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Appraising solar: a new approach

by James F. McClister

home-solar-systems-appraisal-value-real-estate-residential-energy-renewable

By the end of 2016, the Department of Energy estimates 1 million homes will be equipped with a solar energy system. And still there is no definitive way to value those systems in appraisals. A new report from the Lawrence Berkley National Laboratory and the DOE’s SunShot initiative hopes to change that.

“I think it is extremely important to understand what contributory value solar has in the marketplace,” says Ben Hoen, a staff research association at the Lawrence Berkeley National Laboratory and co-author of the report. “It can swing a significant amount of the home price and it can also encourage solar adoption if it’s clear that the market is responding positively.”

A new kind of appraisal

In 2014, nearly 200,000 solar photovoltaic (PV) systems were installed in properties around the country – most of which were residential. However, as the report points out, despite the proliferation of PV systems in homes, they “still receive no value during an appraisal because comparable home sales are lacking.”

In its report, Hoen and his co-author, Sandra Adomatis of Adomatis Appraisal Service in Punta Gorda, Fla., present a new approach to solar appraisals that expands its valuation criteria to include not only sales comparisons, but also incomes and cost.

Hoen explains: “Our suite of methods allows an appraiser to understand how their market is reacting to the presence of solar, because each of those methods takes into account slightly different characteristics of the community – like the underlying retail-electricty rate, or the cost to install a similar sized solar system, or, ideally, how the market is actually pricing those systems when they resale.”

The real value of understanding solar’s value

But the appraisal system pitched isn’t perfect – yet. The study only looks at homes with a very specific type of PV system (the kind that uses crystalline-silicon panels) and its scope was limited to six states: California, Florida, Maryland, North Carolina, Oregon, and Pennsylvania.

The true benefit of the report, though, is not the data it produced on price premiums and how solar systems affect days on market in those specific locations, but rather what it says about the future possibilities of accurately applying value to homes with solar systems.

“It could be one of the drivers in wider, national renewable resource adoptions,” Hoen says. “It allows people to make a choice and affect their energy usage directly. It puts the power in the hands of the homeowner, and with that they can directly affect their carbon footprint.”

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