Does Solar Make Sense?

Being and Appraiser and a Real Estate Agent I am asked on a regular basis about solar systems and whether or not they make sense to purchase or lease. Is it worth the money? What type of plan should I go with? The most frequently asked is how much will it add to the value of my home? Here are some things to think about which will hopefully answer some of your questions – but ultimately do your research, gather lots of information and make an informed decision.

What’s is the typical holding period or more importantly how long do you intend to stay in your home?

If it were me this is the first question I would have to answer for myself. On average people stay in homes for 5-7 years or until inevitably one decides to make the “final move” and purchase the forever home. If you don’t think you’re staying long term and your monthly electric bill averages $200-300 you’re looking at an annualized electricity bill of $2400-3600.

My understanding is that solar starts in the $20,000 range but more realistically most people I know have paid in the $30,000 to $40,000 range. A $200 to $300 electricity bill broken down is:

$2400 x 5 yrs = $12000, x 7 yrs = $16,800.

$3600 x 5 yrs = $18,000, x 7 yrs = $25,200.

This analysis alone might help you to make a decision.

How much does solar add to my homes value?

Solar does not add to your homes value in the same way that another permanent amenity does. For example an in ground pool is a permanent site improvement that is generally valued based on the market, quality and condition and sometimes additional factors. If a solar system is leased it is NOT figured into the appraisal of your home. If the solar system is owned the value of the system is generally based on a net present value calculation that takes into account the average holding period and utility costs in your market. This is sometimes a significantly different value opinion that what a homeowner might expect.

Purely an environmental decision. On the other hand if the money calculation is not an issue for you there is the environmental decision which as we all know is a compelling one. There is the question of the impact on the environment from the production of solar panels / systems but I would argue that the production of all types of renewable energies come at some cost. You can do more research on this one but unless there were some known adverse effects caused by the production of these systems that proved detrimental to the environment I don’t think I’d let it stop me.

Do you have a pool?

If you do have a pool and depending on the pump and heating system for your pool solar just might save you a significant amount of money. I don’t have a pool myself but I live in an area where pools are common and from what I know the monthly heating bill alone can significant in peak months. I probably don’t need to expand on this much but if you’re considering a pool do some additional research on the heating system and monthly maintenance costs before you start digging.

Buy versus Lease?

Buying is pretty straight forward, just run some realistic numbers to see if it makes sense. Also if you are purchasing a home and utility costs are an unknown you can always ask the seller to disclose them to you. A lease on the other hand can be very complicated depending on the terms and conditions set forth by the Company you’re dealing with. This one is outside of my wheelhouse but you need to read the lease carefully and understand all aspects of the agreement before signing. Leases will take into account a lot of things from maintenance to transferability to positioning the system on the roof and everything in between. If you don’t understand the lease don’t sign it, find an independent third party with the expertise to help you.

This one can be very important: What type of roof do you have on your house?

I don’t have first hand experience here but a very reputable Contractor in my area once told me that if you have a concrete tile roof (or similar) stay away from a roof mounted solar system. His explanation was simple, a solar system installation requires many penetrations through the tile in order to secure the system. In his experience these installation types inevitably caused water leak issues. I can tell you that if you’ve ever experienced a roof leak issue in the middle of winter you don’t want one again.

Other questions you might want to consider before installing solar:

• Where is your home located?
• What part of the Country is your home located in?
• How many hours of daylight to you have on average in your area?
• What are the immediate surroundings like, topography, tree’s etc?
• Is solar typical or common in your area?

Consider how the panels will look on your home and make sure they will not deface your property or look out of place. If this is the case it may have a direct impact on the marketability and value of your home

At a minimum do some research, ask a lot of questions and “pencil” out the pros and cons which will ultimately help you make an informed decision. If you have additional questions you can always reach us at www.SanFranciscoEastBayLiving.com or www.BestBayAreaAppraiser.com

I hope you have found this information helpful.