Does solar add value to your home? Some things to consider.
Solar is biginning to become commonplace in Arizona. Typical system can cost around $18,000 or can be leased with no money down. However, even though you may place a high value for the solar system you installed don't assume the buyer will place the same value on the system. In the case of a leased system, the buyer will have to qualify to take over the lease payments, which could run $100/month, or more.
According to a recent article in the Arizona Republic:
"Solar panels owned by the homeowner add 4 to 6 percent to the value of the home sale, often less than the cost of the panels, according to an analysis of local home sales and reports from real estate agents. Houses with leased solar panels actually sold for less than those with no solar."
Arizona Republic, July 18, 2015
The alanysis was performed by Michael Orr, from ASU's Carey School of Business.
Fannie Mae this year clarified its requirements for properties with solar panels and state that leased solar panels may not be included in the appraised value, which appears to be one of the reasons that leased solar panels detract from appraised values, according to Orr.
A further complication is that the credit score required to take over a solar panel lease is often higher than that required to qualify for the home's mortgage. And Fannie Mae and Freddie Mac don't want to be in second position behind a solar company in the event of foreclosure. On top of that, because leased systems require monthly payments, Fannie and Freddie want those payments to be included in the mortgage applicant's debt to income ratio. However, they do not include the electicity savings as a positive factor when calculating debt to income; a double hit.
Sandia National Laboratories and Energy Sense Finance developed the "PV Value" tool. The tool calculates the anticipated savings from solar panels so appraiser and homeowners can have something to base value decisions upon. The tool calculates the value of the electricity that the panels are expected to generate during their lifetime. Appraisers know that Fannie and Freddie will back the loan if they use the tool. What homeowners are going to find is that the tool frequently determines that the value is less than what the homeowner paid for the system. However, this is similar to adding a pool to your home. You may pay $30,000 to $40,000 for your pool and only get $10,000 when selling. For those wanting to know more about how PV Value works, click here.