Solar as an Equity Building Asset

15 Nov 2020

By John Blattner

Residential solar is booming. Despite the economic uncertainty and the physical challenges of COVID-19, a sense of urgency has been created by the federal tax credits sunsetting in 2021. Some demand could be attributed to the growing awareness of the effects of climate change or the push for energy independence, but solar as a financial solution has been the driving force for adoption.

Residential solar companies that have built their message around the financial benefits of solar are increasingly relying on the hope that decreasing equipment prices and favorable tax policies will sustain the current demand.            

But, as we all know, these kinds of economic and policy-driven environments are too volatile to be counted on for very long. The only constant is change, and it is sure to come our way - perhaps sooner than later. How will the solar industry survive when that time inevitably comes?

An Untapped Market

Fortunately, there is an untapped market force yet to be unleashed - solar as an equity building home improvement. It seems obvious to those of us in the industry: a home that produces its own energy, costs less to operate, and guards against ever-rising utility rates, is inherently more valuable than a typical home. But proper valuation faces major hurdles, especially in the real estate industry and home sale process. 

Recent surveys have shown that 69 percent of prospective buyers want, and are willing to pay for energy-efficient and high-performing homes. Gen X, Millennials and Gen Z are especially interested in investing in renewable energy, and homes that allow them to live out their environmentally conscious values. Yet relying on values-driven purchases alone is not enough in this economy, and few homebuyers are aware of the true long-term value that solar adds to the home. 

The Burden of Proof

For years, solar sales teams have implied that solar adds to a home’s value. The challenge has been to make those equity-enhancement benefits concrete and measurable. Other than a few outdated studies conducted in other markets, or the rare publication that shines a glimmer of light on this common-sense value proposition, solar sales teams have had little to work with.

Clearly, the ability to effectively demonstrate the measurable benefits of solar as an equity-building asset would be a powerful sales tool that could change the game for this industry. Even a demonstrable increase of two to three percent would effectively replace the value now provided by the federal tax credit. 

Imagine solar as a recognized and recommended home improvement: Tapping into the $17 billion-a-year home improvement market, and giving rise to a rapid nationwide adoption of solar, would have enormous implications for the industry that would turbo-charge economic growth and environmental stewardship.

Real Estate Woes

Historically, the real estate industry has failed when it comes to properly incorporating the value of solar, often viewing it as an obstacle rather than an asset. To complicate matters, in the rare instance that an appraiser is qualified and willing to properly value an array, the documentation they need is often difficult or impossible to obtain. Installers are hesitant to share the necessary information with agents and appraisers, while homeowners misplace paperwork, and so on. 

When solar is passed over in the valuation, marketing, and (ultimately) listing price of the home, the original investment goes unrewarded. If even a single link in the chain breaks, the valuation process can fail. For example, if a buyer agrees to pay a premium for a home with solar but the appraiser doesn’t properly value it, then the loan will not match the ask. Or if an agent isn’t comfortable marketing the solar home, it will be more difficult to attract the right buyer. It can an uphill battle

Seeing the Light

Because market demand will influence change, the proper valuation of solar homes starts with the way contractors/installers market and sell solar to homeowners. It’s about providing a new value proposition: solar not only saves money now, it also builds long-term equity in the home. 

When solar installers effectively communicate the message that solar is an equitable home improvement, and provide approved and licensed documentation, homeowners are able to better justify the cost and feel more confident in their purchase. They no longer fear that their investment will turn into a stranded asset, should they ever move. 

When the time comes to sell the home, an expert certification provider can guide the appraiser through the process of collecting and housing all the data needed for proper valuation and marketing. This ensures that the investment in solar is recognized and valued. 

When appraisers are given everything they need to conduct a proper valuation, and agents are equipped with all the necessary marketing materials, it’s easy to attract both the right buyer and the premium asked. When presented with a willing buyer, a proper appraisal, and enthusiastic agents, lenders have everything in place to finance the deal in a way that rewards the seller for their solar investment. 

It’s a true win-win solution. By closing the gaps and creating a continuous “loop” or mutually beneficial, cyclical business process across every major sector of the residential solar housing industry/market, our industry can escape volatile market forces and policies, and ensure long-term growth and success. 

 

John Blattner is a solar partnership executive at Pearl Certification, a national firm that certifies high performing homes with solar panels, energy efficient heating and cooling systems, smart home devices, and high-quality ventilation. Pearl’s Certification Reports drive demand for these features by making them visible at time of sale.

Pearl Certification | http://www.pearlcertification.com


 

 


Author: John Blattner
Volume: 2020 November/December