Mandatory Energy Audits on Selling-- Really?

Ontario’s proposed mandatory Home Energy Rating and Disclosure Program (“HER&D”) would force an energy audit on a seller before a home is listed for sale on a “listing service” such as MLS, and require the auditor’s report and energy rating be disclosed in the listing.

Voluntary energy audits are a good thing, but forcing them on a seller is another ploy by the government to interfere with the real estate market. The proposed legislation is discriminatory as it excludes homes sold through non-listing services, apartments, condos, commercial, manufacturing and farm properties. The Ontario Real Estate Association further argues that making REALTORS® unqualified “government enforcers”, for HER&D “unjustly attempts to regulate MLS®” and puts REALTORS® in conflict with their clients.

What’s the Recoup Value? The Ontario Home Builders Association has stated that homes with energy efficiency ratings will receive a premium on selling. OREA contends that audits could stigmatize certain homes. Historically the recoup value rarely equals the cost of the upgrade. In some instances, it merely makes the home more saleable.

The 2015 Cost vs. Value Report indicates a recoup value in the Atlantic region of 64.8% on the cost of replacing vinyl windows and 57% for the cost of replacing a roof. Overall, the average recoup value is 61.51%, and that’s considering some highly attractive remodels and upgrades.

The Appraisal Institute of Canada’s booklet, “How to Value Your Renovations” measures payback on the cost of renovations in three ways: by the value of increasing selling price, enjoying the renovated space or maintaining a home’s worth. Also, how long one plans to live in the home can help decide how much to spend. In the short term, and that includes selling, “smaller and less-expensive improvements” tend to best recover a seller’s investment.

It’s essential to replace roofing, heating/cooling, windows and the like near the end of their life expectancy. They fall into “... maintaining the worth of your property,” not increasing the selling price. Yet if not updated, they negatively impact a home’s value by the cost to replace. Needed upgrades are sometimes best left to the buyer who plans to live in the home for a while. The seller is moving out and needs to carefully determine what work is needed to maintain value, improve price and salability without loss and just as importantly, determine affordability. 

Checks and Balances are Already in Place. REALTORS® help determine a home’s value based on features, shortcomings and market conditions. Home Inspectors check for deficiencies in structure and needed upgrades. Mortgage companies confirm or refute a home’s value and condition through an appraiser. Insurance companies insist on home systems that are up to standard. What’s more, a buyer may include any due diligence conditions that concerns them. Is more government intrusion needed?  

Eugene Pilato

Eugene Pilato

Broker of Record
CENTURY 21 Today Realty Ltd., Brokerage*
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