Environment

Green Energy Act for Home Resales: Unfair and Unwise

By Adrian Duyzer
Published February 25, 2009

The requirement in the Ontario government's proposed Green Energy Act that all homes undergo an energy audit before being sold is unfair and unwise, and it disproportionately punishes people who own old houses in dense urban neighbourhoods.

It's easy to support the idea if you live in a new house. However, many people, myself included, live in old houses (mine is 120 years old).

I would love to put in a new furnace and new windows, for example, but I simply can't afford it. Half of the windows in my house are modern, the other half are not. I was quoted almost $10,000 for upgrading the rest of my windows.

I don't have $10,000 to spend on windows.

Energy audits are great big bargaining chips for anyone looking to buy a house. An energy audit on my house is going to turn up problems. When that happens, it's going to cost me a lot more than $300. It will probably cost me thousands of dollars: for a problem that if I could fix, I absolutely would.

My current plan is to make a hefty profit on my current house, and sink a good $10 or $20 thousand into my next house on upgrades, including energy efficiency. I'm not going to be in my current house for long enough to make that kind of investment worth it.

So ultimately, this could lead me to get less money for my current house, leaving me with less profit that I could apply to energy upgrades on my next house. (The argument that investments in my current home will be repaid when I sell it doesn't fly: some will, some won't. It's a gamble I'm not willing, or able, to take.)

I don't know how common my scenario is, and this act would likely force investment in green technology. But my problem is that I want my house to be more energy efficient, but I simply can't afford it. This Act has the potential to hurt me personally, not just by a little bit, but potentially by thousands of dollars.

Worse, this act is going to disproportionately hurt the people living in older neighbourhoods - the dense, urban neighbourhoods we promote at Raise the Hammer. And it's going to reward the people who are living in new homes out in the 'burbs, because those are going to be more energy efficient just because they were built later.

In other words, the fact I chose to purchase an older home in a dense, urban neighbourhood, just a few blocks from my workplace (less than five minutes walking distance) and within walking distance of almost all of the amenities I need, would be hugely penalized by this Act. My family and I would have been much better off purchasing a new home in some sprawling subdivision where I have to drive to buy a bag of milk.

This Act is unfair, unwise, and in my case, totally counterproductive.

Adrian Duyzer is an entrepreneur, business owner, and Associate Editor of Raise the Hammer. He lives in downtown Hamilton with his family. On Twitter: adriandz

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By gullchasedship (registered) - website | Posted February 25, 2009 at 14:27:41

You are right on the money with this post.

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By Elseperson (anonymous) | Posted February 25, 2009 at 14:43:41

This article is bang on! Those airtight homes around the perimeter of the city will pass with flying colours. Homeowners in older neighbourhoods near the downtown, however, will suffer by either having to dump thousands to retrofit their homes, or lose just as much on resale value as a penalty for not upgrading. God help those who'll be losing their jobs and having to sell their homes in these bad economic times.

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By TreyS (registered) | Posted February 25, 2009 at 15:23:15

Adrian keep in mind two things.

  1. You could ask for more money for your house as a result of the improvements.

  2. The next house you buy will have had the required improvements to meet the standard. Even if you don't live long enough in your current home to realize the full investment, you next home (even it is 150 years old) will have those improvements (perhaps even new windows if they were needed) and you'll be able to realize the benefit of those improvements.

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By arienc (registered) | Posted February 25, 2009 at 15:44:49

I don't believe that owners of older homes will be unfairly punished by the requirement for an energy audit when selling.

Presumably, people prefer older homes in the core because of the added character, higher quality workmanship and materials, and the fact that older neighbourhoods are more walkable and liveable. An energy audit won't change those things.

What it will do is ensure that those homeowners that have done things to boost their home's energy efficiency are rewarded for that effort and expense when they sell. An energy audit is not a pass/fail proposition. Each home is given a number between 0 and 100 reflecting the overall energy usage required for the average family to operate the home. A score of 100 means there is no energy use whatsoever (the house is entirely self-sufficient). An Energy Star home typically scores 80 or higher. Most newer homes score in the mid-70's, and most older homes in the low to mid 60's.

Think of it this way. Many people believe that home staging is a necessary part of the selling process. They spend money and a great deal of time to tidy up clutter and store personal items, bake cookies, put out fresh flowers and gloss over all of the cosmetic issues in the home in hopes that they will get the best selling price possible.

Energy efficiency is far more important to our future prosperity than the cosmetic improvements in homes traditionally considered to add value, and need to have much greater consideration. Why wouldn't applying a good bead of caulk around the windows be just as important as having strategically placed flower vases in the home? If a seller can afford to spend on staging or a new coat of paint, they can certainly afford to provide their home's efficiency rating to all prospective buyers. After rebates, we're talking about $150 here, which should easily be recouped in the sale price if the homeowner has been at all consientious about the energy they use in the home.

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By TreyS (registered) | Posted February 25, 2009 at 15:47:46

I'm considering doing this even though I have no intention of selling/moving.

I would like to know where I could improve energy efficiency to save money.

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By jason (registered) | Posted February 25, 2009 at 15:58:36

good post Ade.

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By Capitalist (anonymous) | Posted February 25, 2009 at 16:12:42

Just another tax grab from our communist premier. Meanwhile our provincial economy is in tatters. I'm sure this new tax will help. NOT!!

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By Hopeful (registered) | Posted February 25, 2009 at 17:14:12

I share your concerns Adrian and am glad to see you've raised them (I've already tried to bring them to light on the SpecThread page amidst the commie cash grab postings). Though it might be well-intentioned, the audit requirement falls way short in many many areas. Most of these are issues that the green building community has been grappling with for years in trying to craft a residential LEED standard. For instance, which is more appropriate to measure, R10000 windows or walkable access to public transit? Modern building envelopes or proximity to where you work? Finally, can a house with 2500 square feet per resident ever actually be considered more efficient than one where four, five or ten people share the same amount of space?
The audits, as they stand, will not touch on any of this and risk giving folks the mistaken impression that Energy Star living on the outskirts of Guelph or Milton might be more environmentally benign than living near their work or sharing space wisely enough to allow for investments in improved infrastructure (be it buses, bike paths, cogen heating systems or modern sewer systems). In short they'll focus folks on "the house" as opposed to "the community" and potentially penalize those, like you, who have chosen to make decisions based upon the latter. This is especially important in older urban settings like ours. I really hope that this becomes more of an issue and that some changes to the program or its methodology are still possible (are you listening local councilours and/or MPP's?). Thanks again for posting this.

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By TreyS (registered) | Posted February 25, 2009 at 17:28:57

Also unfair is the one garbage bag per household then.

What about a household that "2500 square feet per resident........ than one where four, five or ten people share the same amount of space".

The same two households can only put out one garbage bag regardless of # of occupants.... soon enough.

Nothing but an tax grab as well... if households will have to purchase tags for more garbage bags. It doesn't have the enviro as a concern but extra revenue for the City.

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By Hopeful (registered) | Posted February 25, 2009 at 18:32:22

Hi Trey I'm not sure that I follow your comment to my post. What I'm saying is the audits as proposed look only at the building and not it's utilization (or neighbourhood). Large houses with few residents, by necessity, consume more resources per capita than more densely populated dwellings (or, by extension, neighbourhoods). This fact will not be quantified or penalized with the system laid out yesterday. Regarding bag limits and fees for extra bags, this will impact very few and, when it does, will be akin to user-fees being assessed, the same as any utility charge. Furthermore, as I understand it, the upcoming bag limit in the City of Hamilton actually allows a number of exemptions based on a variety of factors, including family size. Finally, the tax grab comments regarding the home energy audits really have to stop. I can't find anything in the bill (or full newspaper articles about) which suggests that the audits are designed to produce any revenue for Queens Park. The fees will go the auditors who do the work. I may have a ton of problems with the mandatory audit requirement but it's unfair (and seemingly inaccurate) to label it tax grab. Please correct me if I'm wrong. Cheers.

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By TreyS (registered) | Posted February 25, 2009 at 20:19:39

fair enough Hopeful

Understood, that households with fewer people do consume less per capita, definitely in terms of energy. In terms of garbage, I'd suspect it's somewhat less per capita but not a great deal.

We couldn't conceivably force empty nesters out of their 3-bedroom home after the children are gone.

Def Not a tax grab I agree. Although the $150 grant will be recovered through taxes in about 5 transactions. So for people to think this is wasted tax payers dollars, it's simply circulating dollars through the system to be eventually recouped and recycled again.

The secret to globalization prosperity is through trade surplus. Add more dollars to our national economy without printing more money, that is with positive trade balances in favour of Canada. That way more money can circulate without inflation. The tax and spend policy that is so often criticized by conservatives does not mean money is 'burned' when taxed or spent. it's simply collected then spent again within our own economy and collected again through taxes and so on. Money needs to flow, or it's called a recession.

Sorry for the off topic rant, I'm just baiting Capitalist. :)

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By arienc (registered) | Posted February 25, 2009 at 21:41:16

hopeful, Trey...I think your concerns are unfounded.

What this bill will do is put a number relating to the home's energy efficiency in the listing.

That number is only one of many factors that buyers will consider when buying a house. Someone who wants to live downtown will not choose to buy a house on the outskirts of town simply because the efficiency ratings are a few points higher.

The objective is so that someone who has taken the initiative to improve the efficiency of their home sees the recognition when they go to sell that home.

Think now...if someone had spent a few hundred bucks making sure all leaks were caulked, and the attic was insulated to a higher R-value, that homeowner should indeed realize more value when they go to sell than on an identical house that did not do the upgrades.

This creates an added incentive to do the work before you sell instead of leaving the house in an inefficient condition for the next owner to deal with. Just like there is an incentive for people to employ "professional home-stagers" to arrange the furniture in such a way that buyers will envision themselves living in the home and pay more for it.

This creates the same incentive for the seller to do those little things that bump up the rating - caulking, weather-stripping, insulating...Not all of these cost a fortune, but they all deliver long-term benefits.

Make it optional, and only those few of us who consider efficiency as an important criteria will even bother to have it done. Yet this is incredibly important for our future economic growth. This is why it has to be included on every listing, just like the property taxes, square footage and number of bathrooms.

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By g. (anonymous) | Posted February 25, 2009 at 22:11:43

i wonder how the author feels about fuel efficiency ratings on new cars? or energy star ratings on appliances? doesn't this ratings system unfairly punish people who build and sell inefficient vehicles and fridges?

does the author honestly believe that people buying an older house would not have some understanding that there is the potential that the older house might be less energy efficient than a newer one? this system will simply quantify what people already presume, hopefully with some interesting exceptions, like well performing, well maintained older houses or identify shoddily built cheap newer homes that were not built with care. it will simply allow people to make informed decisions.

p.s. new windows are an over hyped way of making a building more energy efficient. in most cases the money isn't justified and is better spent insulating, weather stripping and improving the efficiency of the heating and air conditioning. this is why the government will subsidize so little of the cost of upgrading windows compared with other renovations. window replacement is driven by the window replacement industry not sound research.

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By Frank (registered) | Posted February 26, 2009 at 12:10:58

G, I think you're mistaken. I live in a building with double single pane windows. My parents have newer double paned windows and I can definately feel a difference between the two.

Efficiency ratings are cars are virtually useless unless you can show me that it's sensible and safe to drive on the highway at 95km/h and energy star ratings show a customer how efficient an appliance is and that's useful when purchasing. So what? It works for NEW stuff, not the old.

I'd love to see an energy audit as an option, not something mandatory.

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By A Smith (anonymous) | Posted February 26, 2009 at 12:54:04

Karma in action my friends. If you want to keep attacking those who live in the suburbs, then you will eventually reap what you sow.

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By Mike B. (anonymous) | Posted February 26, 2009 at 13:17:31

Adrian wrote:

Energy audits are great big bargaining chips for anyone looking to buy a house. An energy audit on my house is going to turn up problems. When that happens, it's going to cost me a lot more than $300. It will probably cost me thousands of dollars: for a problem that if I could fix, I absolutely would.

Absolutely; but you're only dealing with this from your narrow perspective as a current homeowner with an inefficient house. Having just spent 20% of the cost of my Beasley-neighborhood rowhouse on efficiency upgrades, my partner and I know it's damn expensive to make the necessary changes in a 100yr old house, and yeah, you likely won't get it all back (depending on how quickly you are envisioning selling it), but I would certainly have liked having the results of an energy audit on our home before we purchased it. Not because it would have changed our minds, but because it's an extra piece of information that can be used in determining which home best fit our lifestyle, budget, personal convictions, etc.

Let's put it this way, if your home is energy inefficient, it's not the audit's fault, and just because you have a low rating doesn't mean you need to do any upgrades; but potential buyers who are concious about energy use (and I believe people are becoming more concious about the advantages of energy efficiency) should be entitled to know how your home stacks up to other homes that may have been upgraded. In time, I believe that people will pay a premium for these homes, so I'm uncertain as to why you believe that efficient and inefficient resale homes should be marketed on the same playing field as one another.

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By Mike B. (anonymous) | Posted February 26, 2009 at 13:22:23

Adrian wrote:

Energy audits are great big bargaining chips for anyone looking to buy a house. An energy audit on my house is going to turn up problems. When that happens, it's going to cost me a lot more than $300. It will probably cost me thousands of dollars: for a problem that if I could fix, I absolutely would.

Absolutely; but you're only dealing with this from your narrow perspective as a current homeowner with an inefficient house. Having just spent 20% of the cost of my Beasley-neighborhood rowhouse on efficiency upgrades, my partner and I know it's damn expensive to make the necessary changes in a 100yr old house, and yeah, you likely won't get it all back (depending on how quickly you are envisioning selling it), but I would certainly have liked having the results of an energy audit on our home before we purchased it. Not because it would have changed our minds, but because it's an extra piece of information that can be used in determining which home best fit our lifestyle, budget, personal convictions, etc.

Let's put it this way, if your home is energy inefficient, it's not the audit's fault, and just because you have a low rating doesn't mean you need to do any upgrades; but potential buyers who are concious about energy use (and I believe people are becoming more concious about the advantages of energy efficiency) should be entitled to know how your home stacks up to other homes that may have been upgraded. In time, I believe that people will pay a premium for these homes, so I'm uncertain as to why you believe that efficient and inefficient resale homes should be marketed on the same playing field as one another.

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By grahamm (registered) | Posted February 26, 2009 at 14:21:35

"Let's put it this way, if your home is energy inefficient, it's not the audit's fault, and just because you have a low rating doesn't mean you need to do any upgrades;"

Thats my sense too. I can't see how an getting energy audit necessarily results in sellers being required to upgrade their home.

The audits findings do not require upgrade - its merely information, similar to a home inspection. If a homeowner has to make improvements to their house in order for it to be attractive to buyers, then so be it. But I find it hard to believe that a buyer would expect the same results of an audit on a 100+ yr old house and a 5+ yr old house.

I also hold a larger view. If these audits mean that generally the energy efficiency of houses rises (likely simply due to a new awareness), it is good for everyone - buyers, sellers, observers. As housing stock improves efficiency, energy uses goes down.

While our homes' energy efficiency may improve come from bottom up (ie, individual home owners), I find it short sighted to criticize government efforts to improve our cities. This new program will result in more houses having higher efficiency more quickly. In the end, that is good for everyone.

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By g. (anonymous) | Posted February 27, 2009 at 00:33:41

frank,

i am sure you "feel" a difference, qualitatively, however, i'm not suggesting that replacing windows makes no difference to a home's energy usage. i am suggesting that, quantitatively, your heating bill would drop significantly more by addressing some more cost effective but less apparent ways of reducing heat loss in your building.

the thermal gains achieved by replacing windows, i.e. the R value of single vs. double pane windows is minimal.

single pane R value .85
double pane R value 1.5 - 2

marginal gain of 1 or 2 units of thermal resistance

compare this with adding any amount of insulation.

6 inches of fiberglass or mineral batt insulation r value 21
2 inches of extruded polystyrene r value 10

gain of 3-5 units of thermal resistance PER INCH of insulation added

this combined with the fact that the per square foot costs of replacing windows compared with adding insulation are higher by an order of anywhere up to 100 times as expensive while gaining a fraction of the thermal efficiency and it really doesn't make sense to make it a priority

of course what you "feel" is the draft blowing through the gaps in the seals around old windows which can be repaired quite effectively and relatively cheaply compared to replacement.

one is much better off investing in repairing the weather stripping in old windows and doors to seal them properly and investing the rest of the money in insulation. replacing windows should be a last resort especially if you have wood windows. vinyl windows have a very limited life span by design, vinyl breaks down quite rapidly in architectural terms, while wood windows can and do last for centuries with proper care. wood windows can be repaired quite effectively and the end result will be better than any vinyl or aluminum window in the long term.

making energy efficient homes of any age relies on several things, two of which are r value, or the amount of thermal resistance to heat loss through building materials and by air changes per hour, or how well sealed the house is from drafts.

natural resources canada puts out a publication called Whole House Retrofit Techniques which explains all this quite well along with practical advice about solutions to energy inefficient houses.

and just briefly, efficiency ratings on cars are a proven benchmark to the characteristics of a certain vehicles tested capabilities that allow a buyer to understand how different models will perform under similar situations. to state that there is no value to this is completely asinine and barely requires a response. same with energy star ratings. would you say the same thing about horsepower ratings? doesn't it matter how you drive the car and not how big the engine is in terms of how fast you go? so why bother with any specs on anything?

to summarize, i would have to say that actually frank, it is you who are mistaken, but thanks for the opportunity to expand on my point, always appreciated.

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By JonC (registered) | Posted February 27, 2009 at 09:30:24

To be fair on comparing the R values...because insulation typically has a R value 10 times higher than that of windows, you need to replace 10 times as much area for a similar percentage increase in efficiency (ie 1% to 2% compared to 10% to 20%)

This looks messy without subscripts and the Greek alphabet, but bear with me.

Heat Loss (Q) = Area (A) * Change in temperature (DT) / R

Comparing your before (1) and after (2) Q1 - Q2 = (A1DT1)/R1 - (A2DT2)/R2 Assuming constant Area and temperature change DQ = ADT/R1 - ADT/R2 Cross multiplying DQ = R2ADT/(R1R2) - R1ADT/(R1R2) DQ = (R2ADT - R1ADT)/(R1R2) DQ = (R2-R1)ADT/(R1R2)

So if the R values increase by a factor of ten, the numerator increase is by ten, but the denominator increases by a hundred.

Your point is still entirely accurate, seals & insulation are a much more economical way to increase the efficiency, but not by the massive amount implied.

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By JonC (registered) | Posted February 27, 2009 at 09:45:18

I just nerded this board up hardcore.

Back to the original post. The audit shouldn't lower the value of your home as long as it's consistent with your neighbourhood. Anyone who thinks they are going to be able to reduce the sale price by 10k to have the windows replaced in an older home is dreaming. The quality of your home is already factored into the market value.

I posted this elsewhere, but I think requiring the audit if you aren't going to force action to remediate the issues is pointless. Having said that, the easiest way to deal with the bureaucracy of the program is to make it a CMHC requirement and put the cost of the inspection into the premium they already charge. While that may sound unfair (only including insured purchases), anyone that has gone through the effort of putting away 20% down payment (anything less is insured, except for the occasional sub-prime mortgage and no one should be rushing out to purchase at those rates) should be well versed in the housing market and have an idea about energy costs.

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By Mike B. (anonymous) | Posted February 27, 2009 at 11:08:52

JonC wrote:

I posted this elsewhere, but I think requiring the audit if you aren't going to force action to remediate the issues is pointless.

I think the points Adrian makes in his article would be more valid if this situation were the case (luckily it isn't). Not everyone is going to have the funds necessary to remidiate an inefficient house, and in some neighbourhoods, it would be incredibly unfair to force homeowners to spend thousands retrofitting their houses when they know they cannot possibly recoup the expense. As grahamm said, If a homeowner has to make improvements to their house in order for it to be attractive to buyers, then so be it. But you can't force it on people in one fell swoop. I'm not a market fundamentalist, but here is a case where 'the market' should work quite well.

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By Frank (registered) | Posted February 27, 2009 at 12:56:23

G. there is however an increase of about 200% in both cases. Also, I've never seen a house built with only 2" of extruded polystyrene and I've built houses since I was 18 lol. In fact, one of the oldest houses I've seen had newspapers as insulation in the wall. I'd also like to remind you that many homeowners have no idea how to install insulation, thinking that "stuffing it in" is better when it's not. Also, the only place where 6" of insulation is possible in the majority of houses is in the attic as most walls etc are only 3.5" from ext finish to interior vapour barrier.

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By arienc (registered) | Posted February 27, 2009 at 14:06:33

Mike B...I still don;t see what the big deal is.

Here's a scenario.

Joe Shmoe's house down the street is the same house as mine. Everything looks the same. Yet Joe's house has better insulation in the walls than mine does, and all the gaps were recently caulked. However since the houses appear identical, both houses end up selling for the same price. Joe loses out on the value of the upgrades that were made to his home. Therefore the person who acted most responsibly is the one who loses out. Not the ideal situation.

Now let's look at the same transaction with a mandatory audit. Joe's house scores a 75 on the audit, while mine scores a 70. The audit tells me that I have to install new insulation and re-caulk to bring my score up to 75. If that work costs $2,000, I either accept that my home is worth $2,000 less than Joe's is, or I put in the $2,000, get the work done, and get the auditor to recertify (earning me an EcoAction tax credit to help pay for the upgrades). Either way, the value goes to the homeowner who acts more responsibly, which is exactly the way things should be.

Actually, I would go the government one further and make the energy audits mandatory for all homeowners every five years, whether selling or not. It's rather annoying that if you don't get all the work done within 18 months of the audit, you lose out on any possible tax credits. The program should be run continuously, as the process of making buildings greener is a continuous one.

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By JonC (registered) | Posted February 28, 2009 at 10:05:18

They might look the same, but if you're selling you should be identifying the increased efficiency as a selling point. Also, it's rare that a house ever increases in value by the amount put into renos, in your example, the $2,000 might increase the value by $500 or $1,000.

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By Frank (registered) | Posted March 02, 2009 at 08:20:10

Exactly! JonC has it right. The audits are great however they shouldn't be mandatory. If Joe Schmoe is selling his house and has put in the extra effort to insulate and caulk, then he should have the option of showing that his house is energy efficient by having an energy audit done.

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By Ted Mitchell (registered) | Posted March 02, 2009 at 20:56:16

I'm really of mixed opinion on this.

It has great potential for enhancing renovations, creating more technical jobs, and simply establishing more understanding about energy efficiency.

But it could harm house prices in the places that need it most.

As my last article argues http://www.raisethehammer.org/index.asp?... the biggest bang for the buck is in retrofitting old buildings. This program doesn't seem like the smartest way to accomplish that.

Then again many old houses still have another 50 years or more in them and whatever small thing you do to improve efficiency and comfort is significant because of the duration.

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By not gullible (anonymous) | Posted March 04, 2009 at 00:10:05

If the author hopes to make a healthy profit from selling a substandand house, I pity the poor foll that falls for the sales pitch. Sorry, no sympathy. As long as the audit just indicates deficiencies, and does not force someone without the means to fix them, then at least everyone knows the current status of the building, and afair price can be negotiated from there.

Trying to get more than what you deserve is a big part of why the whole economy has gone down the toilet in the last year. Learn anything?

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By Frank (registered) | Posted March 04, 2009 at 14:06:33

Not gullible, the real estate market is what's called a "buyers' beware" type of market. It's up to the person purchasing the house to do the proper research (liens etc) which is why most people hire lawyers to do that. It's very easy for a buyer to put the energy audit as a condition of sale as well. It should not be a mandatory process.

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