Equity Increase in home after solar install

[bryankloos]

Guys,

What's the going logic how much equity you gain after a solar install? I've heard about $4.00/watt. That is,
A 20 kW system should add $80k to the homes value...

Seems a little high to me. What have you heard?

[solar pete]

Howdy that seems very high to me too, very , very high. Opinions vary a lot on this subject. There are those who feel a solar install will actually de-value a house, I dont agree with this but it will depend on who the next potential purchaser is, beauty is in the eye of the beholder.

[FFE]

Adding $20,000 in solar is like adding a $20,000 pool. Some people will tell you it will add $20,000 to the value, some $10,000 and some will say $0. Some buyers will want a home with solar installed (or a pool), some will not want solar (or a pool) and most don't care. Last time I purchased a home I immediately crossed all with a pool off my list. So, adding solar might exclude some buyers (like a pool). My opinion is that solar will make it harder to sell a house but add some value.

I seriously doubt you will be able to get more than an extra $40,000 for a 20kW system and it will take you much longer to get that $40,000 than to sell the house for the same price as if solar is not installed.

Also, avoid leasing solar as it proves to be an issue if you ever sell the house. Even a prepaid lease might turn off a few buyers.

[FNG AZ]

I have heard + or - 3-4% for Solar. + for a owned system and - for a leased system

[J.P.M.]

Why would someone pay what amounts to $4.00/Watt for a used system that's probably not sized correctly for their needs when they can get a new one that is possibly correctly sized for their needs for about $3.50/Watt less 30% (= $2.45/Watt ?

Believe it or not, more than a few folks do not like solar and would not have it on their home at any price.

If I was a savvy buyer, whether I liked solar or not, the first thing I'd do if a home interested me is let the seller know the PV is an albatross, as I'm pretty sure at least some other potential buyers will do, regardless of their feelings about PV or its future. That tactic will get legs pretty soon as folks wake up to it. When they do, it will have an effect on the perceived value of solar, regardless of the reality or anyone's feelings or opinions about PV. Besides, there's always another house.

[DanKegel]

Assuming it's an owned system and not a lease:
the recent study "Selling Into the Sun: Price Premium Analysis of a Multi-State Dataset of Solar Homes",

https://emp.lbl.gov/publications/selling-sun-price-premium-analysis

from Lawrence Berkeley National Laboratory, tries to answer the original question.
It came up with an estimate of $3.56 to $4.80 per watt.
This was based mostly on fairly new systems, so it probably didn't include prorating for age.

Personally, I'd treat that as optimistic; if I were buying a house, I'd ask how what the peak wattage currently was, the system's age in years, and then assuming everything was in tip-top shape, I'd estimate its value as the price of a new system with similar output, prorated by its expected life. That's going to be less than the LBNL study's estimate. (For instance, in Los Angeles, new systems go for $2.20 or so a watt after subsidies. If solar systems last 20 years, a 10 year old system would be worth something like $1.10/watt.) That's just a guess, though; I haven't been in this situation myself, and I don't particularly trust my figures.

JPM is quite bearish on the value of solar because he expects people to trash talk its value down, evidently. Time will tell whether his opinion turns out to be accurate in the future; it hasn't been so far, though, at least according to the LBNL paper.

[DaveDE2]

If I were a buyer and the installation's aesthetics were alright, I'd base the value on what the system would save me in electric bills over the expected remaining life of the system minus what it would cost to remove the system when it's worn out. My local electric rates are relatively low at about 8 cents/kWh so I don't expect my system to be worth much when I sell the home 10 years after the installation. However, since I'll have gotten my payback in about 9 years, I should at least break even. I also value carbon free energy over fossil fuels but that's just me.

[J.P.M.]

JPM is quite bearish on the value of solar because he expects people to trash talk its value down, evidently. Time will tell whether his opinion turns out to be accurate in the future; it hasn't been so far, though, at least according to the LBNL paper.

My opinion about how much value existing residential solar adds to the value of a house is conservative for reasons I've described elsewhere. If, to use your term, I'm bearish, it's for many reasons, However, I don't believe I'm as much bearish as realistically informed.

Again Dan, you miss the point and run off and presume to know what I meant.

If some buyers don't have negative opinions about residential PV, others will. The crux of my point you seem to miss: Even among those who are favorable inclined toward solar, some - IMO the savvy ones, and the slime balls too, will be negative as a negotiating tactic. That will remove some other prospective buyers and/or make those who remain perhaps less optimistic, particularly the seemingly near ubiquitous solar ignorant.

Somewhat cynically as well, I'm also of the opinion that some honest negativity is a healthy thing in most situations, and for solar just now, to counter all the pie-in- the-sky excessive optimism pushed on the solar ignorant by those with skin in the game. It seems a bit lopsided to me just now with the peddlers and snake oil salesmen having the upper hand.

BTW, I've seen your cited report before and reread it. Again, I have no trouble believing the data, and agree with some of its conclusions, but not others. It's a matter of interpretation. FWIW, your $1.10/Watt SWAG seems closer to what I'd agree with, but a lot less than what someone might take away after reading your cited report, which, to me anyway might be something like $4.00/Watt, at least at the time the report was published. The $4.00/Watt vs. $1.10/Watt is an example of the type of mistake that reading some without reading all sides can cause. More Caveat Emptor.

[azdave]

My home appraisal came back with solar adding no value as the appraising company did not want to commit to anything. This was on a 2-month old fully paid for 6.3 kW system with a 20-year grid-tie agreement that would be transferable to any new owner for the life of the contract. I had plenty of equity so I didn't need solar to add anything to the value to do the refi. Since I plan to retire in this home I found it interesting but not a worry.

As mentioned, it is much like a pool. Some people will pay extra for them, some people won't. Which buyer will make you an offer?

[cebury]

Same here. And talking with three appraisers, albeit two years ago, they would only commit that solar would add value if reflected in the comps with solar. I'm surprised CA, for being so pro RE and progressive, hasn't established or at least suggested some guidelines for the appraisers to use as valuations, like % of warranty left times half cost savings per year, or something more objective.

[SunEagle]

There is a home close to me that just went up for sale. It is pretty "up scale" with about 10 acres, 9500sq ft home, a big pool and is on the bay with a 300ft dock & 2 boat lifts.

Now here is the thing that drives me crazy. This property has a ground pv array consisting of 150 panels. I am not sure of their wattage but they look like around 300w each. That is a 42 to 45kw system that only gets mentioned in the sales add as "solar pv system". There isn't even a photo of the array but there are 25 photos of the rest of the home.

Can you imagine not mentioning a solar pv system that is probably in the neighborhood of $100,000.

[J.P.M.]

My home appraisal came back with solar adding no value as the appraising company did not want to commit to anything. This was on a 2-month old fully paid for 6.3 kW system with a 20-year grid-tie agreement that would be transferable to any new owner for the life of the contract. I had plenty of equity so I didn't need solar to add anything to the value to do the refi. Since I plan to retire in this home I found it interesting but not a worry.

As mentioned, it is much like a pool. Some people will pay extra for them, some people won't. Which buyer will make you an offer?

My direct experience that forms a part of my opinion comes from working with my HOA with such things and is limited to about 3 or 4 situations, but is pretty much similar to what you report.

In the end, it only matters what a potential buyer thinks a property is worth, and solar is but one consideration in that valuation.

The more solar ignorance, the higher to probability the potential buyer will get screwed as a result of some peddler and/or homeowner taking advantage of that ignorance. Seems to me the power to increase the likelihood of that not happening comes with knowledge that is not simply and exclusively from cherry picked sources.

[Sunking]

Depends on the state and market. In many states where electric rates are low, solar is negative equity like a new car where you pay $20K but only worth $10K. It is almost impossible to ever obtain an ROI in states with low electric rates. So installing a system in many states eliminates a lot of potential buyers for your home. Informed buyers are not going to put much value on a system and will only buy if free or pennies on the dollar.

[gmanInPA]

Ultimately, do any of these attempts to determine the equity value matter much in any situation where there is a bank-financed mortgage? Typically a bank will order an appraisal. Part of that is finding comparable homes - so decent appraisers - assuming your local market is large-enough, would probably try to find similar homes to the one being appraised that also included solar. The sales prices of those comparable homes would determine the bulk of what a bank believed the home was worth which is the important part. They're unlikely to finance more than the appraised value no matter what the owner or purchaser values the system.

If the bank doesn't find them valuable, seems to me that the seller is going to have to wait it out until someone wants to buy without a mortgage, or who can manage to put enough down/in to convince the bank to give them the financing on the over-valued property.

In my neck of the woods, we have a similar scenario with mineral rights and gas wells. Buying a property with a gas lease could make you very wealthy eventually, or it could result in a gas well on your property. A buyer who does not want the latter is certainly not going to plunker down a premium for the property just because there is or could be a benefit. It has made it very hard for banks to determine worth.

[wwu123]

I haven't seen this discussed much or really at all either the owned or leased re-sell threads. What POCO rates are available to the buyer of a home with pre-installed solar? Is iit just what is available to someone installing a new grid-tie, or do they get some grandfathering of things like NEMS as well?

As we know the value of buying a new solar diminishes greatly as NEMS goes away, similar would seem to hold if the home buyer is not able to take advantage of all that the present owner can...

[solarix]

I go by an article from the Appraisal Journal: "Evidence of Rational Market Valuations for Home Energy Efficiency" that suggests using 20 years worth of savings as the what the improvement is worth in home appreciation. Your solar gonna save you $100/month? that makes the home $24,000 more valuable.