HereÕ what appraisers need to know about solar power

California and Northeast boom in solar power projects

Solar-power projects are taking on a bigger role in housing as more investors and innovators help make it more affordable. 

Most recently, SolarCity (SCTY) announced that it has created a new investment program with Bank of America Merrill Lynch (BAC) to finance an estimated $400 million in solar power projects in 2014 and 2015.

As a result, thousands of American homeowners will be able to install solar panels with no upfront cost and pay less for solar electricity than they currently pay for utility power.

But as solar energy has gained prominence, appraisers have been left to figure out how to properly assess the value of the technology.

“It will take a while for people to come to understand the system,” said Sandra Adomatis, SRA, LEED Green Associate.

And with the emergence of solar features in homes, the Appraisal Institute has developed a Residential Green and Energy Efficient Addendum, which is a new tool in green home marketing. The Addendum is a high-performance communication tool that standardizes terms for lenders, appraisers, real estate agents, and homeowners, making it easier for all parties to understand the benefits and value of the high-performance homes.

Adomatis explained that although not all appraisers are jumping on board to learn more about solar features yet, they are in the areas that solar energy is booming.  

How much a homeowner will make back by having solar power features depends significantly on location, she explained. If a homeowner's electric rate is above the regular 11 or 12 cents for a kilowatt-hour, there can definitely be value in the system.

People roughly spend 11 years in a home, and if they don’t reap the financial benefits of a solar energy home in that time, they are not willing to pay.  

In places like the Midwest, the pay-back period is longer. But in California, the electric rate is around 22 cents for a kilowatt-hour, so the pay back period could be less than five years.

Utah, Oregon, Massachusetts and New Jersey also see higher demand, but it's not because their rate is high but because they have more incentive to offset the cost.

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