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Solar power: Will homeowners pay the extra costs?

Appraisal Institute members help pioneer study

A new study revealed that there is demand from homebuyers for solar energy homes, finding that buyers consistently have been willing to pay more for homes with photovoltaic energy systems.

The study – “Selling into the Sun: Price Premium Analysis of a Multi-State Dataset of Solar Homes” – found that buyers were willing to pay an average of about $4 per watt of PV installed – across various states, housing and PV markets, and home types. This equates to a premium of about $15,000 for a typical 3.75 kW PV system. 

Both Sandra K. Adomatis, SRA, of Punta Gorda, Florida, and Thomas O. Jackson, Ph.D., MAI, of College Station, Texas, were part of a multi-institutional research team of scientists led by Berkeley Lab, in partnership with Sandia National Laboratories, universities and real estate appraisers.

 “The role that these two Appraisal Institute members played in this important study is typical of the thought leadership our organization provides,” said Appraisal Institute President Lance Coyle. “As the nation’s largest professional association of real estate appraisers, our membership includes some of the highest qualified, best educated and most experienced valuation professionals in the world.”

The team analyzed almost 22,000 sales of homes – nearly 4,000 of which contained PV systems, in eight states from 2002 to 2013 – in order to produce the most authoritative estimates to date of price premiums for U.S. homes with PV systems.

Before the study, PV home premiums were limited in size and scope. However, this study more than doubled the number of PV home sales analyzed, examined a number of states outside of California and captured the market during the recent housing boom, bust and recovery.

 This solar research is only the latest in a list of green and energy-efficient initiatives from the intitute.  

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 Adomatis.

The Appraisal Institute 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.

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.

3d rendering of a row of luxury townhouses along a street

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