There are a host of factors to consider when tasked with solar photovoltaic (PV) system valuation. First, the type of financing used to install the system plays a roll. Is it a lease, power purchase agreement, solar loan, pace loan (which may nullify the ability to finance the home on the secondary market as they can stand in the first mortgage position on some properties), or cash purchase? All require different handling by appraisers.
If the ownership allows the solar PV system to be valued as real property all of the physical factors (number of arrays, size of arrays, brand, efficiency, azimuth of the panels, compass bearing of the panels, and amount of sun hours) come into play along with possible whole house batteries, the warranty of the solar system, and the local cost of power to estimate energy savings cost over the life of the system. This can provide support for an increase in the value of the property based on the discounted energy savings over the life of the panels using www.pvvalue.com.
The other typical approaches to value (using sales of similar homes that have with solar measured against similar homes without and the cost approach for replacement of the solar amenities) can also help. Right now, solar is a complex issue and very few agents or appraisers have the education to value it properly.
As an agent, if you are dealing with a property with a solar PV system, there are specific questions you should ask the property owner to be sure you document all the details correctly. You can find them on the top portion of page 3 of the Appraisal Institute’s Residential Green and Energy Efficient Addendum, which can be found here.
You should also make sure the appraiser you are dealing with has had the training and classes to properly value a solar PV system. They should be familiar with this addendum and have training on using the PV Value website.
If you have any questions on where to start on documenting solar reach out to me. We have the training from the national experts and experience valuing, selling, and helping agents document these improvements for their listings.