Facing public opposition from consumers and the real estate industry, it appears the Province of Ontario is going to backdown on its plan to require mandatory home energy audits on the sale of homes.

As I blogged earlier, while this facet of the Act was well intentioned, the Energuide rating systems used in Canadian home energy audits has technical complexities and assumptions that  make it a poor measure or comparison tool of a home's operational costs.

Last week, Pauline Aunger, president of the Ontario Real Estate Association, spoke to the Standing Committee on General Government:

First, let us look at the costs. Home sellers will first pay some $350 to $500 to obtain a home energy audit. It's an unnecessary fee because it provides very little information beyond a highly subjective number. But that's not the real problem. The real problem is that few homes will receive positive ratings, and those with less-than-ideal energy ratings will face pressure from homebuyers to either spend thousands of dollars to improve the energy efficiency of their home or lower their sale price.

For a moment, let's assume that a homeowner sells his home for $10,000 less than the original asking price based on the results of a home energy audit. Bill 150 presumes that homebuyers will use these savings to invest in improvements to the energy efficiency of their newly purchased home. I have been a realtor for over 30 years, and I can say with certainty that the overwhelming majority of homebuyers will not invest in new energy-efficient furnaces, wall insulation or solar water heaters. Instead, buyers tend to customize their recent purchase by investing in things like kitchen renovations, new furniture and other cosmetic alterations.

If the ultimate goal of mandatory home energy audits is to improve the energy efficiency of the housing stock of Ontario, then the government should expand its successful rebate program, not pass laws that won't work.

OREA is also concerned that mandatory home energy audits unfairly target single-family homeowners. Although subsection 2(1) of the bill is broad in terms of its application, OREA has learned that mandatory home energy audits will apply only to single-family homes. The fact that the government has chosen to place the burden of mandatory home energy audits directly on homeowners is extremely concerning to Ontario realtors. This design ensures that while all Ontarians contribute to our pollution problem and share in the benefits of going green, owners of single-family homes will bear the majority of the costs. If a culture of conservation is indeed a public good, as the government has indicated, then we should all share in its cost, not just homeowners.

As well as having concerns about home energy audits' impact on homeowners and our economy, realtors have serious doubts about their reliability. For example, an investigative report by the Toronto Star on home energy audits received three different sets of energy ratings and three different lists of recommended retrofit renos, ranging from $5,000 to $25,000, all on the same house. Compare this lack of standards to the consistent results of testing used to produce energy ratings on cars and appliances, and you will find that trying to rate an individual home is a very subjective process. We believe that the results of home energy audits are too inconsistent to be legislated as a requirement in a real estate transaction.

Realtors are not alone in their opposition to mandatory home energy audits. In fact, we are now joined by one of the largest, most important groups in this province: Ontario's 2.5 million homeowners. An Ipsos Reid public opinion survey released on Monday shows that 65% of Ontario homeowners oppose a system of mandatory home energy audits. Indeed, 92% of homeowners favoured voluntary audits, as does the Ontario Real Estate Association. Furthermore, a massive majority of 94% of homeowners believe that mandatory home energy audits will impose significant costs on home sellers and first-time buyers.

In addition, the poll found that 70% of Ontario homeowners believe that mandatory home energy audits will deter them from selling their home, having a detrimental effect on the real estate sector and Ontario's economy. Not surprisingly, the majority of Ontario homeowners oppose mandatory home energy audits because they know that the audits will hurt the affordability of housing, add yet another brake on the economy and erode hard-earned home equity.

In her response, the MPP from Etobicoke-Lakeshore stated:

It would seem to me that type of information, combined with the fact that the audit is then transferable to the new purchaser, helps very much on a critical issue and a critical barrier to first-time buyers and entry into ownership, and that is the carrying costs associated with that home.

To be clear, only the information in the audit is transferable to the purchaser.  If the buyer wishes to carry out an ecoEnergy retrofit, the new owner must get a new pre-retrofit audit done, complete the work within 18 months, and obtain a post-retrofit audit to apply for the grant.

McGuinty and the Liberals are rushing "Bill 150, Green Energy and Green Economy Act" through the legislature this past week.  (Introduced on Monday, with Second Reading immediately following on Tuesday, Wednesday, Thursday, ...)

A notable component of the bill is a mandatory home energy audit prior to the sale of a home.  Like the private member's bill (Bill 101, Home Energy Rating Act) -- that appears to have died in committee -- the mandatory home energy audit raises many of the same concerns that I pointed out in October, including:

• EnerGuide ratings are not consistently measured.  EnerGuide ratings of an existing home can, and do, vary between energy advisers, depending on the assumptions they make and extent of data collected on the building's actual construction (limited to non-invasive visual inspection), without consulting the builder, building plans, materials specification, or equipment (e.g., HVAC) specifications.

• EnerGuide ratings between different homes cannot be meaningfully compared.  First, the EnerGuide rating scale is logarithmic (according to the Canadian Home Builders' Association); a home that rates 80 is not 10% more efficient than a home that rates 70.  Second, the HOT2000 software (used to compute the EnerGuide rating) makes adjustments for climate zones (heating and cooling degree days); thus, homes in different climate zones may have the same EnerGuide rating, but have very different energy efficiencies.

• EnerGuide ratings are not stable over time.  First, the tightness of the building envelope may change over time (e.g., degradation of caulk, compromised vapor barrier, etc).  Second, the Ontario government has no control or oversight into the implementation of the HOT2000 software -- achieving minimum EnerGuide ratings could be akin to chasing a moving target.  Natural Resources Canada made controversial changes to the software last summer, without industry consultation, which if applied retroactively, would have had the general effect of lowering the EnerGuide ratings of existing homes already labelled.  An added confusion is that EnerGuide rating reports and labels do not show the version of the HOT2000 software used.

• EnerGuide ratings alone are not a measurement of building quality. The Canadian Home Builders' Association advocates the design and construction of a "house as a system".  One danger in emphasizing EnerGuide ratings is that we may end up with homes with very tight building envelopes but which fare poorly on indoor air quality, humidity levels conducive to mold, etc.

Given these technical problems, homeowners should be extremely concerned about the impact of an unfavorable home energy audit on the resale value of their homes.  (Nevermind that the home energy audit is going to cost you somewhere around $300 to $350 up front, before you receive the provincial rebate of (up to) $150 in the mail, roughly six weeks later.)

And the government's claim that mandatory home energy audits would stimulate green renovations is weakened because the ecoENERGY 'D' audit (the pre-retrofit audit) is not transferrable between homeowners (e.g., from seller to buyer).  [The ecoENERGY Retrofit program is a federal program managed by Natural Resources Canada; the province can't change this constraint.]  There is no immediate incentive under the proposed bill for the new homeowner to undertake any renovations, green or otherwise.

Hey!  OREA's policy submission re: private member's Bill 101, and a recent press release, "Mandatory home energy audit could significantly hurt home sellers in an already tough economy" borrowed a phrase from my text without attributing me as its source!  Plagarized by my own association?  I'm flattered.  ;)

Here in the GTA and other parts of Ontario, water consumption is a metered utility.  The occupant or owner may be billed quarterly by the city, regional municipality, or the local utility company.  Like other utilities (e.g., natural gas & electricity), the seller is responsible for any consumption up to the date of closing.

However, unlike other utilities, water bill arrears can be carried forward and billed to the new owner.  And from what I've seen, solicitors can overlook this in the closing adjustments.

One of my clients received a notice from the utility company for water bill arrears owed by the property's previous owner.  Knowing that my client had title insurance, I contacted the insurer and confirmed that his policy covered the water bill arrears and that the deadline to file a claim had not lapsed.  I assisted my client in preparing a claim, and in about a month, he received a cheque.

This incident came up in conversation with another client, and he remembered getting stuck with the bill on another property he had purchased directly through the listing agent.  Unfortunately, too much time had elapsed.

Work with a knowledgeable and competent real estate professional who'll represent you and protect your best interests.

Start saving and earning your EcoBroker designation today!

1. Enroll / Sign up here:  EcoBroker - Get Started
2. Enter my EcoBroker number:  EBC13654 into the promotional code box.
3. Refer a colleague  (or more) and earn a referral fee.

BTW the online version of NAR's GREEN designation core course has slipped its December release.  Learning Library says the target for release is around the end of this month (January 2009).  In the meantime, you don't have to wait to take the Residential elective at Realtor University because the core course is not a prerequisite.  Unfortunately, the 10% discount code I posted in November no longer works.  (Sorry.)

I hope you all had a safe and enjoyable New Year.  My wife and I "rang" in 2009 with a pair of matching iPhone 3G's.  Techno-geekie-romantic, sort of.  ;)

I'd like to thank again all my clients and partners for working with me in 2008.  And as we step into 2009, may our patience, hard work, and diligence, continue to reward us with opportunities and good fortune.

2009 will undoubtedly be a year of change, in politics, in the economy, in the workplace, and at home.

The Bank of Canada surprised some today by sharply cutting its key benchmark rate by 75 basis points (3/4 of a percent), at the high end of analyst predictions.  This matches a 50 year low, last seen in 1958!

Ok, the central bank says Canada is entering a recession.  On the other hand, this is positive news to homeowners with variable rate mortgages tied to prime before discounts disappeared and banks started quoted prime-plus.  Some clients are enjoying prime minus 1% and prime minus 0.6% on their mortgages.

This is an entertaining (and educational) online game from the folks at Quebec's Agence de l'efficaté énergétique ("Agency of Energy Efficiency").   Grab Energuy's hand, lead him around rooms, and point out the energy savings.  You'll play it over and over until you find every one (20 in all), or maybe you can't get enough of the celebratory dance moves.  B-)

The Residential elective course for NAR's Green designation has been launched at Realtor University.  Check out the Featured Product link.

Enter the Discount Code "GREENRE08" (that's zero-eight for the last 2 characters) on this screen (not at checkout) to get the promotional pricing, i.e., 10% off the elective course, or 20% off the ABR+elective bundle.

Does this sound familiar?

I just submitted a sealed bid on a tax sale property, and I think I bid too much.  Is it too late to back out?

Sounds similar to buyer's remorse.  Here's the scoop when bidding on a property being sold by public tender for tax arrears (i.e., municipal property taxes, interest, penalties, and other reasonable costs incurred by the city):

• Contact the City.  Theoretically, you should be able to withdraw your tender (e.g., by written request) any time prior to the closing date/time for receiving tenders.
• The City reserves the right to cancel a sale up until a tax deed is registered.
• If your tender is rejected, the City will either send back your bid documents and deposit, or provide you with the necessary information for other arrangements.
  
• If you are the successful bidder, you have 14 days to close.  If you fail to close, your deposit is forfeit.
• If the successful bidder fails to complete the sale and you're the second highest bidder, you are then given 14 days to close.  And if you also fail to close, your deposit is forfeit.
  

That said, remember, "Nothing ventured, nothing gained."  To avoid an expensive learning lesson, do your due diligence.

• By its very nature, a tax sale property is a problem property. You can't include conditions on your tender, i.e., subject to financing, insurance, inspection, etc.
  
• The "assessed value" is not the same as its "market value".  Use conservative estimates, and budget for overruns.  If this is an investment, treat it like one.  You're in business to make money.
  
• Consult a lawyer.  Chances are you won't receive a survey, nor be able to tour the property, get vacant possession, or even obtain a key.  Know the risks.  Know your rights.

Yes, it's that time of year again.  NAR would like to remind all of us of the value of professional development, and in particular, a NAR recognized/approved designation (or certification).

According to Realtor University, the "At Home with Diversity" online course is currently half-price ($24.50, reg $49).

For those of you attending the 2008 NAR Annual Conference and Expo (Nov 5 & 6), and taking the Green designation core course live, I'm looking forward to reading your reviews.  The residential elective is slated to be available later this month as an online course, with the online version of the core course following in December.

Me, I just wrote my Professional Real Estate Brokerage exam this past week, and I'm hoping to wrap up my EcoBroker and NAGAB courses this month, after pushing them to the backburner for a few months. (*blush*)