When Solar Panels Do and Don’t Add Value to your Home
So you’ve decided to put solar panels on your home to save energy, save money and save the planet and the first thing you are going to ask the appraiser is:
Do they add value? The answer is….not very often, the only way for sure is to pay cash for the system, then you OWN them.
If you get a loan, they are likely classified as personal property and the only way to give value when there is a loan is if the terms of the note do not allow the note holder to remove the panels in the event of default which is very rare.
How much value do they add? Like most things, significantly less than what you paid for them. Due to the cost of solar panels coming down, installation is costing $2.50 to $3.50 per watt and the value of a properly installed Solar PV system has been running in the $2 to $3 range depending on where you are and how much your electricity costs.
What about a lease or a PPA?
Well, with both a lease and a Power Purchase Agreement (PPA) you don’t own them, not only that, when you get a FNMA backed loan on your house, the lease or PPA terms must be able to be modified in the event of foreclosure and you must not be disconnected from the grid. When you try to sell a house with a Leased or PPA system, it may be difficult and as appraisers we must analyze if there is a NEGATIVE market reaction.
So now that you are sold on Solar, here’s a few tips to make sure you get the most out of your system if you do add a Solar PV System to your home:
- Be aware that your roof warranty will likely be voided when you install solar, unless you do it at the same time as your roof and the solar installer is also a roof installer.
- Have as many panels as possible pointed due south
- They should also be pitched at slightly less than the Latitude of your location, that’s 33 to 34 degrees for most of So Cal.
- Pointing in the wrong direction or pitched improperly can cost you 15 to 30% in efficiency and less efficiency means less energy savings which means less value.
If you are having an appraisal done, the appraiser will need to know if they are leased, PPA or owned and if you have a loan specifically on the solar panels. If you own them, in an appraisal, the appraiser will need the “plan set” and your receipt proving that you own them. The “plan set” has the specs on your system that will help the appraiser to properly analyze it’s value in a discounted cash flow analysis.
This is also a good time to remind you that if you have owned solar panels and are getting an appraisal done for a refi or purchase, you should request an appraiser who is properly trained in solar valuation so that they are analyzed correctly when attributing value.