will achieve Challenge Home compliance. Field verification: Again, very familiar to homes qualifying for programs such as ENERGY STAR Homes. Our field verification steps here are designed to be fairly seamless, requiring no additional or very few additional site verification visits. We've heard loud and clear from builder and rater partners that keeping site verification visits and additional site verification visits to a minimum is very important, so the specs and the verification requirements have been constructed with that thought in mind. And finally, certification: There are several more slides on how homes will be certified, but the HERS provider -- excuse me, the HERS rater -- provides the key, a key responsibility in that facet, and then homes will be submitted to the National Building Registry being launched by RESNET.

Slide 26: The next several slides show a long-term process and the current temporary process. The difference there is, the program is up and running, however, we're still developing the final few building blocks for the program infrastructure. So long term, there's a vision for how things will work, and we're almost there, but currently a few aspects of program operation are still in an interim phase. So for training, the partner registers in both cases, takes the online webinar. Right now, you're listed if you register and take the online webinar, you'll be listed on the website, and that's the entirety of it. The long-term process will be a little different. You'll take the online webinar, and then you're listed as a partner on the website. So right now, we have a number of partners, and they have a little leeway in terms of how long it takes for them to take the orientation training. But we're happy that you're here with us today, so you can check off that box.

Slide 27: The construction and rating process. The rater follows the standard plan review process and the HERS rating process. As we'll see in a few minutes, qualification and design of DOE Challenge Homes follows very closely with the typical process for designing and rating an ENERGY STAR qualified home. ENERGY STAR and DOE Challenge Home rating can happen concurrently. It's important that we have this collection of mandatory items, in bullet point three here, so the rater and the builder need to be comfortable that the mandatory items are indeed being met. And then the bar you get under is Target Home HERS Index, which we'll get more into in a few minutes. Builders will also have a builder-partner ID, and then this is part of the data inputs that are attached to a home rating that qualifies for the DOE Challenge Home. That will be apparent when raters and builders submit homes. Rater submits the home per the RESNET process, and we are setting this up so that qualifying home records will follow through the RESNET National Building Registry. We're not quite there yet. We're working with RESNET and the RESNET software developers to connect all those things, the compliance reporting from the software going upstream to the National Building Registry, so that's a long-term process. Right now homes would be submitted directly through DOE. I'll show how that happens in a minute.

Slide 28: So long-term process for certification: I just mentioned most of this. Certificate, qualifying homes will be awarded a certificate. And the key element of that certificate, which we're just in the final stages of completing, will include some basic information about the rating details. It will also include a graphical HERS Index showing the HERS Index for the designed home, and then the certificate will also show the list of optional programs that the builder partner is participating in. Currently, the way it works is that the rater completes the rating, then they get in touch with DOE and the Challenge Home program, and we're accepting sorta the core information on qualifying homes in spreadsheet format just for the time being, until the rating software is fully updated and incorporated automated compliance reporting for DOE Challenge Home. But currently, the home's qualifying information is sent via spreadsheet, the certificate is then sent back to the builder and rater, and then they have that certificate information sharing that the home does indeed meet DOE Challenge Home.

Slide 29:  There is a label. So in addition to that certificate we described, there's also a label that will physically go on qualifying DOE Challenge Homes. Long-term, raters will be given a stockpile of the labels, and they will give them to the builders for qualifying homes. Currently the label is in development. We are in the final stages of developing that, so that's something you can expect to see within the next couple months. Sorta the concept behind it: It's to really illustrate graphically how DOE Challenge Homes really illustrate superior performance across all the different value propositions that Sam mentioned in the DOE Challenge Home. Things such as energy efficiency, comfort, and so on.

Slide 30: Just a little bit of additional info. Every builder partner has an online profile. This is populated with the number of homes certified. The website and the database behind the website are also being constructed such that builder partners who were with DOE under the Builders Challenge program, that record of building homes under that program will be kept intact and be available and displayed under the builders' profiles. So that strong record of building high-performance homes in partnership with DOE will be maintained for builders who have a prior history of Builders Challenge qualifying homes. DOE is also very keen on showing where the rubber meets the road with these homes, and we want to do that through case studies that really collect very relevant, pertinent information focusing on the marketing, business case, and the technological innovation of qualifying homes. So this is an opportunity for builders to really showcase the proven performance of DOE Challenge Home work for their(noise). And in the process of doing so, gain additional recognition. As a sidebar, homebuyers can opt to provide utility bill data to DOE Challenge Home. The process for that is in development, but it follows the same concept that these homes by and large will have outstanding energy bills which really prove out the value propositions. DOE wants to celebrate that and showcase that so as to benefit our partners in the overall program.

Slide 31: A quick overview of partner benefits. You will have access to a variety of resources at no cost. One of these includes that customized builder brochure that Sam highlighted a few minutes ago. Case studies: We've just received a partner DOE Challenge Home graphical mark that the partner will be able to use. Home certificates, labels and more. So all of these things are either developed or near completion in development. These will be reserved for use by DOE Challenge Home partners. Resources will by and large be available through the DOE Challenge Home website. And we are trying to make it seamless and very easy so things like that Builders Challenge customizable brochure for builders -- excuse me, Challenge Home customizable brochure -- are automatically generated. So there's not a lot of back and forth and it's available to our builder partners easily and quickly. Technical support: There's limited technical support available through DOE. Certainly, we're available to answer any questions on program operation, the meaning of certain technical steps and so on, and we invite those questions. Alongside that, DOE is also finishing development of the DOE Building America Solutions Center, which is something else Sam is deeply involved in. In a nutshell, it's taking volumes of really good technical research from Building America and packaging them in a way that is easily navigable, and you can find the information in a way that you would look for the information. So that's something to look forward to, as well. And lastly but certainly not least, DOE is in the process of developing a national awards program that will give great recognition to some of the highest performing DOE Challenge Home partners. So look for more on that in the next few months.

Slide 32: Also online, I mentioned a minute ago, we have partner locator tool. So it allows different program partners, homebuyers and others interested in the program easily to access partners based on their geographic center of operations. So we highly encourage builders as they register to identify themselves and where they're actually building or rating or verifying homes. The builder locator tool and the online builder listing also clearly list the number of homes that meet the challenge. And the builder profiles include a website link to the business website of our partners.

Slide 33: So that's the program architecture and (??) in a nutshell. We're doing fairly well on time. So I'ld like to jump into the overview of the national program requirements. I like Sam's choice of words: We're not going to use the "gory" details today.

Slide 34: But we will get into some depth on some of these, because again, we want you to walk away from today's webinar with a good grasp of what's expected and why these homes are such excellent performers. So we heard about the program strategy and the value propositions. It makes sense that the specs for the program, the details, really follow suit and they flow from all those value propositions that Sam covered as part of the Challenge Home story.

Slide 35: So this document is too small to read, but I just want to point out a few aspects of it. We have two tables. The top one is Table 1, Mandatory Requirements. The lower table you see here is the "Target Home" Design Specs. We'll get more into both of those, but at the highest level, this should look fairly recognizable for any of our partners familiar with ENERGY STAR Homes version three. It's made up of the small collection of mandatory items, a reference home, in that nomenclature, a DOE Challenge Home "Target Home" within Challenge Home. But they both function in the same way.

Slide 36: And then we also have a benchmark home size. Again, this is in lockstep with the benchmark home size parameters in ENERGY STAR Homes. It simply establishes where a typical home size is based on a bedroom count. Homes of a larger size than this ultimately will have a somewhat more stringent HERS Target. Again, we'll have more detail on that in a minute. Just a quick side note: Renewable energy systems cannot be used to meet the HERS Index Target Score, however, if a designed home is larger than the benchmark home size, and the design needs to make up ground, if you will, renewables can certainly contribute to making up that ground in terms of meeting that adjustment.

Slide 37: OK, so a closer look at Table 1. And that's those mandatory requirements. DOE looks at these very carefully, because mandatory kinda cuts against the grain of flexibility, which we hear loud and often from our partners we very much value, like builders, raters, and contractors. Flexibility in high-performance programs is a good thing. DOE supports that. So when we look at mandatory requirements, we try to highlight and really focus in on those things that are must-haves. It might be a must-have because if we don't do it during initial construction, we'll probably never get it done in that home. If it's something with a severe energy penalty, or we're missing opportunity, we might want to have that during initial construction. So that's a common strategy that's run through most of mandatory requirements that we see. I'll touch on these in more detail on the next couple slides.

Slide 38: Exhibit 2, we'll got to, too, is the target home specs. The most important thing I want you to remember about this slide and the target home specs is, you don't have to do any of these items. They're not mandatory. Nowhere in Exhibit 2 does it say mandatory. The thing to remember is, this is where the bar is set. So you can design a home in a wildly different manner than where these target home specs are set as long as you meet the mandatory requirements in Table 1. In Table 2, the Target Home, it's the target that sets the bar; you don't have to comply exactly with respect to it. As we take a closer look, the specs include HVAC equipment up here in the first few rows. It's parsed out based on climate zone. And what we see if we compare this to where ENERGY STAR Homes v. 3 is, they both have targets for the HVAC. The efficiency levels are more stringent for DOE Challenge Home Target Home. There's also a key difference in the envelope. DOE Challenge Home baseline is 2012 envelope insulation levels in the target home, versus 2009 insulation levels for ENERGY STAR Homes v. 3. Likewise, there is a target air inflitration spec, ACH50. The targets for DOE Challenge Home are exactly one-half of the targets for ENERGY STAR Homes v. 3. So again, it's that next tier of energy performance. We also see more efficient window specs in the target home. There's more stringent U-values, especially in the colder climates, and more stringent heat gain coefficients in the hot climates. It's also important to note that the water heater. Water heating is a big chunk of whole house energy consumption, typically number two and number three. The baseline or the target home for DOE Challenge Home sets the bar at an ENERGY STAR level of water heater. You don't have to put that in. You can put in a run-of-the-mill electric resistant storage tank water heater if you choose to. But you'll have to make up that ground elsewhere.

Slide 39: So, when we bundle all this together, it's a natural question to say, well, where do we end up? And DOE conducted some modeling to try to answer that question, and incorporate the few different prototype homes built on climate-appropriate foundations, so that means basements in the colder climates and 50-grade construction in the warmer climates. Just to give our partners a vehicle to where the bar ends up being. And overall, the minimally qualifying homes, the homes that are just dialed in to where they need to be, qualify, end up around the HERS in the mid-50s, 55, 56, and you can see that varies a little bit based on the climate zone. Warmer climate zones have slightly higher numbers, HERS Indexes, and the extremely cold ones, that HERS Index starts to drop a little bit more, down even to the low 50s or high 40s. And in the HERS homes, actual results still vary, but this gives a feel for the stringency for where Challenge Homes will end up.

Slide 40, 41: OK, here's the part I was hoping to get to here. We have these mandatory requirements, and because these are mandatory, we really want to make sure that partners understand the ins and outs of why they're in here, how they can be met. So first of all, it makes all the sense in the world to lessen any confusion, to align federal initiatives that DOE Challenge Home and ENERGY STAR Homes be aligned. Right out of the gate, ENERGY STAR for Homes compliance is mandatory for any DOE Challenge Home. That's really square one. And then Challenge Home does beyond that. You use much of the same structure as ENERGY STAR Homes, but it goes beyond that to really bring the home performance level to that net-zero ready level. And along the way, it's systematically in a systems-based way allows the builder and the rater and the contractors to assure performance and mitigate any risks by dealing with moisture and durability, indoor air quality and combustion. So right out of the gate, ENERGY STAR Homes compliance is mandatory.

Slide 42: That value proposition of being built to future needs by applying to 2015 model year car today, that concept is proven out here by making the baseline envelope insulation levels to 2012 IECC. That's a step above programs like ENERGY STAR that use 2009 as a baseline. It is forward-reaching. We find that this resonates with a lot of partners. Builders will eventually see the 2012 energy code; this gets them off the learning curve sooner. Other programs, such as utilities and state programs, also like the fact that educating and having builders partners participate in Challenge Home gets them off the curve of future energy codes sooner. The qualifying homes will meet this 2012 IECC Envelope Insulation Levels, which basically assures that that envelope is going to at least be turned out with the energy codes in place for several years to come. And that's more than most other programs can claim. ENERGY STAR windows are also required. This assures that windows, window performance goes beyond current code minimums, and it's also slightly higher than ENERGY STAR Homes. Important note, and we heard it loud and clear from raters, builders, and others: Don't rule out passive solar design. And rest assured, there are exemptions from this requirement that create plenty of flexibility for passive solar design that need to use different SHGC factors.

Slide 43: Another key element of the mandatory requirements is that ducts be located within the home's thermal and air barrier boundary. In other words, within the conditioned space of the house. And this is really one of those must-have attributes in the building, because if we don't get this right during initial construction, it's probably going to be that way through the life of the building. That being said, it's not a one-size-fits-all type of requirement, and there are several key alternatives and alternate compliance paths allowed. Just to touch on them quickly here, because we are dedicating a full tech training to this in the near future. But there's an allowance of 10 feet of total duct length to not be in conditioned space. Unvented attic assemblies, which are recognized by code, are also permissable environments for ducts to be located. There's also a compliance path that involves insulating, encapsulating ducts with an SPF then burying ducts within an attic. That's based on some recent Building America research. So there's a prescriptive alternative on how to do that. Attic jump ducts are permissable with certain caveats. Ducts located within unvented crawls are also permissable. Ducts which are located in a basement which is fully within the home's thermal and air barrier boundary are permissable. And then ducts, or ductless HVAC, rather, systems also pass this requirement. That's a big one, we realize, for a lot of partners. There is a good amount of flexibility there, which allows design innovation. And I'll also just remind folks that there will be upcoming training on that exact topic, where DOE's going to tap into some of their experts from the Building America research program.

Slide 44: Another one, which is dealing with hot water distribution. It's another must-have. It's fairly unusual and unlikely that this would be changed after initial construction of the home, the distribution of hot water. So the provision is drawn from EPA's WaterSense Single-Family specs. It involves a storage limit of 0.5 gallons of water between the hot water source and any hot water fixture. We did just recently clarify that the hot water source from where you measure this 0.5 gallons is a recirc system in play, then you'd measure that 0.5 gallon limit from where you branch off the recirc system to the actual fixture. So what we recognize is that recirc systems really extend the reach of the hot water distribution in an efficient manner. And then there's also a 0.6 gallon limit of water delivered before we see a minimum temperature rise. Recirc systems are certainly allowed and welcome. However, timer and temp-based systems are not allowed to meet this criteria; rather, the specification requires a demand-based system. So an occupancy sensor or even a manually operated switch which energizes the recirc system.

Slide 45: In the August newsletter for DOE Challenge Home this last week actually had a short technical article on that exact topic and how to verify those specs. Another mandatory item is the appliances and lighting. This really ensures that good performance levels are gained from appliances, and then as we get into these very well-insulated, very airtight homes, with high-efficiency HVAC, appliances become a bigger slice of a smaller pie of whole house energy use. They're important. Likewise, lighting: 80 percent of the fixtures or lamps will be the ENERGY STAR lighting qualified.

Slide 46: Indoor air quality is a mandatory spec. And the reference there is to meeting the Indoor airPLUS Checklist and Construction Specs from EPA. This makes sense because as homes get to such low tightness levels and they are so well-insulated, a systematic approach to indoor air quality really becomes essential. It's not a matter of choosing to do this, choosing to do that, skipping this or skipping that. Because really, the forgiveness in the home really goes away as we have tighter construction, better-insulated construction. So this is a systematic approach of indoor air quality best practices all packaged up by EPA. There are a few notable exceptions here, which I'll cover quickly. There is a number of moisure control provisions for building assembly within Indoor airPLUS. Our partners have the option of following those or migrating over to the Water Management Builder Checklist, which is part and parcel of ENERGY STAR Homes version 3. So there's some latitude there in the exact details of which water manage assembly provisions the builder chooses to meet. Builders are also not required to provide the radon test kit directly to buyers, which is Provision 2.2 of Indoor airPLUS. The reason DOE went this way is that they heard strongly from builder and rater partners questioning the implications of this process on the design and purchase process, so for the time being there's an exception to that provision. And then lastly, the third item here is that garage exhaust fans, garage exhaust ventilation, which is required by AP, is relaxed a little bit in terms of the run time, duty cycle of that exhaust fan from the garage. So there's a little more latitude for what's the post-occupancy run time of a garage exhaust fan has to do. So at least 10 minutes of run time after a garage has been vacated is deemed acceptable. And the reasoning behind this is we heard strongly from several very active high-performance builders that there was a product availability issue, so DOE for the time being offered more design flexibility for garage ventilation. And finally, builders that do want to achieve full IaP, Indoor airPLUS certification and label homes in that fashion are certainly encouraged to do so. However, they need to meet 100 percent of the IaP checklist items. So they wouldn't have the opportunity to exercise these options and allowances.

Slide 47: Finally, the Renewable Energy Ready Home Checklists are a mandatory item. So all these other items have been really focused upon high-efficiency envelopes. Very good insulation, very low infiltration, efficient lighting, efficient appliances, very efficient HVAC, whole house mechanical ventilation. All this has brought the home to the precipice of being so ready for renewables that a small renewable system could really put a dent in whatever remaining energy usage you have. That's great, but if you take a quick step back it makes a lot of sense to prepare the home for that next step if there are no-cost or low-cost ways to do so. And that's what the Renewable Energy Ready Home Checklists do. They are a short list of practical measures that can be undertaken during initial construction that later on, when a PV or solar thermal system is added to the home they dramatically reduce the cost and complication of doing that because some foresight was given to renewables during initial construction. A few examples of what this means. Documenting the maximum allowable dead load / live load roof ratings, documenting that and presenting that in the home ownership materials. Those specs are readily available at initial construction. Having them two, three, four years down the road can possibly reduce or negate any structural load count that a buyer would have to pay for. Providing conduit between the attic and water heater area, which would allow for wiring or piping to be easily routed in the home down the road. Again, it's very simple to do that during initial construction, very little added cost, and it would save more significant costs down the road. Reserving and labeling space in the electrical service panel, where a future PV circuit breaker would go. Same thinking there. Simple to do early on; more complicated and costly to do later on. And they also really reinforce how ready this home is for the addition of renewables as the next logical step. Given all that, DOE did want to make these checklists to be applied rationally, so there are allowances; it's reserved for homes where renewables make the most sense. And there's also recognition; for example, if a very high-performance water heater is put in, such as a gas-fired tankless or heat pump water heater, some of the solar thermal checklist items are waived because they make a little bit less sense if the builder has invested in a very high-performance system up front. So those details are all documented in the national program specs.

Slide 48: OK, I'm going to take the next few minutes to really walk us through the target home and provide an example as we hit the home stretch. We'll cover a few of the true-false questions, make sure we're getting the message across, then we'll wrap up with questions as time allows. So again, the most important thing to remember about the target home is these are not mandatory items. They set the bar, but a designed home can do much, much different specs if it chooses to, if it works for the builder, as long as it meets the energy threshhold. "Target Home" is basically the same thing as a "Reference Home" for ENERGY STAR v3. To avoid confusion we don't use the exact same terms. We'll look at the specs in a second here, but looking at this last bullet, the Target Home specs generally represent good or very good practice. We wouldn't say anything in here is a relic or requires well, well beyond traditional practice to reach these levels. They're available with common methods and materials, and they're broken out by climate zones, so you see things like looking for higher air conditioning efficiency in the hot regions and emphasizing heating efficiency in cold regions.

Slide 49: So, here are the specs I was just mentioning, and they're broken out by climate zones. So up here we have AFUE for furnaces and boilers, here HSPF for HVAC and heat pump systems, on down the line.

Slide 50: I'll refer back to these, but instead of just looking at another table, I'd like to take you to a quick example just to make it hopefully resonate a little bit more. So we have an example home, which we've done some analysis on, and we use it to do, use it for different trainings. So it's four-bedroom, 3,500 square feet, located in climate zone 2. In our three columns, we have the building system, the spec, then we have what the Target Home requires, what the Target Home specifies, rather, and then we have this imaginary design home. So if we look at the mandatory items. Things like ducts in conditioned space, 2012 IECC insulation, ENERGY STAR windows, we're assuming out of the gate that our design home meets those specs. They're mandatory, so we really don't have any other choice. So we have ducts in conditioned space, 2012 insulation levels, and et cetera. But now we get down into windows, infiltration, duct leakage, et cetera. These items reside in Table 2, the Target Home specs. So the windows -- and again, Target Home sets the bar -- the windows which are used to set this bar in the Target Home, which is really just a twin of your design home, same footprint, same orientation, same square footage. So when the software programs a Target Home, it's looking at a U factor of 0.4, efficiency 0.25 (switching back and forth between slides). And if you want to believe me on that, here we are. Climate zone 2, here's our SHGC, here's our U. The design home in this case uses slightly better windows. The U factor is 0.32, easily available and economical in many cases. The SHGC is a little bit lower as well. That's why it's highlighted in green. Any items in this last column shown in green are a little bit above and beyond what the Target Home would require. Infiltration: The Target Home spec is 3 ACH50, and we see that right here (previous slide). Climate zone 2, we're looking for a 3 ACH50 in the Target Home. The design home based on this imaginary builder's practices, is going to come in around 2.5 ACH50, so it's a little better seal, a little less infiltration. So that's in green, and there'll be an energy benefit to that. Duct leakage: And you'll notice the duct leakage is not actually shown in this Target Home table, and that's because DOE Challenge Home does not have a different, distinct duct leakage spec. It is consistent with ENERGY STAR Homes version 3, which is a CFM 25 for every 100 square feet of conditioned floor area. And CFM 25 leakage to outdoors for every hundred square feet. So the design home in this example files in right at that level, the 8 percent and 4 percent levels, it's in black. So the design home and our imaginary builder does just what the Target Home spec would require. Furnace AFUE: It's an 80. Not extremely efficient, but it's a warm climate. That's what the Target Home is looking for. In this case, the design home has a 92. So it's significantly better than what we need. It's a warm climate, so the heating level isn't going to be all that great, but there will be an energy benefit for that. We see builders in different projects go for high-efficiency furnaces because it can simplify venting and offer them some advantages in terms of their floor plan and layout. Air conditioning SEER: We're in a hot climate, so Target Home 18. Very good efficiency levels for air conditioning unit. Not we're in red. Our design home, our imaginary home, is doing less than required by the Target Home. Is that OK? It can be. We'll find out in a minute. But there's no hard and fast rules that you have to have an 18. This design home uses 16. Probably for reasons of cost-effectiveness and the builder's relationships with suppliers. Whole House Mechanical Ventilation: If we jump back to the Target Home specs, we find this here. We're looking for ASHRAE 62.2 Whole House Mechanical Ventilation Performance. ASHRAE 62 for this size home is looking for 75 cfm. You don't find that in that table; you find that in ASHRAE 62.2. What you do find in this table is the efficiency of that ventilation in terms of cfm per watt. So the Target Home spec here, 1.4 cfm per watt, no heat exchange required. A little sidebar: If we're in a very cold climate, we want that energy exchange, because we're coming here, it's going to be really cold for part of the year. So there the Target Home is looking for a balanced ventilation system that's 60 percent simple recovery efficiency and also a 1.2 cfm per watt. Just tuck that aside if you're in cold climates. For our example, we're just looking for 1.4 cfm per watt for our whole house ventilation. What we ended up with in our design home, you can actually do a lot better in terms of fan efficiency than the 1.4 cfm per watt. And in this case the design home does just that. Higher fan efficacy, more efficient fan moving that air. The water heater, ENERGY STAR water heater, is in the Target Home spec. We dial right into that level in a 0.67 energy factor gas storage unit. So if we model this Target Home as a twin to our design home, floor plan and footprint, same orientation, we get a HERS Index of 55. However, give yourself a pat on the back if you caught this, if we remember back to that earlier slide with a benchmark home size: four-bedroom benchmark home size is 2,800 square feet. And there's a formula that says if you're above that, you're going to have to adjust the HERS target down a little. So if we apply that formula and factor in a 3,500-square-foot house, we end up with the real target to qualify this house of 52. So if we look down our design home list of specs, the green, the black, the red, it ends up at 52. So this home would comply. So this example is kinda meant to walk us through the Target Home specs and also just give a little bit of insight into how you can trade off against the specs, do more in some areas, do less in others and still qualify a home.

Slide 51: Just some quick closing, wrap-up info. There's a prescriptive path that's available. It's not often used, but it's out there. And the prescriptive path is really (back to previous slides) just this. You have to meet all the mandatory specs, and you also have to address these items which we see here in the Target Home specs. So you have to dial in right at these levels or better than them. However, a sort of drawback to the prescriptive pathway is that you don't gain any building tradeoffs, so you can do far better than the spec requires in the area of SEER, for example, but you wouldn't gain a benefit and trade that off in some other building system. The door is open for presciptive compliance.

Slide 52: Performance is much more flexible. Home can be any size, larger than the benchmark, mandatory provisions are met, and the Target Home specs are used to set the performance threshhold, and sorta just like that example we just walked through. A couple quick notes. We are waiting for the rating software. You saw (noise)HERS, Energy Gauge. DOE is working with those developers, and we're on a timeline now that looks like mid-fall for these updates which automate the compliance. So you don't have to program in a Target Home; it's done automatically. And that compares to your design home and you see if it needs to meet Challenge Home specs or not. Much like the way that software has been updated to reflect ENERGY STAR v3 compliance. Up until that time -- and we see July here, but it's been pushed back a little, unfortunately -- up until that time, the rater will manually configure the Target Home index, which really isn't as bad as it sounds. We have a guidance document on that, a how-to document. So if you're already programming in your design home, you basically have to tweak the number of the building systems so they land on this Target Home spec. We're happy to answer questions on that. The document is available on the website. And it's likely we'll hold one more training on that, another webinar on how to program, or how to manually program a HERS Target Home. Until the software is updated.

Slide 53: This is just a little bit more about the presciptive and performance pathways. Again, the performance path offers the greatest flexibility. Prescriptive path offers a little more simplicity but at the expense of being able to trade off building systems, performance across different systems. And homes also have to be no larger than the benchmark home size to follow the prescriptive path.

Slide 54: So here's where we are in terms of the timeline. Homes that are being permitted at this point, since we're well after April 1, are under Version 2. We had sort of this transition period that DOE migrated from Builders Challenge over to Challenge Home, and as we said here, fall 2012 we're expecting a release of the updated rating software and we understand for run rates that should be some version of 14 software update when they release that.

Slide 55: OK, thanks for sticking with that. Jeff, who is helping us, Jeff Smith, who is helping us administer our webinar today is going to launch our true-false questions now. Jeff, if you can throw them out there. And we'll give you a few minutes to do that.

Slide 56: And when we tune back in following that, we'll wrap up and answer a few questions. (Scrolling through true-false question screens.) Jeff, can you let me know when we hit the last question, please?

Jeff Smith: 
Will do. ... And last question.

Jamie Lyons:
Great; thank-you. ... OK, while people wrap up with the questions, we do have a few minutes to cover, to answer the questions that came in. So Sam, if you're dialed in, I'll throw a few out. We received several questions asking about some recent industry news that DOE Challenge Home will be collaborating with Passive House. And the general theme of the questions is can you explain more about the relationship and how these two energy programs will be working together.

Sam Rashkin:
Sure, Jamie. There's this wonderful continuum in the marketplace of four very linked levels of efficiency. You have the code level, which I mentioned earlier, which is a baseline level that establishes government thinks all buildings need to be at this point in time. Then you have ENERGY STAR that takes you to above code. Then you have Challenge Home, which takes you to what we call zero-net-energy ready performance, which means a small solar system can offset most or all of the energy use for heating and cooling and loads in the house. And so that's the third step. And then the fourth step is passive house, which is the most aggressive, comprehensive, thermal enclosure solution that you could strive to achieve. And so it's kinda this maximum level of thermal enclosure performance, and more aggressive ventilation requirements, as well. So you have this continuum, and what we've done with Passive House is set up an alliance where every Passive House now has Challenge Home as a prerequisite, much like Challenge Home has ENERGY STAR as a prerequisite. So that each level is kinda feeding to the next. You have to do code, at least do ENERGY STAR, you have to do ENERGY STAR to do Challenge Home, and you do Challenge Home to do Passive House. So you have this wonderful coordination among the four major tiers of performance you can strive to achieve in the marketplace. And that's what this big announcement has been. I should mention, though, with Passive House, is that it's, there's some wrinkles and issues that we're still resolving that are almost quite done, but we've announced this agreement, and we're pretty well good to go. So that's the linkage there to Passive House.

Jamie Lyons:
Great. I'm going to take a few quick ones just with the minute or two that we have left. What is the status of the DOE Challenge Home logo and its availability to partners?

Sam Rashkin:
That's an interesting one. I think the logo is all done, but in terms of availability, we're still waiting for our contractors working with the main, bigger branding efforts to wrap up all their materials. I expect within the next two weeks we'll have all the high-res files for the new logo. It's slightly different, actually, than the ones we used in the presentation today. It's very nuanced changes that you might not pick up, but there are some differences. And we'll start disseminating the logo probably about mid-September. So we've got to get some brand identity guidelines complete which enforce the use of the logo before we can distribute it to partners. So those brand identity guidelines are in progress and just starting. So until we get that and the high-res files. we're not ready to distribute. But within a month, by mid-September we should be good to go.

Jamie Lyons:
OK, and I think one final question which is a very good one, concerns what is DOE Challenge Home doing to address the appraisal process and the ability of appraisers to accurately capture the value of such high-performance homes?

Sam Rashkin:
This is almost the first webinar where we could get away without that question.(Laughter) But sure enough, it was the last question. Save it for last. Yea, the appraisal question's a great one. And what I've been doing is coordinating very closely with Institute for Market Transformation. Cliff Majersik is the executive director and Bob Sahadi the senior official there. And Bob has tremendous experience with Fannie Mae before he came to the Institute for Market Transformation. So there's excellent expertise and kinda guidance for how to move the transaction process to recognize the value of high-performance homes. What my latest communications with Bob informs me is that they're much more confident that they can get the SAVE Act passed in Congress now. There was a poison pill for the realtors who were blocking it, because it had to do, I forget which provision, it escapes me right now, that was in the SAVE Act. It was never any issue with the appraisal provision, but there was with some of the other requirements that originally were in the bill. So they're carving the bill down so it virtually has no major objections, and now they're ready to push it through. And the SAVE Act, I forget the acronym's words, what they stand for, but essentially what it will do in the form that they're going to push it through, what it will do is take the normal, comp-based appraisal value, the market value that the appraiser gets, in normal comparison of properties regardless of the performance attributes, and it will add net present value of the energy saving, as documented by an accredited, third-party HERS rating. And so the rating, I believe the HERS rating still documents the present value of the savings under a term called the energy savings value. So if a home saves, let's say, 50 dollars a month on the utility bills, that will come out to like a 9 or a 10,000 present value. A present value is basically, what's the value of that monthly 50-dollar savings over a 23-year term, discounted to a rate that's usually the rate, mortgage interest rate on January 1 each year. So that will vary each year. But that's the details and boring details of the formula, but essentially getting a 23-year kinda cash flow savings results in the present value. And that will be added to the normal appraised value. And so in a home like an ENERGY STAR home that saves about 40, 50 a month, it might be 8 or 9,000. A Challenge Home that saves 60 or 70 dollars a month, it might be more like 14 or 15,000. And that gets into the appraised value so you should basically be able to come out ahead or least equal so you can not have the appraisal process block the transaction. Now, that still has to pass, so what I recommend right now is that when you are involved in high-performance homes, in most markets you cannot, in all markets you cannot select the appraiser for your house. You have to take whoever's next in the queue. But what you can do in most markets is you can specify to the lender that you want only an appraiser who's a certified, screened appraiser. And that will ensure that you have an appraiser who's been trained to address the value proposition with green and high-performance homes. It doesn't mean that you'll always get a consistent process in assessing that value, but it's quite a step improvement than if you're just getting a regular appraiser who's not on that certified list. So that is the backstop right now. There are some other activities that I'm currently exploring, and I don't want to talk about them unless I have more certainty behind them. So let me leave those not to be discussed for right now. But again, I've very encouraged that in the latest conversations with the Institute for Market Transformation that the SAVE Act has a lot more chance of passing this time around. They stripped away the objectionable portions of it, and I think that will be a substantial way to solve the problem. I'll also mention, by the way, FHA, which is doing like 40 percent of the mortgages today, offers an energy-efficient mortgage, and that mortgage recognizes the value of the savings in that process as well. So that you can stretch the buying potential of the buyer and get past the appraisal issue.

Jamie Lyons:
Thank-you, Sam. We have a number of other very good questions we will respond to in writing. I'm sorry we don't have time to get to all of them today, but thank-you for putting so many good questions out to us. This concludes the training. We hope it's been informative to you. You've completed the DOE Challenge Home orientation training course. You will receive a certification of completion via email. And if you found this training to be helpful and you'd like your colleagues to participate, here's our email where you can contact us, and you can also request the slides as I mentioned earlier. And it's also worth noting that partners, builder partners, verifier partners, manufacturer partners, are all included on periodic email newsletters and communication which will highlight upcoming training seminars over the next few months. Please take advantage of that as well. Thank-you very much for joining us today.

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