Category Archives: Real Estate Market

Green Home, Real Estate Market, Solar

Shining a Light on Solar Panels

Shining a Light on Solar Panels: Unlocking the Value in Real Estate Appraisal

Are you considering adding solar panels to your home? Beyond the environmental benefits, did you know that solar panels can also contribute to the overall market value of your property? Real estate appraisers take a multifaceted approach to evaluate the impact of solar panels, considering various factors that go beyond the initial installation cost. Let’s delve into the key aspects that appraisers typically take into account, breaking down the evaluation process.

 Cost Approach: Unpacking the Initial Investment When appraising a property with solar panels, appraisers often begin with the Cost Approach. This involves considering the initial purchase and installation costs of the solar panel system. The age and condition of the panels also come into play, with well-maintained and newer systems being valued more highly due to their extended economic life. This physical depreciation is factored into the overall effective age or condition of the home.

 Income Approach: Powering Up Future Savings The Income Approach centers around estimating the income generated by the solar panels over time. This income can be derived from savings on electricity bills or even income generated by selling excess electricity back to the grid. Let’s break it down: Imagine your solar panels save you $1,500 per year on electricity bills. The appraiser then applies a discount rate (let’s say 5%) to calculate the present value of these future savings. In our example, that’s approximately $24,000, reflects the financial benefit you receive from the solar panels over the years and is not directly added to the market value of the property. Instead, the income approach is used to incorporate the present value of the future energy savings into the overall valuation.

Market Comparison Approach: Solar Panels in the Neighborhood Appraisers also employ the Market Comparison Approach, looking at comparable properties with similar solar panel installations in the local market. This helps gauge how solar panels impact property values in a specific location. If homes with solar panels are selling for 3% more than those without, this percentage increase is factored into the overall market value calculation. In our hypothetical scenario, a home without solar panels is estimated at $250,000, while one with solar panels is valued at $257,500 (3% higher). This implies that, in this case, solar panels could add $7,500 to the market value.

It’s important to note that different appraisers may use slightly different methods, and the impact of solar panels on market value can vary based on local market conditions and buyer preferences. As solar technology continues to evolve and awareness of its benefits grows, the value of solar panels in real estate may see further enhancements. So, if you’re considering going solar, not only will you be contributing to a sustainable future, but you may also be enhancing the value of your home. Find a Solar Company in AR https://www.cnet.com/home/energy-and-utilities/arkansas-solar-panels

Green Home, Home Improvements, Investment Strategies, Real Estate Market, Real Estate Market Analysis

Getting an appraisal when you are already in contract

What happens in a scenario where the buyer decides to have an appraisal performed after the home is already under contract? What are the possible outcome if an appraisal comes in above the contract price or below it?

 If  the Appraisal is above the contract price: 

If the appraisal comes out higher than the contract price, it may be seen as a positive outcome for the buyer. It means that the property is valued higher than what they agreed to pay, potentially indicating that they got a good deal.

However, since the buyer has already agreed to purchase the property for $320,000, they are typically obligated to honor the contract. The buyer may still proceed with the purchase at the agreed-upon price or renegotiate with the seller based on the new appraisal value. Renegotiation could involve trying to lower the price or requesting additional concessions from the seller.

Appraisal below the contract price

If the appraisal comes out lower than the contract price, it can create some challenges for the buyer. The lender (if involved) might only be willing to provide a loan based on the appraised value rather than the contract price.

In this case, the buyer may face several options: a) Proceed with the purchase as planned, covering the difference between the appraised value and the contract price with additional cash from their own funds. b) Renegotiate with the seller to lower the purchase price based on the appraised value. This renegotiation is typically subject to the willingness of the seller to adjust the price. c) Terminate the contract if there are contingencies in place that allow for this, such as an appraisal contingency.

The buyer may be entitled to have their earnest money deposit refunded if they decide not to proceed with the purchase due to the low appraisal.

It’s important to note that the specific consequences and available options may vary depending on the terms outlined in the purchase agreement, any contingencies present, local real estate laws, and the willingness of both parties to negotiate or modify the contract. Consulting with a real estate professional or an attorney would be advisable in such situations to fully understand the implications and potential outcomes.

Before you make a home purchase

It important do research about your neighborhood. Try to find similar homes in the same price range so you can see how your house compares in quality and size etc. And even if there is no mortgage involved, it is always prudent to have an appraisal on a property you are interested in before you enter into a legal agreement. Purchase agreements should always have a contingency in the event the property appraisal comes in below or above your offering price. An appraisal could save you the loss earnest or deposit money, paying too much or even a possible breach of contract.