Property values and solar energy for realtors and appraisers:
Categories: Solar Energy
We all know that solar panels are able to produce energy thus reducing or eliminating overall electricity costs for a home. But what about the real estate? Does it go up in value? There is a simple answer, and one that is more complex. Let’s dig into both:
First, we all understand that in order to come up with a value for a home, it’s important to find comparables in the area. Sometimes its hard to find a home with solar on it to compare. But simply finding a home with solar panels should not be the goal. Here’s why….
People who install solar energy on their homes tend to be long-term planners, living in the home of their dreams without plans to leave any time soon. For that reason, homes that do sell that have solar on them tend to be older installations. The technology keeps on moving ahead. So a system installed 10 years ago may have used 150 Watt Solar panels.
Let’s compare an old system with a new system: This thoroughly shaded home has 42 x 150 Watt solar panels that are about 10 years old. 13 of them are on a south face. A sunny south face produces an average of 5.35 sun hours per day in Sunny South Florida. So 13 panels x 150 watts per hour x 5.35 hours = 10.43 kilowatt hours per day on average not accounting for the shade. At a cost of 11.5 cents per kilowatt hour, that’s about $1.20 per day in energy production, or about $36.00 per month. Now an issue with old systems was that when one panel shaded, the whole array would not produce. Today that doesn’t happen. They all produce independently. So a modern system with same panels will produce much more energy than an old one. Shaded as it is, this home’s energy would be cut in half to about $18.00 per month:
This second home has modern panels. 18 x 400 Watt panels. That times 5.35 sun hours per day is 38.52 kilowatts for the day. That times 11.5 cents per kilowatt hour is about $4.42 cents per day x 30 days is $132.89 per month.
Now because home #1 couldn’t produce all of its energy on the south face, it had to resort to the less sunny faces of the roof. 21 panels x 150 watts x 3.9 sun hours on the north face = 12.28 kilowatts per day or $1.41 per day on north faces, or $42.36 per month. Then another 8 panels on the East face to produce 8x150 x 4.85 sun hours per day in SW Florida. That’s 5.82 kilowatt hours per day or 66.9 cents per day or about $20.00 per month. So home #1 produces $20 + $42.36 + $36 or $98.36 per month in energy if there were no shade, or maybe $45 per month in energy because of shading.
So the real reason it’s hard to find comparisons in solar homes is because old solar installations have low value for a large install. That means more potential maintenance issues with larger installations, and less production for the install. Modern installations have much more production per panel, thus giving homes with a large south face the capacity to produce all of their energy on the one face of the roof.
There is a standard value calculation for the amount of value a home should assess based on energy production. The amount of energy savings by solar x 20 years. So for home #1, $45 x 12 x 20 = $10,800 in value to be added to the home for the solar system. The trees have overgrown the system, and unless they are trimmed to allow the solar to produce as it should, the value is tremendously diminished.
For home number 2, $132.89 x 12 x 20 = $31,893 in value added to the home for energy production.
There’s another way to see comparisons. If you research energy efficient homes or zero energy home contractors, you’ll find that a new build is quite costly. Where you can find a 2000 sq ft regular home for about $180,000 in construction costs, you may pay $320,000-$450,000 for the same home with zero energy costs. Builders tend to do other things… radiant barrier, sprayfoam insulation, hurricane windows, and many other energy conserving techniques so that the home needs little solar, and then solar is the final step to get energy values to zero. These other efficiency options tend to cost a pretty penny, making the homes far more valuable.
Total value of energy production isn’t the entire picture. Some homes are energy hogs to start with, so it takes a lot of solar to take care of that bill. But the good news is, say for instance you’ve got a new solar system but an old inefficient air conditioner system. You might be producing $300 per month in energy with a $60,000 solar system, but changing out the air conditioner for a new one could lead to a huge surplus in energy. That surplus could be used to power a couple electric cars or a new pool heater, or whatever. The good news is, the amount of production still has a great value because it can be reassigned to do other things if you streamline the other efficiencies within the home.
The best way to discover how much to add for a solar system is to contact a local solar company. They will assess the system and tell you just how much money’s worth of energy it is producing. That will give you a great idea about how much to add to the value of the home, and the realtor can promote the home by the amount of energy produced. Ie: “This home produces $40 in monthly energy by solar” or “this home produces $300.00 in monthly energy by solar.”
It is exciting to see developments like Babcock Ranch building new homes with solar, and banks financing them with the solar at full price – built into the sell price of the home.
There’s a community in Fort Myers that all homes have solar as well. We’re noticing a trend for land with back yards that face south – being bought up by green building companies to maximize the production of energy. Some potential home buyers don’t want solar on the front of the home, and that limits the potential customers. For this reason, I expect to see an increase in these types of land values in the near future.
The age of the roof can affect home values moreso with solar as well. If you have an older home with solar, and an aged roof that should replace soon, expect to spend $125.00 per panel to remove and replace it after the new roof is installed. The good news is that the roof underneath solar panels tends not to age like the sun-exposed areas. Also note that a $30,000 mobile home may run a $300.00 electric bill. Putting a $60,000 solar system on a $30,000 mobile home will not increase the home value as exepected, however, if it is a ground-mount installation and the property is owned, the land may reap the benefit of that energy installation. There is much to consider in different markets around the country. With South Miami now requiring solar on all new construction projects, and Orlando considering to do the same, solar energy is on fire in Florida! There will be more and more comparables and more homes with solar energy to assess. That said, knowing what you're assessing is key to providing good estimates.
Feel free to reach out if you have any questions. I’m happy to help!
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