The Real Value of a Solar Home

Solar energy systems are becoming increasingly popular. Many factors are driving the trend: lower system costs, improved performance, environmental awareness and new options for system acquisition. I’ve received a ton of calls and emails about the issue lately, especially regarding the topic of solar leases.

People want to know if they are making the right decision and it is not always easy. For those with some savings, purchasing a system with cash can provide a safe, reliable return on the investment. Whenever a financing option is introduced into the equation, homeowners can still benefit, but the financial rewards are split with a third party. It all comes down to determining the real value of a solar home.

The Solar Lease

If you are considering a lease, take your time, read the fine print and think it through. Solar leases can be challenging to understand since there are many variables to consider.

Not all solar companies are equal. Try to work with those who are well-established. Get references. Lease agreements can run 20 years or more so be sure you are working with a company that has solid financial resources and staying power so they’ll be there to support your system as time goes on.

You must pay careful attention to the fine print! I recently reviewed a “Solar Lease Agreement Summary” provided by a leasing company to a potential customer. It clearly listed “Next Year Solar Savings” being well over $600. Wow, sounds great!

The item was linked to a note in small print that read in part, “The energy usage and savings referenced herein are for discussion purposes only and should not be relied on.” A cautious homeowner might apply the last five words to the company and walk away from that offer immediately. A careful analysis using the leasing company’s own numbers revealed that the lease would likely result in significantly higher monthly payments, but a typical homeowner might never catch the discrepancy. Good leasing companies do not do that.

Solar Home Resale Value

Another issue to consider is your home’s resale value in case you decide to sell. Unfortunately there is a lot of ambiguity regarding the added value of solar energy systems.

Home improvements can add value to a home, but many are subjective. Some, like swimming pools, actually add considerable ongoing maintenance, expense and liability. Only those who “perceive” an added value will be willing to pay extra for something like that.

Solar is different in one very important way. It produces a tangible, measurable, and essential commodity that has real value. Maintenance is low, longevity is high and the value of the energy it generates can not only be documented to the penny, but is likely to increase over time.

An energy-efficient solar-powered home has a significantly lower operating cost than an otherwise equal but grid-powered home. Thus, it is more valuable.

Determining Value

If the PV system is completely paid for, the benefits will be fully realized by the new owner and should be factored into the price of the home. When systems are leased or financed, the financial impact for the new owner will be different and must be carefully calculated. The best way to prove value is to keep meticulous records, including a “before and after” energy bill history. No one can argue with real numbers.

Since the real estate industry relies on “comps” to fairly estimate the value of a home, one would think it would be a simple equation in the appraisal process. The industry is making progress regarding green homes, but there is still a need for further education.

Download the full report on residential PV values.

That leads me to the best part. Homeowners can get some solid practical knowledge about residential solar resale value from the best study I know on the topic. The report, “An Analysis of the Effects of Residential Photovoltaic Energy Systems on Home Sales Prices in California,” was done a few years ago by Lawrence Berkeley National Laboratory. Nevada is not California but many of the same concepts apply here and some are even more favorable.

Green Specialist Designation for Realtors & Appraisers

Real estate professionals have an even better option. On October 20th and 21st (this Monday and Tuesday), real estate and financial professionals can obtain a Green Specialist Designation as part of the Home & Building Education Series produced by the Green Alliance.

I cannot overstate the importance of this training since it addresses a vital area of education that is lacking in the real estate industry.

Don’t be left behind. Make sure you have the skills and knowledge to properly represent the growing number of green home buyers and sellers. Visit GREENAllianceNV.org for details.

If you know anyone who is a lender, inspector, realtor or appraiser, please make them aware of this opportunity. The cost is quite reasonable and the first 50 registrants will receive a significant discount.