City of Austin Energy Conservation Audit and Disclosure (ECAD) Program

The new Austin Energy Audit ordinance is in play now, and we’re already starting to see it affect some deals. The official start date of the ordinance is June 1, 2009, but that means any home subject to the ordinance that is closing on or after June 1 will have to comply.

Covered homes must be 1) ten years old or older, 2) located in the city of Austin city limits, and 3) be a utility customer of Austin Energy for water and/or electricty service. If your 10+ year old home is located in Austin but you get your electricity from PEC and don’t get water from Austin Energy, your home is not subject to the ordinance. If your home is located in the Austin ETJ, is is not included. Condos are not subject to the ordinance at all, but townhouses are. Homes that have received over $500 in Austin Energy green energy rebates, or completed any 3 improvements under the rebate program, are exempt for 10 years and not required to have an audit.

There are a lot of additional details we could cover, and the links to the Austin Energy website are below if you’d like to know more, but what I want to write about now is how ordinance this will affect actual real estate transactions. Sylvia and I currently have homes under contract and listed that are subject to this new ordinance.

Example #1. Our buyer wrote an offer on a house covered by the ordinance. Prior to the offer being executed and signed, I asked Sylvia if we had received an Energy Audit along with the Seller’s disclosure. She said no, we hadn’t. After discussing it, we decided not to ask for it until the contract was signed by the seller, as we didn’t want to introduce a new variable into the negotiations. Once we had the signed deal, we requested the other agent provide us with the Energy Audit prior to the end of the option period.

The other agent at first said that it wasn’t June 1st yet, so the ordinance wasn’t in effect. We had to explain that the property will close after June 1, thus the Audit will be required. The agent said he needed to look into that. He later called back, still confused, and said that since the Effective Date of the contract was before June 1, that it was not required. Again, Sylvia had to explain that the closing date is what controls whether the audit is required (more specifically, it’s the deed recording date, which would obviously be on or after after the close date anyway).

We’ve cleared the option period after negotiating repairs, and still don’t have the Audit. The buyer is moving forward nonetheless, mainly because the audit isn’t actually a required condition of the contract. More on that later.

We don’t think these Energy Audits will be deal killers, but when we represent buyers, we still want to see it during the inspection period because we do think under certain circumstances the information in the audit could affect the value of the home.

Example #2: On our other buyer deal, the agent provided the Audit without being asked. I’ll post a copy of a blank audit at the bottom of this article, but here is a sample of what that Audit said, for a 1980s home:

1) Windows and Shading: Solar screens recommended? No
2) Attic Insulation: Add R-22 of insulation to bring the overall R-Value to 38. (to the attic)
3) Heating Cooling and Air Duct Systems: Perform duct seal? No. – Repair/Replace/Insulate Ducts? No.
4) Air infiltration: Weather strip exterior doors? No. – Caulk plumbing penetrations? No. – Seal Attic Hatch? Yes.

Pretty basic stuff actually. At the end of the audit there is a list of other recommended actions, such as installing low-flow toilets, and the report indicates for all suggestions whether or not a rebate program is available.

My initial impression is that these audits are not going to cause a lot of trouble once we get a few months into it and some standards of practice among Realtors have time to emerge.

Example #3: On our listing that will require the Energy Audit, we’re not having it done because the house is also for rent and if it rents the seller would not be required to provide an energy audit. But upon receiving a sales offer, my first call would be to my inspector to find out when he’d be able to go do the audit, so we’ll know that we could provide it during the option period.

The city of Austin and some auditors have been to our Keller Williams office twice in the past few weeks to answer questions and talk about the audits with agents. There remains a lot of confusions. I must say I’m a bit surprised at how angry some agents seem, and how worried they are that this is somehow going to be a big hassle. It’s not.

One question was “what if my seller can’t afford to pay for an Energy Audit”?
I’d say, write the deal up so the buyer pays a $300 Option Fee and use the money to pay for the energy audit. Audits will cost from $275 to $350, plus extra for additional A/Cs or homes bigger than 2,000 sqft. Each auditor has their own pricing, but that seems to be the pricing range.

Another question was “how does this Austin Energy Audit program benefit my seller”?
Well, it wasn’t written to benefit your seller. It’s a dumb question. It was written so hopefully Austin can avoid building another coal fired power plant in the next 30 years by reducing consumption of wasted energy in homes. It benefits the community, of which your seller is a part.

Another question: How do we explain what the Audit means to our buyers”?
Well, it’s fairly self explanatory. The audit provides the buyer with a list of suggestions, which if followed, will provide a cash return on the investment that is estimated to be around 20% to 30%. Also, Austin Energy has the best and most generous rebate program in the entire U.S., so the cost of those upgrades is subsidized by tax dollars.

There is no better place or better time for a smart buyer to make energy efficiency improvements to a home than right now, right here in Austin TX. And you get a free report handed to you explaining it all when you buy a house. And if it’s a first time buyer, you get the $8,000 tax credit to boot. What is there to explain? Go buy a house!!

Back to sellers, I think what I’ll be doing, and most agents I’ve talked to, is advising sellers to go ahead and get the audit when we list the home, and while we have our inspector there, go ahead and get a pre-inspection as well. Pre-inspections are not widely used in the Austin real estate market, but they are really good to have so that the inspection and repair negotiation process is more predictable. Most of the inspectors who also do audits, as two of our inspectors do, will give a discount for doing both the pre-inspection and the energy audit up front.

For seller who don’t want to do it that way, we’ll let them know that we recommend having the audit done during the option period once they receive an offer. A seller can technically and legally refuse to provide the energy audit until closing, because it’s actually not part of the sales contract or the sales process, but I don’t think buyers will receive that well or that it will become a common practice. A buyer would wonder why the seller is holding back and it might create disharmony with the deal.

But from a compliance standpoint, a seller could say that will comply with the ordinance and nothing more and they could bring the energy audit to closing, and the buyer would receive it there. In fact, at the end of the energy audit report, on page 9, it states:

“The Energy Conservation Audit and Disclosure is not required to be included in the sales contract nor the Seller’s Disclosure form (Texas Real Estate Commission), but instead is a standalone requirement of the City of Austin”.

Odd that it’s called a “Conservation Audit and Disclosure” but in fact is not a required disclosure. It’s just expected that it will be disclosed to buyers.

If a seller completely refuses to provide an energy conservation audit, it won’t affect the deal at all unless the buyer cancels during the Option Period. It will still close. The title company won’t require it. But the seller will be subject to criminal misdemeanor charges after the non-compliance is later discovered by the City of Austin.

Finally, it’s worth noting that when originally proposed, this ordinance was going to mandate repairs and upgrades to homes upon sale. The Realtor community worked with the city to create what we have now, which is a voluntary program. Other than getting the audit, nothing else is required. None of the recommended improvements or upgrades have to be performed. It’s a market based solution, based on voluntary participation, with the hope that educated buyers will opt in because it makes sense to do so.

That said, there are those who strongly fought for a mandatory program, stating that voluntary participation won’t accomplish the needed level of conservation and energy savings. They wanted to mandate $500 to $3,000 of improvements that would have been required by either the seller or buyer upon the sale of covered homes. Those activists are still out there and will be looking for the program to fail, and will be back at the Austin City Council in a couple of years, if not sooner, pushing for mandated energy upgrades at point of sale.

So the success of this ordinance will be measured largely by the level of participation in the Austin Energy Rebate program by home buyers of audited homes. One thing the city people couldn’t answer for me was how they will track upgrades that don’t go through the city rebate programs. For example, if I have my home audited and it need more insulation in the attic, and I don’t care about a rebate and simply call my A/C guy to come blow in some insulation, that improvement won’t be documented at the city and they won’t know that the program worked. So, one of my suggestions was that they create a way to track upgrades and improvements that are done outside the city rebate program. One way to do this would be for the auditor to simply come back and certify the improvements and report them to the city.

If not enough people participate, we’ll probably be looking at major government intrusion into the real estate sale process by the City of Austin in the future. That’s something I’m against. We can handle this ordinance, but ordering buyers and sellers to make home improvements is a whole ‘nother ballgame.

City of Austin Energy Conservation and Disclosure (ECAD) Program.
The Actual Austin Energy Conservation Ordinance
Sample Blank Austin Energy Audit Report form.
360 Home Inspection Website overview of the Energy Audit (this is Bill Deatrick’s website. He’s one of our inspectors)
Approve Auditors

15 thoughts on “City of Austin Energy Conservation Audit and Disclosure (ECAD) Program”

  1. Steve and Sylvia: Very good newsletter. Wanted to clarify a couple of quick items for you. Autin Energy sells only electricity. We have nothing to do with water. A home must meet the ECAD ordinance requirements when sold if it is located within the City of Austin (as you indicated) and receives its electricity from Austin Energy. It is exempt from the ECAD audit if it is less than 10 years old or has had either three energy efficiency improvements or received a total of $500 or more in rebates — through the Austin Eneargy residential energy efficiency program — within the past 10 years.
    Thanks again for helping to spread the word and for your positive view.

    Ed Clark
    Communications Director
    Austin Energy
    (512) 322-6514

  2. Hi Ed,

    Thanks for clarifying. I thought AE provided water because all of the services are initiated and billed from the same place, but I suppose the water is separate from City of Austin and Austin Energy is simply owned by City of Austin? It’s somewhat confusing.

    But your point I think is that one has to be an electricity (Austin Emergy) customer, not just a city of Austin utility customer.



  3. As I understand it, the audit now only consists ONLY of duct leakage tests and EVERY home being tested is failing because in order to receive a passing score the home has to have less than 10% loss/leakage in a system that is not a sealed system and is not designed to be 100% leak free. If every home tested is going to fail, than I can’t see the wisdom in requiring this test! Seems to me that what the home seller is paying for is a document (which must be given to the potential buyer) showing that their home is somehow defective even though there is no way to make the home pass the test. I was told by a couple of the inspectors who are doing these audits that even brand new, very high end homes are failing this required test. How can the homeowner convince the buyer that this “black mark” on their property isn’t important? Home buyers I have worked with want the property they purchase to be in perfect condition and they want the seller to do (and pay for) any and all repairs that they precieve as needed. WE (as agents) may know that every home is going to fail, but it won’t be easy to convince the first time buyer that this is the case. I think this report will deter sales if it is handed to a potential buyer before they have a vested interest in purchasing the property (ie: test results given to buyers before an offer has been accepted.) Also, how does it reduce greenhouse emissions to conduct this test? I also don’t understand why the city feels it is fair to exempt bank foreclosures (the properties that are always in the worst condition!) mobile homes (one of the biggest culprits in wasting energy) and, now most recently condominiums. All of these buildings generally have central HVAC systems that are the same as those in the buildings that the audit is being required on, so why are they exempt? The ordinance should be applied to ALL buildings or it is not fair. As it is, the poorest homeowners are the ones who will suffer the most negative effect of this ordinance. If they can not afford to have the audit done, they will be in violation and could be fined. If they have the audit done, their home will most certainly fail and they will not able to afford to do improvements to overcome the stigma of the failed test in order to lure buyers back to their properties. This ordinance might have been proposed for the right reasons, but it isn’t being fairly administered and, what we have ended up with is just a big expense that does nothing to correct any problems and only ends up hurting the public in the long run. I am hoping some ACLU attorney looks into how this is going to have a much greater negative effect on minority sellers and decides to file a class action suit against the city because of the way they are administering this ordinance!

  4. To help clarify Susan D’s remark, there is really no pass or fail involved in the Audit process. The terms “pass or fail” should be removed from everyone’s vocabulary during a home inspection or audit.

    The Austin Audit is only a tool to help buyers / sellers understand their home and provide a general assessment of the homes energy efficiency and to recommend repairs / upgrades that may help to make the home more efficient. What Austin Energy is asking of the ECAD Audit is actually only a small sampling of a full comprehensive Home Energy Audit. A full comprehensive energy audit would include a blower door test to depressurize the home, gas checks, carbon monoxide inspections of gas fired appliances, and possibly an infrared camera scan and would take upwards of 4 hours to complete. This type of audit would include hundreds of of other factors NOT even required by the Austin Audit. These types of audits can cost upwards of $700

    The Austin Energy Audit is asking only for a test of the duct system (Duct Blaster Test) and some basic energy efficiency information such as attic insulation, obvious air leaks, solar screens, etc. This is only considered a “basic” or “partial” audit at best. The thought process that led to these requirements are somewhat based on the fact that in this area of the country, Central Texas, our homes are mostly serviced by cooling and heating systems that use “flex duct” materials in the attic. These systems are notorious for leakage and replacing the bad ones and sealing the newer ones can greatly improve the energy efficiency of these homes. As much as 30% of the the homes energy can be lost just through the ducts and attic access penetrations. These are some of the areas that will provide the greatest efficiency gains for the least amount of money.

    There is currently a LOT of misinformation circulating about these Austin Energy Audits as well some animosity over how it all came to be. But, for now, it is here and needs to be dealt with in the least painful way possible. Go to Austin Energy’s website and read what is required and what is NOT required. Call several auditors and try to understand the process. If your are currently selling your home don’t sweat the audit process, ALL homes can use some improvement. If you are buying a home don’t be misled into thinking a home fails an audit if it has leaky ducts. There is nothing that will be discovered during an energy audit that cannot be easily fixed or improved.

  5. I think that your clients should be aware of the fact that the goal of the ordinance is to keep the City of Austin from having to build more power plants. This will make them a little less disgruntled about the whole process. Also, cheap fixes, e.g. duct sealing, increased insulation, will cause a home to perform significantly better on the ECAD audit and make it more attractive to buyers.

  6. Is there a minimum EER or SEER requirement for a air conditioning and heating system in a existing home? Can someone be required to replace a system with a SEER rating of 13 SEER or less?

    Thank You

  7. Steve, your correct in the fact that a 13 SEER system is the minimum that you can currently buy or install. However, to qualify for a rebate the new system must be at least a 14 SEER/11.5 EER. For an existing home with an older system, there isn’t a required minimum SEER or EER rating. As a general rule however you will find that the older the system is, the lower the SEER or EER will be.


  8. Wonderful page! My name is John Barksdale and I’m an Austin homeowner. I have followed this liberty-robbing ECAD ordinance with great interest and am perplexed by its implementation. If I owned a manufactured home without a foundation, a condominium or a home 10 years old or newer, I could use 10,000 kilowatt hours a month and be exempt from the ECAD. But my abode doesn’t meet these exemptions, so I’m saddled with a mandatory “disclosure”. What angers me is the Class C misdemeanor provision; my home belongs to me, not the City of Austin and I should decide if I need to make energy improvements to MY PRIVATE PROPERTY. As a consumer (customer) of electricity, I have to use Austin Energy because it is a monopoly. I can’t use any other provider. The carbon-koolaid cult members who participated in the ECAD task force were (luckily) out-voted. Those tyrants wanted all deficiencies found during the energy audit to be corrected before the close of sale. I intend to get the ECAD misdemeanor provision eliminated through persuasion or a lawsuit. For those of you who believe in the ECAD because you believe it will negate the construction of another powerplant and feel you have the right to tell me what to with my time and capital, then I want to suggest an energy auditor audit my 1500 square home. For free. If you can come into my home and tell me to get an audit, then I should be able to tell you what to do with your labor and time. In a few years the carbon-cult special interest groups will whine to Austin City Council and persuade them to mandate the repair of all energy deficiencies uncovered in the audit. I thought it was very sneaky to mandate the audit for the seller. A seller won’t have the time or resources to fight the Austin City Council and their electricity monopoly, Austin Energy.

  9. Steve and Sylvia,

    I googled ECAD and came upon your site. I’ve read a few of your articles and have enjoyed them greatly. I was curios when you mentioned that the “Realtor community worked with the city” because I’d like to be more involved. I am a home inspector in Austin and have the energy auditor certification. It is my opinion that the audits are a waste of money and that there are other means of obtaining the city’s goal of saving energy. I’m hoping you could point me in the direction of someone who represents the real estate industry side of dealing with the city. I’ve had brief conversations with some Austin Energy officials involved in the mandatory audits but do not feel they are interested in any changes.

    Thanks and I’ll continue to subscribe to your articles.


  10. Hi Steve:

    Now that it’s one year since the implementation of ECAD, can you comment on how it has affected the Austin real estate market? Are most home sellers complying? How are prices affected? Are any sellers motivated to improve the energy-efficiency of their homes? etc.?


  11. Thanks, Steve. It sounds like it hasn’t affected realtors too much.

    Have you found that homes with “good” energy audits can sell for a higher price than the same house with a “bad” energy audit? Or has there been no effect on how buyers view the value of a house they are thinking of buying?

    As a real estate agent, would you include a “good” energy audit as a feature you would promote in the listing of a house you were selling?

  12. Hi Dave,

    No, we haven’t found that “good” or “bad” energy audits affect the price or negotiation at all. In fact, after all the hype settled down, we stopped providing the Audit up front unless the agent wrote it into the contract. Otherwise we just provide it to the buyer at or before closing as required, and that hasn’t been a problem.

    For our buyers, we write it into the offer that the seller will provide it prior to the end of the Option Period. But it’s never been a factor in the deal or caused a buyer to feel happy or sad.

    Mainly, the audits are predictable and boring as they all say basically the same thing, which is: Add insulation, weather stripping, solar screens and seal the ducts. Those same 4 things dominate almost every audit, All homes have leaking ducts.

    Therefore, we can tell a buyer in advance what the audit will say and be right 99% of the time. This makes it a non-eventful, perfunctory step in the process.

    Other agents may report a different experience based on how they handle things.


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