Factors, such as split incentive, information asymmetry, opportunistic behavior, ill-informed users, and institutional transitions, etc., incur different levels of Transaction costs (TCs) and affect the stakeholders’ willingness to take part in building energy efficiency (BEE). A better understanding of the nature and structure of TCs is essential to improve the market mechanisms for BEE investment. It covers three dimensions of TCs: specific investment, frequency and uncertainty. The paper provides a framework to understand BEE barriers in general and the TCs concerns of stakeholders in particular. In-depth interviews questions are designed to be conducted with the real estate representatives and architects, using a case of Hong Kong, where real estate developers are chosen to be the study object as they are the initiative and dominate force. The study focuses on how to smooth BEE transactions and lessen TCs involved. It indicates that TCs are the key factors impeding BEE market penetration, and will provide references to design a governance structure as well as to design policy packages to promote BEE.