What Is a HERD Score? A Michigan Home Buyer's Guide

If you've been shopping for homes in the Ann Arbor area, you may have noticed something new appearing on some MLS listings:

HERD Score or Home Energy Score

Many first-time buyers see these reports and have no idea what they mean. The good news is that they can provide valuable information about a home's future operating costs and help buyers make more informed decisions.

What Is a HERD Score?

HERD stands for Home Energy Rating Disclosure. The program uses the U.S. Department of Energy's Home Energy Score system to evaluate a home's energy efficiency and estimate future energy use. The score is presented on a scale from 1 to 10, with higher scores indicating greater efficiency. Ann Arbor describes it as similar to a vehicle's miles-per-gallon rating.

The assessment looks at items such as:

• Insulation levels

• Heating systems

• Cooling systems

• Water heating equipment

• Building construction characteristics

• Overall energy performance

The result is a report that helps buyers understand how efficiently a home may operate.

Why Was HERD Created?

Historically, buyers have had access to information about:

• Square footage

• Bedrooms

• Bathrooms

• Property taxes

• School districts

But buyers often had very little information about a home's future utility costs.

Ann Arbor created the HERD ordinance to provide buyers with information about a home's potential energy use and estimated energy costs before purchase.

Think of it like buying a car.

Most buyers want to know fuel economy before making a decision.

HERD attempts to provide similar information for homes.

Does Michigan Require HERD Scores?

No.

There is currently no statewide Michigan requirement that homes receive a HERD score before being sold.

However, the City of Ann Arbor has adopted a Home Energy Rating Disclosure ordinance that applies to many home sales within city limits. The ordinance generally requires qualifying homes to obtain a Home Energy Score assessment before being publicly listed and to make the score/report available to buyers.

For buyers shopping in:

• Oakland County

• Wayne County

• Monroe County

you may not encounter these disclosures as frequently.

For buyers shopping within Ann Arbor city limits, you'll likely see them more often.

What Does the Score Mean?

The Home Energy Score uses a 1–10 scale.

Generally speaking:

• Lower scores indicate less efficient homes

• Higher scores indicate more efficient homes

A higher score may suggest:

• Lower utility bills

• Better insulation

• More efficient heating and cooling systems

• Improved overall energy performance

A lower score doesn't necessarily mean a home is a bad purchase. It simply means buyers should understand the home's operating costs and potential improvement opportunities.

Why First-Time Buyers Should Pay Attention

Many first-time buyers focus on:

• Purchase price

• Down payment

• Interest rate

Those are all important.

But monthly homeownership costs also include:

• Electricity

• Natural gas

• Water

• Sewer

• Maintenance

A home with lower utility costs may fit a buyer's budget better than a similar home with higher monthly energy expenses.

For example:

Home A:

• Mortgage Payment: $2,300

• Utilities: $350

Home B:

• Mortgage Payment: $2,300

• Utilities: $200

That difference could save approximately $1,800 per year.

Over several years, those savings can become significant.

Can a Lower-Scoring Home Still Be a Great Purchase?

Absolutely.

Many older homes in Southeast Michigan have:

• Excellent locations

• Character and charm

• Strong resale potential

A lower energy score isn't necessarily a reason to avoid a property.

Instead, it may help you plan future improvements such as:

• Additional insulation

• Air sealing

• Furnace upgrades

• New windows

• Heat pump installation

The score provides information—not a pass/fail grade.

How Can HERD Help Buyers Budget?

This is where the report becomes especially useful.

Most buyers estimate:

• Mortgage payment

• Property taxes

• Homeowners insurance

But many forget to budget for utility costs. A HERD report can provide another piece of the affordability puzzle by helping buyers understand potential energy consumption and operating expenses.

That information can help buyers:

• Compare similar homes

• Budget more accurately

• Identify future improvement opportunities

• Understand the true cost of ownership

Final Thoughts

The HERD program is still relatively new, but it gives buyers something they've historically lacked: information about a home's expected energy performance.

For first-time buyers, that's valuable. The score shouldn't determine whether you buy a home. However, it can help you understand future operating costs, compare properties more effectively, and make a more informed financial decision.

Like a home inspection, a property tax estimate, or an insurance quote, a Home Energy Score is simply another tool that helps buyers understand the full picture before making one of the largest purchases of their lives.