Note: The information contained in this periodical weblog may be outdated. This was my personal weblog published before January 1, 2015. Since then I have been the co-owner and Principal Solar Designer at Florida Solar Design Group.

Solar Energy and Residential Real Estate Appraisals

Look through the MLS and you will find many Southwest Florida homes that have solar energy systems installed, especially solar heated pools. Solar energy is more than a selling point – it’s a feature that adds value to a home. Residential real estate appraisals have not traditionally included solar energy products in the valuation.

It has always been difficult to appraise the value of a solar electric system. The purchase price is not a good indicator because of varying rebates and tax credits. The energy output alone does not take into account all relevant factors. The property appraiser does not include solar energy products in the taxable appraised value. The true value of these systems is somewhat abstract.

A new spreadsheet tool named PV Value™ has been released by Sandia National Laboratories for real estate appraisers, mortgage underwriters, credit analysts, real property assessors, insurance claims adjusters and PV industry sales staff. The model uses future income and expenses to capitalize the current value of a solar electric system. By plugging in facts and assumptions, we can get a reasonable appraisal value.

My initial observations of the tool are positive. It is flexible enough to enter a variety of factors that influence the value of a solar electric installation. Since there are quite a few assumptions are made, it nice that it calculates a low, average, and high appraisal value to provide a reasonable range. In most cases the appraised value exceeds the purchase price for new systems when rebates and tax incentives are taken into account.

I would like to see some additional graphical representations. It would also be helpful to show the future expected value of the system, not just the current appraisal value. A PV system is not necessarily a depreciating asset – it can increase in value for a period of time due to escalating energy rates. Because some systems now come with 25 year warranties on all major components, the expected maintenance costs can be next to nothing. Fortunately the inputs allow for adjustments to the default settings.

If you are a real estate or mortgage professional, I highly recommend that you take a look at this new tool. The solar energy industry needs the real estate industry to be familiar with and accepting of solar energy system appraisals, and this tool should add legitimacy to valuations.

More information is available on the Sandia National Labs page here.

2 Comments

  1. Hello, I am trying to find an appraiser to value our 18 month old home with a 6 month old 9633w PV system in melbourne florida. All of the local appraisers are having trouble assigning a value to this or are uncomfortable. I am hoping you know an appraiser that can help us out. I have our original appraisal from 18 months ago.

    Bruce

    1. Author

      I do not know any appraisers that work in that area with special knowledge related to PV Systems. You can use the Appraisal Institute’s finder page and enter Sustainable Green Building for the specialty: http://www.appraisalinstitute.org/findappraiser/

      You might direct an appraiser here for more information about valuations: http://energy.sandia.gov/?page_id=8047

      One thing to remember from a practical standpoint is that the buyer will not be able to take advantage of the Federal Tax Credit, which should have benefited the seller already. That will reduce the value to a buyer by about 30% in my opinion. What’s important, especially for systems in the first few years of operation, is how much a buyer’s net price would be today given all incentives.

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