A home renewable energy system represents money saved every month, resources conserved throughout the year, and a comforting degree of energy independence. That's why it should come as no surprise that a solar panel system also adds to the value of the property.

According to the National Appraisers Institute, the value of a home increases 20 times the annual savings in electricity. Let's say that photovoltaic (PV) panels save you $1,000 a year on electricity. A good estimate of the corresponding bump in home value would be $20,000.

Expert real estate appraiser Sandra Adomatis has carved out a niche for herself in the complicated realm of assessing and communicating the value of green energy systems to prospective homebuyers. She helps real estate agents learn the ins and outs of solar panels and the factors that increase value, like battery backup and transferrable warranties. Many agents can be well versed in the hottest kitchen trends or can state off the top of their head the dollar value of adding a second bathroom, but when it comes to a solar energy system all they know to do is count panels.

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There's much more to it than counting panels. Adomatis described why three characteristics of a solar energy system weigh on the appraised value of a home in her article An Overview of Solar Photovoltaic System Characteristics. Here we take a close look at those three characteristics and explain why they are crucial to appraising a home's true value.

1. Ownership Status

Leased systems belong to the lease parties, not to the house. When appraisers evaluate a home, they wouldn't include a leased solar energy system any more than they would include the automobile in the garage.

"If the system is leased, a power purchase agreement, or owned but financed with a UCC [Uniform Commercial Code] filing, the system is personal property and not a fixture or part of the real estate," said appraiser Sandra Adomatis.

For homebuyers interested in reaping the benefits of solar power themselves, taking over an already installed and operational system is icing on the cake. To sweeten the deal, the homeowner can show starkly different energy bills from before and after the system. Also, the system's warranty might be able to transfer to the homebuyer. But if the buyer only wants the house, the homeowner may have to pay to remove the system.

The downside of leasing solar panels and why people still do it

2. System Specs

Keep good records about your home solar energy system so that its full value is incorporated into the home. Let an appraiser see the paperwork you were given by the solar provider so that he or she can take note of:

  • Installation date
  • Make and model
  • Wattage
  • Inverter type
  • Warranties
  • Past electric bills

Adomatis said, "The size of each array or grouping of panels must be identified. Simply counting the panels will not give the system size because panels vary in wattage."

Even with the popularity of residential solar panels today, many appraisers don't know how to evaluate a system. They could count the panels and think that's enough. Your documented specs are useful not only to appraisers so they can appreciate the true value of the system but also to real estate agents so they can communicate the value to buyers.

“Solar homes move faster, sell for higher prices than non-solar homes.”

Phoenix Business Journal

3. System Age

Berkeley Lab recently added to our knowledge of the relationship between solar energy systems and home values. The lab published an in-depth study of 22,822 home sales, 3,951 of which had a solar photovoltaic (PV) system.

Analyzing data from eight states, the lab found that the age of the system was an important factor in a home's market value. Researchers tracked a drop-off in the home value premium once a PV system had aged 10 years.

People like new things, and it figures that home buyers are willing to pay more for newer amenities: a newer roof, a newer kitchen, a newer solar PV system. Buyers are interested in buying new solar, not necessarily old.

Researchers wrote, "We find home buyers are consistently willing to pay PV home premiums across various states, housing and PV markets, and home types; average premiums equate to approximately $4/W or $15,000 for an average-sized 3.6-kW PV system." The scope of the study was homeowner-owned PV systems across eight states and therefore excluded systems owned by a leasing company.

The 20x bump
If solar panels save you $1,000 a year on electricity, a good estimate of the corresponding bump in home value is $20,000 (savings multiplied by 20).

Offering the appraiser's perspective, Adomatis said, "The age of the system is important because as the panels age, the energy production will decrease each year. The reduction is small, but it will affect the energy production over the life of the system."

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