New research sponsored by the Department of Energy shows that home buyers are willing to pay for the value of rooftop home solar systems– a finding that is currently challenging the status quo for sustainable features in home appraisals.
Home Solar Value
The study, conducted by the Lawrence Berkeley National Laboratory in California, found that potential buyers valued a home with an average-sized solar panel system (3.6 kilowatts, or 3,600 watts) $15,000 higher compared to a home without one- translating to approximately four dollars of additional home value for each watt of solar power.
With sales data from almost 23,000 homes in eight states from 2002 to 2013, the study involved more solar property sales than previous research (approximately 4,000 homes with solar systems installed), a sample that is particularly “robust,” says Sandra Adomatis, an appraiser in Punta Gorda, Fla., who is considered an expert in “green” valuation and is one of the study’s authors.
“This study is important for the buying public and the lending side,” Ms. Adomatis said, “and appraisers can say, here’s some proof there is some value to the solar system.”
According to the report, as of mid-2014 more than half a million homes had home solar systems, but real estate agents, appraisers, and lenders are still trying to catch up with the rapid growth and falling prices of solar technology taking place in the last decade.
Consider Long Island, for example, where high electricity costs have created an attractive market for home solar systems. About 40 percent of all systems installed in New York are on Long Island, according to the state’s Energy Research and Development Authority.
Appraising Solar Panels and Home Values
Buyers are “certainly willing to pay more” for a house with the electric bills to prove the savings attached to its solar system, says Gerard O’Connor, an appraiser in Lindenhurst (on Long Island), who has been trained in green valuation. But, he added, most lenders haven’t yet recognized that market shift.
Positive steps are in the works though- In December, the government sponsored institution Fannie Mae acknowledged the growing proliferation of solar by issuing a guideline stating that if a house has an owned solar system, the appraiser should analyze the system and the market to see how much value is being added to the home.
“Any new item or feature is always a nightmare in appraising,” says O’Connor. However, he later added that the new guideline provides “critical verbiage to give us some leverage” with lenders.
Although it appears it will take some time for lenders to get the hang of factoring in new technologies like solar into home appraisals, a willingness to pay more for solar-equipped homes amongst buyers is a good indicator of the value created by these systems. As demand continues to rise amidst falling prices in the renewable energy market, it will likely be easier for real estate agents, appraisers, and lenders to accurately estimate the value that these home solar systems create.
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