How do Solar Panels Affect the Appraisal?

by | Jun 29, 2017 | Legal Tips

Solar panels seem to be the latest craze for the environmentally and financially conscious homeowner. But how do solar panels affect the value of your listings? What do you tell a prospective buyer about values? Today we examine several issues related to the sale of a home with installed solar panels.

In preparing this post, the attorneys of Blair Cato spoke with a leading real estate appraiser in South Carolina concerning how appraisals are conducted on homes with solar panels.  The appraiser emphasized that solar panels are a “new arena for appraisers.”  The issue simply hasn’t been “around long enough for there to be a consensus on how to value” the addition of the panels.

Whether the solar panels are leased and owned also may affect the appraisal.  Many appraisers are taking the position that there is no added value and perhaps some diminished value with leased solar panels because the buyer must assume the lease. This additional financial commitment makes it harder to market and sell the property. Moreover, the cost of the lease will negate some of the utility cost savings. Therefore, leased solar panels are likely to be value neutral on the appraisal.

As to solar panels owned by the homeowner, the appraiser noted that there had been a few recent seminars offered on the topic.  The consensus seems to be that in determining if the solar panels add any value the appraisers are required to be able to substantiate their analysis.  A likely analysis of the issue is similar to an analysis of the savings on the cost of a mortgage over the course of time when flood insurance is required.  If a homeowner is required to have flood insurance, how much more money will they spend on the mortgage?  Conversely, how much would they have available (the cost of the insurance) and how much larger home could they buy with that same money over time? So, the analysis essentially is one of cost versus benefit.  If the solar panels are owned and you have to pay the cost to the seller how much more of a house could you have purchased if not for the additional expense?  Additionally, as technology changes and advances at what point do the solar panels become obsolete and perhaps a financial detriment to the ascetics of the house?  Many of you may remember trying to sell a house with a large and useless satellite in the backyard.

If the seller wants to be reimbursed for some of the cost of the panels in the value of the property, some appraisers have opined that they would likely consider the following factors: (1) utility cost-savings, (2) risk of repairs to the house caused from having solar panels, (3) the limited number of people who can repair the panels, and (4) the cost of removing the panels and repairing the house once the technology becomes obsolete.  The appraiser opined that he can understand why appraisers would be tempted to say there is no material benefit in having the solar panels because the “issues” are not necessarily overcome by the benefit of the reduced utility bills.

Because some appraisers are holding the panels’ value neutral some sellers have decided to remove the solar panels prior to listing. This is also problematic because the cost of removing the panels and repairing the damage caused to the roof could become a factor. If your seller removes the panels it would be necessary to have a quality roof company inspect and issue a clear roof letter to protect your client and yourself.

In conclusion, until solar panels are more prevalent and there are more contractors who can repair, remove and install the panels, appraisers may conclude there is no material benefit.

Say it ain’t so Tim Tebow!  That loud sigh you heard in Columbia last week was from Tebow’s fans and admirers. The mighty Tim has left us for the beaches of  St. Lucie, Florida. We wish him luck and thank him for the memories!  Personally I will never forget his home run in his first at-bat as a Firefly. 


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