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Selling the Sun: A real estate agent's guide to valuing and selling residential homes with Solar PV
Craig Foley is a solar energy expert and founder of a sustainable real estate consulting firm. He has received several awards for his work in solar energy. The document discusses selling homes with solar PV (photovoltaic) systems. It covers the basics of solar technology, the growing solar market, factors driving solar adoption, and considerations for marketing a home with solar panels, including determining the home's value and discussing ownership structures. Real estate agents are encouraged to understand solar technology and financing options in order to reduce risks and effectively market solar homes.
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Selling the Sun: A real estate agent's guide to valuing and selling residential homes with Solar PV
- 1. Craig Foley Founder ofSustainable Real Estate Consulting Services NAR Evergreen Award 2013 Advisory Board NAR Green Resource Council 2019 Chair NAR Sustainability Advisory Group Specializes in selling high-performance home developments www.realestatesustainability.com @EnergyGeekCraig RE105R18 SELLING THE SUN Listing, Marketing, and Establishing Value for Solar PV Homes
- 2. The complete onlinecontinuing education course can be accessed at ma.keepmecertified.com/selling-the-sun
- 3. Welcome and Introductions RE105R18Selling the Sun: Listing, Marketing, and Establishing Value for Solar PV Homes • Massachusetts-specific 2-hour training course • Eligible for MA CEU’s • Resource sharing with national training partners MA-Specific Training Course Partner: Selling the Sun: Establishing Value for Solar PV Homes • National 3-hour training course • Not eligible for MA CEU’s • Training available online https://learninglibrary.com/Elevate/ National Training Course Partners:
- 4. Course Objectives A. Discusssolar PV technology B. Cite the emerging market opportunity trends C. Understand different financing options for solar PV D. Identify the essential system information in the MLS E. Understand best practices for marketing a home with solar PV F. Use solar PV valuation tools
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- 6. Solar PV andSolar Thermal (Hot Water): What’s the difference • Solar PV turns the sun’s energy into electricity that can be used to power a residence’s gadgets, appliances, and heating and cooling if powered with electricity • Solar Thermal is used to heat your hot water • This course focuses exclusively on Solar PV Source: MassCEC
- 7. SECTION I. Why issolar PV suddenly part of the real estate discussion? Growth of Solar PV in MA
- 8. • 2005: 297solar PV systems installed, 1.7 MW capacity 2005 Growth of Solar PV Installations by the Numbers • 2005: 297 solar PV systems installed, 1.7 MW capacity • 2010: 2,778 solar PV systems installed, 41.6 MW – what changed? GCA passed in 2008 with 400 MW goal by 2017 • By May 2013, MA reaches 400 MW goal • By the end of 2015, 43,274 solar PV systems, 1,069 MW Source: MassCEC
- 9. • 2005: 297solar PV systems installed, 1.7 MW capacity 2010 Growth of Solar PV Installations by the Numbers • 2005: 297 solar PV systems installed, 1.7 MW capacity • 2010: 2,778 solar PV systems installed, 41.6 MW – what changed? GCA passed in 2008 with 400 MW goal by 2017 • By May 2013, MA reaches 400 MW goal • By the end of 2015, 43,274 solar PV systems, 1,069 MW Source: MassCEC
- 10. • 2005: 297solar PV systems installed, 1.7 MW capacity 2013 Growth of Solar PV Installations by the Numbers • 2005: 297 solar PV systems installed, 1.7 MW capacity • 2010: 2,778 solar PV systems installed, 41.6 MW – what changed? GCA passed in 2008 with 400 MW goal by 2017 • By May 2013, MA reaches 400 MW goal • By the end of 2015, 43,274 solar PV systems, 1,069 MW Source: MassCEC
- 11. • 2005: 297solar PV systems installed, 1.7 MW capacity 2015 Growth of Solar PV Installations by the Numbers • 2005: 297 solar PV systems installed, 1.7 MW capacity • 2010: 2,778 solar PV systems installed, 41.6 MW – what changed? GCA passed in 2008 with 400 MW goal by 2017 • By May 2013, MA reaches 400 MW goal • By the end of 2015, 43,274 solar PV systems, 1,069 MW Source: MassCEC
- 12. • 2005: 297solar PV systems installed, 1.7 MW capacity 2018 Source: MassCEC Growth of Solar PV Installations by the Numbers • August 2018: Over 85,000 solar PV systems installed and 2,200+ MW capacity • Over 230 communities where 5% or more of owner-occupied homes have solar PV installed • 40% of solar PV systems are host-owned, and 60% are third-party owned (TPO) • State-set MW capacity goals have been reached years ahead of time. Launch of new SMART incentive in November 2018 to add additional 1,600 MW
- 13. Source: MassCEC Comparison ofHost-Owned vs. Third-Party Owned
- 14. Why is solargrowing so quickly?
- 15. Ratepayer stress andthe volatility of energy prices Source: U.S. Energy Information Administration 0 5 10 15 20 25 Jan-01 Aug-01 Mar-02 Oct-02 May-03 Dec-03 Jul-04 Feb-05 Sep-05 Apr-06 Nov-06 Jun-07 Jan-08 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12 Sep-12 Apr-13 Nov-13 Jun-14 Jan-15 Aug-15 Mar-16 Oct-16 May-17 Dec-17 Average Residential Electricity Rates, 2001-2017 (cents per kWh) New England United States
- 16. Cost of equipmentand installation is dropping Source: Bloomberg NEF
- 17. Jurisdictions with IncentivesSupporting Solar PV Income Tax Credit or Deduction Property Tax Exemption or Abatement Sales Tax Exemption Federal, AZ, CA, CO, FL, GA, HI, ID, IA, KY, LA. MD, MA, MS, MO, MT, NE, NV, NY, OK, OR, RI, SC, TX, UT, VT, VA, WA AK, AZ, CA, CO, CT, DC, FL, HI, ID, IL, IN, IA, KS, LA, MD, MA*, MN, MO, MT, NE, NV, NH, NJ, NY, NC, ND, OH, OR, RI, SD, TN, TX, UT, VT, VA, WI AZ, CA, CO, CT, FL, IA, KS, KY, MD, MA, MN, MS, MO, NE, NV, NJ, NY, RI, TN, WA, WI *Massachusetts Renewable Energy Tax Exemption: “Solar energy systems…used as a primary or auxiliary power system for the purpose of heating or otherwise supplying the energy needs of taxable property are exempt from local property tax for a 20-year period.” See MA Department of Revenue for more information.
- 18. Why is solar growingso quickly? Effective Massachusetts State Policies: • Net Metering • SREC / SMART Program • Solarize Mass Massachusetts incentives supporting solar PV Policies and incentives are constantly changing. Make sure to keep up to date with what is available in your market by reviewing the incentives on www.DSIREusa.org.
- 19. Why is solar growingso quickly?
- 20. The New EnergyConsumer: Thriving in the Energy Ecosystem NEW YORK; July 13, 2016 – Consumer demand for new energy-related products and services is high, especially for millennials (ages 18-34), demonstrating that this group will drive much of the future value for energy providers, according to new research by Accenture Notably, 56 percent of millennials, twice as many as people over 55, are likely to sign up for solar panels in the next five years. Source: Accenture
- 21. • 2005: 297solar PV systems installed, 1.7 MW capacity Why is solar growing so quickly? • Allure of off-grid home, or off-grid ready home • NOTE: Off-grid homes are not currently accepted in the secondary mortgage market
- 22. Interest in NetZero Energy (NZE) Homes Increasing Example residential new construction NZE home: • High efficiency building envelope • 9 kW solar PV system • Heating & Cooling ASHP Annual solar PV generation: 10,912 kWh Annual house electric usage: 9,555 kWh Net Positive: +1,357 kWh Excess energy used to cover half of the electricity used to charge the owner's electric vehicle Homeowners: “When my husband Tom and I decided to build our home we knew that a super efficient, even ‘zero energy’ home was the goal.” Image and text courtesy of Northeast Energy Efficiency Partnerships (NEEP)
- 23. Potential Impact onHome Value • National analysis of market value of solar PV homes • Compared over 22,000 properties with and without PV • Found high solar PV premiums for owned systems • Recommends using comparable sales of other PV homes, present value of energy savings and replacement costs to predict value elsewhere. Other Research: "Appraising into The Sun" six appraisers found similar premiums as above "Leasing into The Sun" no premium found for systems owned by a third-party
- 24. Why is solar growingso quickly? • 80% percent of respondents said properties with solar panels were available in their market • 39% said properties with solar panels increased value • 32% no effect on value • 11% decrease value • 19% don’t know National REALTOR® Perception of PV Value Source: 2018 NAR Sustainability Report
- 25. The Market isResponding Sun Number™ on Zillow www.sunnumber.com • Rates a home’s potential for solar on a 1-100 scale. The higher the number, the better suited a home is for solar and the more money you might save. Google Project Sunroof www.google.com/get/sunroof • “Search for your home. Discover your solar savings potential.” EnergySage www.EnergySage.com • Marketplace where consumers can compare multiple installer quotes side by side. Why is solar growing so quickly? Source: 2018 NAR Sustainability Report
- 26. The market isresponding
- 27. TAKEAWAYS SECTION I. Whyis solar PV suddenly part of the real estate discussion? Source: MassCEC
- 28. SECTION II. Solar PV TheParts and Pieces Source: MassCEC Source: MassCEC
- 29. Why is solar growingso quickly? • How Solar Panels Work: https://youtu.be/0elhIcPVtKE U.S. DOE • The basics of solar PV system: a solar array, inverter, and net meter Solar PV: The Parts and Pieces
- 30. Solar PV: TheParts and Pieces Source: NREL
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- 33. Equipment Warranties Warranty TypeTypical Warranty Length* Notes Installer workmanship warranty 5 – 10 years post- installation Typically an all-inclusive ‘bumper to bumper’ warranty against system deficiency Solar PV panel production warranty Typically 20 – 25 years Clarifies guaranteed production levels over time Solar PV panel product warranty Typically 10 – 12 years Note that solar panels have no moving parts making them less subject to mechanical failure. Central inverter warranty 10 years Central inverter will generally need to be replaced between year 12 – 15. Micro-inverter warranty 25 years Paired to solar PV panel warranty *See seller contract/agreement to verify system and equipment warranties. Due diligence: buyers should check to verify if the solar panel and inverter manufacturers are still in business
- 34. Microinverters The net meteris the utility meter that “spins backwards and forwards”
- 35. MicroinvertersTAKEAWAYS SECTION II. TheParts and Pieces Source: MassCEC
- 36. SECTION III. To Ownor Not to Own a Solar PV Home Source: MassCEC Source: MassCEC
- 37. What’s the differencebetween Direct and Third-Party Ownership? Direct Ownership Third Party Ownership* Who buys and owns the system? Homeowner Third-party company Are there any up-front costs for the homeowner? Yes. May pay with cash or take out a home equity or solar loan Few or none Who takes advantage of federal and state tax incentives available for solar? Homeowner Third-party company Who is responsible for any maintenance and insurance? Homeowner Third-party company Who receives ongoing incentives (SRECs or SMART) Generally homeowner. Opportunity for home re-sale bargaining power Generally third-party company Impact of Solar PV on Property Value Fannie Mae guidance: real property. LBNL studies, PV Value Tool Fannie Mae guidance: personal property. LBNL study found no evidence of negative impact on value Point of Sale – What do you the realtor need to know? Ownership and remaining time of SRECs / SMART incentive UCC-1 subordination at refiling *There are two flavors of TPO systems: Power Purchase Agreement and Lease. These are different, though both commonly referred to in the real estate market as a ‘leased system.’
- 38. “To Own orNot to Own” a Solar PV Home Let’s take a look at cost & incentives for a hypothetical solar PV installation… • Nameplate capacity of system: 5 kW • Installation cost at $4.00 per watt: $20,000 • One time Federal tax credit 30%: $6,000 • One time State Income Tax Credit: $1,000 • Likely eligible for 20-year property tax exemption • SRECs or SMART: Programs offer ongoing incentives for 10 years after install • What is the current utility rate?
- 39. Third-Party Owned vsHost owned solar PV • The Pros and Cons of TPO versus host owned solar PV • Initial cost, maintenance by third party are big plusses for TPO solar PV • Federal Tax Credit, SRECs/SMART, income approach to value and easier to handle at the point of sale are big plusses for host owned solar PV
- 40. Third-Party Owned vsHost owned solar PV • Like offers, there are good and bad ones – what do you need to look for in a PPA or lease?
- 41. WARRANTY/MAINTENANCE PROVIDER: contact information AMOUNTAND TERM OF LEASE: monthly payment and term OTHER POSSIBLE CHARGES: • Late Charge • Estimated System Removal • UCC Removal & Refiling Fee What you might find in a PPA
- 42. LEASE PAYMENT ESCALATOR:Annual % escalator, if any SITE AND DESIGN ASSUMPTIONS: • System size/capacity: example 5.2 kW • Estimated system production: example 6,000 kWh • Estimated decrease in production: example 0.5% annually SECURITY FILINGS: UCC filings and subordination ROOF WARRANTY: is roof warrantied, if so, for how long? What you might find in a PPA
- 43. TRANSFERRING YOUR LEASEAND SELLING YOUR HOME: If you sell your home, you ☐ MAY ☐ MAY NOT transfer to the purchaser(s) of your home. The transfer will be subject to the following conditions: ☐ Credit check on the purchaser(s) ☐. Minimum FICO score requirement: ______ ☐. Transfer fee. If Yes insert amount $ ______ ☐. Assumption of contract by purchaser(s) ☐. Other___________________________ If you sell your home, you ☐ ARE ☐ ARE NOT permitted to move the solar system to a new home. You may also have the option to purchase the system. What you might find in a PPA
- 44. Fannie Mae GuidanceTPO Solar If the solar PV system is leased from or owned by a third party under a power purchase agreement or other similar arrangement the following rules apply The solar PV system may not be included in the appraised value of the property.
- 45. Solar PV SystemInsurance: Does solar increase your home insurance? “Once a rooftop solar panel system is installed on your home, it is considered part of your home under most home insurance plans. That means that – in many cases – covering your solar panels under your home insurance won’t create the need for a special add-on (or “rider”), won’t change your plan, and won’t increase your premiums. That being said, every insurance policy is different, which is why you should still call your insurance company to confirm that your PV panels are covered.” Source: https://news.energysage.com/solar-panels-affect-home-insurance
- 46. MicroinvertersTAKEAWAYS SECTION III. “ToOwn or Not to Own” a Solar PV Home
- 47. SECTION IV. The Basicsof Marketing a Home with Solar PV and Risk Reduction Strategies
- 48. Key Concept: Hybrid Transaction Key Concept: HybridTransaction • You are selling a home- Residential Transaction • Homeowner has installed a power plant on their rooftop- Commercial Transaction Source: MassCEC
- 49. What real estatepros need to know about marketing solar PV: • Solar PV and your MLS • IMPORTANT: The RESO is setting standardized listing fields for MLS’s across the U.S. The 2016 version of the Data Dictionary (DD v1.5) has created their recommendations of solar PV data fields for MLSs: o Ownership – TPO or host owned o Year installed o System capacity (the “nameplate” of the power plant in kW ex: 5.3 kW system) o Estimated/Actual power production
- 50. Lawrence Berkeley NationalLaboratory project: “autopop” solar PV data fields Image courtesy of Lawrence Berkeley National Laboratory
- 51. Image courtesy ofNEEP Solar PV and your MLS: HELIX
- 52. What real estatepros need to know about marketing solar PV: • Solar PV and your MLS • LBNL project: “autopop” solar PV data fields • HELIX • Describing solar PV in the “Remarks” – the dos and don’ts
- 53. Describing solar PVin the “Remarks” – the do’s and don’ts Let’s start with the don’ts: • “Solar panels cover the electrical expense” • “Solar PV system has been installed to give you an unbelievably low electric bill of $56.60 per month” • “Brand new solar PV system on the rear roof provides the future homeowner about a 50% reduction on the electric bill”
- 54. Describing solar PVin the “Remarks” – the do’s • Marketing solar PV best practices in “Remarks” section: • Mention static system characteristics and facts: Is the system leased or owned? What is the system capacity? How many years are left to collect SREC / SMART reimbursement? • Provide essential information like warranties, PPAs or Lease Agreements to buyer prior to making an offer • OK to indicate seller’s experience with utility cost savings: “Average monthly electric bill for last 12 months for this owner is only $7.76, including A/C, all professionally installed in 2014.” But make sure guarantees of cost savings are not implied to the buyer
- 55. A few morenotes of caution: • “Solar panels make it an energy efficient home” • “5KV solar panels - owned outright and installed in 2014. No electric bills AND the solar system earns Mass SREC credits, potentially netting thousands of dollars!” • “THIS “GREEN” HOME HAS SOLAR PANELS” • This 1382 sq ft house has a 52,000 kW leased system”
- 56. MicroinvertersTAKEAWAYS SECTION IV. Whatare do’s and don’ts of marketing a home with solar PV?
- 57. SECTION V. How toEstablish a List Price for a Host-Owned Solar PV Home
- 58. • Are yoursellers getting the proper value at the time of sale? • Are you sure that your buyers know what a specific solar PV system is worth? • Some key due diligence issues to pay attention to in the real estate transaction.
- 59. Key Concept: Contributory Value •It’s not just comps, comps, comps • Hybrid: income approach and sales comparison approach • Tool needed to derive income of home with host owned solar PV • What the tool does and does not include • How to use the tool in developing list price of home with solar PV
- 60. How to Establisha List Price for a Host Owned Solar PV Home Contributory value and income approach to appraisal www.pvvalue.com What the www.pvvalue.com does not include: the value of the SRECs, but can be used for the SMART program incentive
- 61. PV Value isbased off the following information: Calculate Calculate PV Value (the full retail price of power at your utility) Calculate Calculate Discount Rate Calculate Calculate O & M Expense for the Inverter(s) Calculate Calculate Solar Resource – you will need the installation agreement. Submit Submit Property Information (can be used for a home with existing PV, but also an undeveloped site as well
- 62. Assumptions Estimated value over lifeof system Estimated annual PV production
- 63. Don’t forget theSRECs… • Don’t forget the value of the SRECs…MA offers lucrative incentives for host owned solar PV. The value of the incentives is real, but are not included in the PV Value Tool, SRECs value may be part of the negotiation process however. • See Course Manual for examples of how to incorporate value of SRECs into sales process Source: SRECTrade
- 64. MicroinvertersTAKEAWAYS SECTION V. Howto Establish a List Price for a Host Owned Solar PV Home
- 65. Resources for Sellinga Home with Solar PV • The complete continuing ed course can be accessed at ma.keepmecertified.com/selling-the-sun • Course Manual can be downloaded from inside the course • Massachusetts Clean Energy Center Solar Resources page: www.MassCEC.com/solar Includes residential and commercial consumer resources including basics of solar PV and incentives, statewide solar PV cost data, Residential Guide to Solar, how to find an installer, and Frequently Asked Questions. • DEMAND a qualified appraiser: http://greenresourcecouncil.org/Appraisal-Links • Appraised Value and Energy Efficiency: Getting It Right http://www.greenresourcecouncil.org/Appraisal-Links Buyer and lender letters templates for request of an AI green certified appraiser (“knowledge and competence” requirements for green buildings). Cut and paste on your own branding, make sure your seller’s don’t accept an offer without using this as an addendum to give to the bank! • www.Pvvalue.com • Attorney General Maura Healey Offers Advice To Homeowners Considering Solar Panel Installations http://www.mass.gov/ago/news-and-updates/press-releases/2016/advice-to-homeowners- considering-solar-panels.html
Editor's Notes
- #4 U.S. DOE funded a three hr class that is not eligible for MA CEU’s and that MassCEC has funded a two hr class (also available online) focused specifically on the MA residential solar environment. The solar environment in this state is unique – MA RE agents need to understand some of the unique features and how they affect the solar RE transaction in the state. The Massachusetts Clean Energy Center is a state economic development agency dedicated to growing the clean energy sector in Massachusetts. By taking this class, they hope the tools you’ll receive will make it easier to build solar into home sales transactions. As a heads-up, they’ve got some great consumer resources about clean energy that are highlighted in your [course manual / training manual], and can be found on the resources slide at the end of this presentation.
- #6 What does PV stand for? Photons are the energy that reach the earth from the sun. Solar PV turns those photons into voltage or electricity to power our homes, appliances, lighting, heating and AC and even our EVs
- #9 297 solar PV systems, 1.7 MW through end of 2005 235 communities where 5% or more OOH w/ solar = 66.9% communities
- #10 297 solar PV systems, 1.7 MW through end of 2005 235 communities where 5% or more OOH w/ solar = 66.9% communities
- #11 297 solar PV systems, 1.7 MW through end of 2005 235 communities where 5% or more OOH w/ solar = 66.9% communities
- #12 297 solar PV systems, 1.7 MW through end of 2005 235 communities where 5% or more OOH w/ solar = 66.9% communities
- #13 297 solar PV systems, 1.7 MW through end of 2005 235 communities where 5% or more OOH w/ solar = 66.9% communities
- #14 Why does this matter? Host owned systems vs TPO systems increase equity at the point of sale. Host owned systems are considered real property and TPO are considered personal property by Fannie Mae. Real property needs to eb appropriately valued by the appraiser
- #19 History GCA, net metering. State Incentive programs (brief). Programs like Solarize Mass – quick example Solarize Melrose
- #20 History GCA, net metering. State Incentive programs (brief). Programs like Solarize Mass – quick example Solarize Melrose
- #22 297 solar PV systems, 1.7 MW through end of 2005 235 communities where 5% or more OOH w/ solar = 66.9% communities
- #25 History GCA, net metering. State Incentive programs (brief). Programs like Solarize Mass – quick example Solarize Melrose
- #26 History GCA, net metering. State Incentive programs (brief). Programs like Solarize Mass – quick example Solarize Melrose
- #30 History GCA, net metering. State Incentive programs (brief). Programs like Solarize Mass – quick example Solarize Melrose
- #32 What’s the purpose of the inverter again? Inverter could be inside or outside the home, but typically close to the electrical panel. This is a CENTRAL inverter, there are also microinverters…
- #45 Add up your own homes utility bills in your head as I go through this: annual cost for heating bills + annual cost for electricity bills + amount of times you go to gas station per month, cost to fill and multiply by 12. For Natalie and Tom it cost them $434 for the year to for everything including one EV
- #46 Add up your own homes utility bills in your head as I go through this: annual cost for heating bills + annual cost for electricity bills + amount of times you go to gas station per month, cost to fill and multiply by 12. For Natalie and Tom it cost them $434 for the year to for everything including one EV
- #49 Whether it is TPO or host owned there are unique characteristics selling a home with solar PV.
- #51 Lawrence Berkeley National Laboratory recently released a roadmap for market actors (MLSs, utility companies, monitors of production tracking systems, and data aggregators) that offers options for auto populating these critical data fields
- #52 HELIX project description
- #61 PV Value Tool was created by AI and NREL and is now owned by Energy Sense Finance. Expect that in the not to distant future when you try to go to this site it will take you to EiValue.com which will include other renewables and EE improvements that can use an income approach for valuation. You will still be able to use the tool for solar PV specifically as well.