Area Real Estate News & Market Trends

You’ll find our blog to be a wealth of information, covering everything from local market statistics and home values to community happenings. That’s because we care about the community and want to help you find your place in it. Please reach out if you have any questions at all. We’d love to talk with you!

Feb. 22, 2017

Should I Add My Boyfriend to Title?

Love and families are complicated at best.  So is real estate.  I have had several transactions recently where the homebuyer wondered if they should add a girlfriend/boyfriend to Title on the property they were purchasing.  To answer that, you have to understand what Title is and how it affects the ownership of your home.  

Essentially, Title defines the legal right to own, use and dispose of real property.  When you purchase real property, you will be presented with the Title Report, which lays out the chain of Title (or ownership) over the life of the property as well as any liens or encumbrances that have been recorded and whether they were cleared.  This is important because you don’t want to purchase a property people may have a legal claim on (Title Insurance protects you from any mistakes or fraud that weren’t included in the Title Report).  Therefore, Title is the legal concept of ownership rights.  

But what good is a concept without proof? The official, written document that acknowledges ownership is the Deed.  It transfers the legal ownership from one party to another.  

There are 3 basic ways to hold Title: Tenancy in Severalty (one owner), Joint Tenancy and Tenancy in Common.  They define an owner’s interest (whole, equal or unequal) to the property and how that interest is transferred upon death (see chart above).   So, if you want to add a boyfriend/girlfriend, adult child, relative, spouse, ect. to a property’s Title, there are a few things to consider.

  1. Do they have terrible credit?  Creditors can place liens on a property that a person has interest in (it is worth money), whether they are on the loan or not.  

  2. Does their job have a high risk of lawsuits (doctors, lawyers ect.)?  Again, the lien issue could come into play if a monetary judgement is awarded against them.

  3. Will giving ownership interest to one child upset the family dynamic?  

  4. Will there be tax repercussions to surviving owners upon your death?  Depending on their relation to you, this may be something you don’t want to pass down.

  5. Do you have children from a previous marriage that you would want ownership to be passed to rather than your current spouse (or in addition to)?  This could cause serious issues depending on your family dynamics.  

  6. Be honest.  You are in so in love now, but where do you see the relationship going? Negative, yes but these things happen.

It may be an easy decision or one you struggle with.  Always consult a lawyer and/or tax professional before making the Title decision and truly understand the implications of the type of Title you choose.  Adding individuals to Title can be done after the purchase of the property, usually without a huge expense.  Better not to make a hasty decision.  

 

Thanks for reading. 

Posted in Home Inspector
Feb. 14, 2017

Rodents? Seriously? I had no idea.

So, you had a pest inspection performed and it comes back clear or maybe with a touch of dry-rot.  No doubt you are relieved.  Then, the home inspector notes evidence of rodent activity (some of the pictures are really gag inducing and leave you with a very creepy feeling).  You think, I had a clear pest inspection.  Why didn’t they notice the rodent issue?  

Pest inspections only look for evidence of active termite infestations and wood-destroying insects or organisms like dry-rot fungus (section 1 items).  They will also note issues that may cause section 1 damage in the future, such as potential water intrusion or where water may cause damage (section 2).  Historically, pest inspections were required for funding by FHA lenders.  As lending institutions have tightened up requirements, many traditional lenders are also requiring pest inspections and section 1 clearance (all section 1 items repaired) in order to ensure they are lending on a structurally sound home.  

Other pests can be seriously damaging as well but are not included in the typical pest inspection required by lenders.  Rodents, especially mice and rats, can chew through wood, brick, pvc pipes, wires (fire hazard) and scamper around your living and food preparation areas, spreading the lovely diseases they carry.  They come inside your home, attic or garage seeking food, shelter and nesting materials.  All they need is an entry point the size of a nickel (mice) or quarter (rat) and they can scurry in via pipes, small cracks, gaps, holes in ventilation screens or under the eaves of the roof.  Here in El Dorado and Placer counties, we have plenty of open space and trees surrounding our homes where these critters can live and breed.  They then sight your abode with all its food and temperature controlled amenities.  Why wouldn’t they make an effort to enter?  

All that being said, I am finding peace of mind for both buyers and sellers by recommending a separate rodent inspection.  It is relatively inexpensive in most cases and will make you aware of rodent inhabitants and where they are entering your home, so you may fix the problem before it becomes a hazard (health and/or structurally).  Further, many pest companies will insure their work against further rodent intrusions when they perform the intrusion repairs (be sure to check on company policy).  

When buying or selling a home, there are many inspections and expenses to consider.  But, as Benjamin Franklin said, “An ounce of prevention is worth a pound of cure.”  Better to rid yourself of these fury disease bringing damage makers before a real problem arises.


I would love to hear your thoughts in the comments below.  Thanks for reading.

Posted in Home Inspector
Feb. 7, 2017

Judging a School By Its Cover (AKA...test scores)

Looking at school rankings can make your head spin.  If all of the acronyms don’t send you over the edge, the variance in numbers between the plethora of websites from which can pull data will certainly do the trick.  You may want to avoid the topic all together but chances are, if you are looking to buy a home and you have children, you will encounter school rankings as a factor in your home buying choice.  

Here is a little history on school rankings in California.  Up until 2013, one could look at the API (Academic Performance Index) for each school to compare their academic worth. This was a score between 200 and 1000 based on a state standardized test.  Each school would have a published average score further broken down in a million ways (race, gender, socio-economic, ect).  School rankings were typically from a 1 to 10.  The total number of schools with API scores were divided by 10 and those with the highest API scores ranked 10 and on down (if there were 100 schools, top 10 API scores ranked 10, next 10 down ranked 9…).

In an effort to standardize education nationally, the Common Core method of education entered the fray in 2014 and California changed their standardized testing (Smarter Balanced Summative Assessment or California Alternate Assessment) to accommodate the new material and methods of learning.   In 2017, a new Accountability Transition Report will be available with multiple measures of accountability for each school.  

Here are a few things to look for when examining school rankings and scores.

  • Look at the year the data is from.  Some websites are still using 2013 API scores.

  • Look at the number boundaries for rankings.  A school with a ranking of 7 may be 1 point away from a school with a ranking of 8.  

  • Get the big picture.  Many websites will publish the percentage of teachers with less than 3 years teaching experience, percentage of credentialed teachers, percentage of full-time or part-time teachers, student:teacher ratios, ect.  

  • Know what is important to you and your children.  You can find information on the number of students in the school, enrollment trends, special programs that may be offered, college acceptance rates, sports programs, ect.

  • Visit the school and district websites.

  • Look at reviews.  Our society is review happy.  You will likely see find the highs and lows of emotions so keep an open mind.  Often these reviews can give you a broader picture of a school’s culture than pure statistics alone.

  • Look at not only the school your child may attend this year, but in the years to come. Intradistrict and Interdistrict transfer policies can vary greatly (look at district websites for more information).  

Nothing is more important than our kids and their education.  Do your research, look at many different factors as well as the source and year of the data.  Good luck on your home search as well.

Education is the passport to the future, for tomorrow belongs to those who prepare for it today.

                                                                                                                            Malcolm X


 

Thank you for reading.  I would love to hear your comments below.

Posted in Home Inspector
Jan. 31, 2017

Do Rain and Real Estate Mix?

The nicest thing about the rain is that it always stops. Eventually.

 

How does all this glorious, drought eliminating, rain affect the Real Estate Market?  In the long term, it is unlikely to affect the El Dorado and Placer County markets.  Market performance is ultimately determined by interest rates, the job market and the buyer’s perception of the right time to buy.  Timing is everything.  That being said, the weather can affect sales in the short term.  

Typically, inventory moves faster in warmer climates than cooler ones.  In cooler months (winter), Zillow finds homes in colder regions are on the market 16 days longer than those in warmer regions (http://www.thehomestory.com/how-weather-affects-homebuying-and-selling/).  If it is pouring buckets outside, the prospect of driving around and looking at homes isn’t too appealing to most buyers.  Open houses may have little traffic.  But, I have found the serious buyer will not be deterred by a little rain.  Often they are on a time schedule to find a new home and can’t wait for the weather to become rosy and clear.  

As a seller, there are some things to consider before you list your home in the the rainy, winter months.  

  • Clear your gutters.  Rain spilling over the gutters and pooling by the foundation is not appealing to a prospective buyer.

  • Have a roof inspection performed (many companies will do an inspection for free) to discover any potential issues and leaks.  

  • Clear your landscaping drains to prevent ponding.  Again, this screams to buyers “DO NOT BUY.”  On this note, make sure your drainage works properly.

  • Make sure your landscaping is tidy and clear of leaves and debri that may be blown around during the rainstorms.  Maintaining curb appeal will help balance the dreariness of the rain.

  • Have your home warm and cozy (but not uncomfortably hot).  You want buyers to experience how comfortable your home can be on a rainy day.  

Rain, although inconvenient when buyer or selling, is a temporary thing, but if your home is ready for sale or you are a serious buyer, it certainly isn’t a huge factor in the real estate market.  

 

I would love to hear your rain and real estate experience and opinions in the comments below.

 

If you like this post, subscribe RSS.  Thanks for reading.

 

Posted in Home Inspector
Jan. 15, 2017

Quick Market Summary

Quick Market Summary: The market feels like it should at this time of year. It’s taking slightly longer to sell than it was a couple of months ago, the sales to original list price ratio has been declining, and prices are softening as the hot summer fades away. This doesn’t mean the market is dull at every price range though. In fact, the bottom of the market under $300,000 is definitely more aggressive than properties above $500,000. Right now housing inventory is 11% lower than it was the same time last year and a whopping 35% lower than it was in 2014. If you remember, two years ago the market felt extremely dull and there were about 400 price reductions every day when logging in to MLS (this year price reductions are hovering around 200 tops every day (that’s for the entire MLS coverage area)). This reminds us some fall markets are softer than others. Sales volume this year has been about the same as it was last year, though it’s important to note FHA is down 6% and cash is down over 8% so far. Celebrity house flipping seminars are coming to town frequently in Sacramento, but keep in mind only 2% of all sales in the region last month were bank-owned, which reminds us low-priced fixer deals on MLS are pretty much a thing of the past. Lastly, there has been lots of talk about the market having shifted or beginning a downturn, but right now the stats look to be showing a normal seasonal slowing. We often hear things like, “the market is starting to tank”, but unless we see a real change in the stats or hear something more definitive from the real estate community about values declining, let’s be in tune with the slowing seasonal market. In case it’s useful, here is a video tutorial I did a couple of weeks ago to walk through the slowing season and what it looked like in 2005 also.

Posted in Home Inspector
Dec. 27, 2016

2016 selfies-market-hotness-waiting-to-sell

Have you ever taken a selfie from a particular angle to make sure you look as good as possible? Be honest. Of course you have, and so have I. Well, housing stats can be just like selfies. It’s easy to pick the best angles (stats) to share while missing the real picture. Let’s keep this in mind as it’s tempting in real estate to gravitate toward “hot” headlines while missing the full story. Let’s kick around some ideas below and then take a deep look at the Sacramento market. Any thoughts?

56299814 - young pretty woman taking selfie outdoors - female winter fashion portrait - teenager student holding mobile phone for selfi photo next to brick wall background - soft and hazy vintage filtered look

1) Market hotness: It’s been blasted all over the news that Sacramento is going to be one of the hottest markets in the nation next year. The SacBee wrote about this a couple of weeks ago and I was actually quoted in the piece. In short, Realtor.com predicts we will see a 7% increase in value. The irony is price stats showed a 7% increase in 2015 and we’re on track to see something similar for 2016 in Sacramento. Thus I suppose Realtor.com could have just said “Sacramento will do what it’s done for two years in a row.” Zing. Remember, just because the median price went up 7% doesn’t mean actual values increased by that much. This is a huge point and we can talk about it in the comments if you wish.

2) Deciding to wait to sell: When sellers hear the market is “hot” or sense values are increasing, they sometimes wait to list their homes. Last week an agent told me an owner who was ready to get her property on the market called and said, “We’re going to wait because we just saw a story on TV that said the market is going to be the hottest in the nation next year.” On a related note I spoke with a client who is now concerned about his home increasing in value too much since he is going through a divorce. This reminds me of a video John Wake shared on Twitter. He was talking about San Francisco values and how sellers tend to wait to list their homes when values are increasing. The thought is, why list now when values are going to be higher next year? But then when values do eventually turn there can be a flood of houses hit the market as a “race to the exit”. Really good stuff from John.

3) VA appraisal fees just increased: If you haven’t heard, VA increased their appraisal fees from $450 to $600 in the Sacramento area. Unlike other loan programs, VA pays a standard fee for every appraisal. Just a heads-up.

4) Fannie Mae waiving appraisals: A few days ago Fannie Mae officially began a program to waive appraisals for certain refinances. In the background Fannie has been mining data from appraisal reports for the past two years for their Collateral Underwriterprogram, and with a database of millions of appraisals they can now eliminate the use of appraisals in some transactions. It’s like Fannie Mae in a small way is helping appraisers dig their own grave. I understand efficiency and how this makes reasonable sense for some transactions, but let’s not forget the very important role appraisers are supposed to play in a transaction.

Posted in Home Inspector
Nov. 17, 2016

Why Did The Election Kill 2016's Rates and Can They Come Back? Political fallout

Why Did The Election Kill 2016's Rates and Can They Come Back?

Political fallout aside, the election has really shaken up financial markets.  While the evening news is more apt to focus on the stock market recovery, it's getting harder and harder to ignore the destruction of 2016's low mortgage rates.  Even the slower-to-react Freddie Mac rate survey caught up with the reality we'd already discussed last week.

2016-11-17 Rates

 

Clearly, the election was a catalyst, but why, exactly, are rates responding like this and what are the chances they can come back?

For bond markets (which dictate rates), the issue with the election isn't so much about who won, but rather, the widespread consensus that the other candidate would win.  Markets LOVE to price-in as much of the future as they can reasonably foresee.  With Clinton, that future was seen as a relative status quo.

The Trump victory started a scramble.  Investors were left to guess what Trump's actual policy path might look like and what the effects would be on financial markets.  One of the most prevalent conclusions last week was that the election made a Fed rate hike more likely, which was in turn pushing mortgage rates higher.

Although Fed rate hike expectations have moved up a bit, they certainly don't account for the move seen in longer term rates.  This is plain to see in the following chart (10yr yield is a benchmark for longer-term rates, like mortgages).

2016-11-17 Fed Hike

If not Fed fears, then what other insidious enemy has bond markets so scared?  There are actually several.  These include any number of the following (in order of importance and apparent level of certainty):

  • Together with a unified GOP congress, Trump is expected to create inflation through increased infrastructure spending, protectionist trade policies, and lower taxes.  (Lower taxes + higher spending = the need to print more Treasury debt, or plain old growth.  Both would push rates higher.  Protectionist policies could raise the cost of imports, which could add to inflation). 
  • The infrastructure spending possibilities and potential tax cuts have boosted equities markets.  Some investors think this is an opportunity to get out of bonds and back into stocks.
  • All of the above increases the likelihood that the Fed will hike rates in December.  This was already assumed, but now more so.  Many investors think the domestic situation makes December a perfect opportunity for Europe to announce that it will taper its asset purchases (thus decreasing overall demand in bond markets, which is bad for rates).  
  • While it may not have been anything more than a hollow campaign threat, Trump did mention the possibility of "renegotiating" with America's creditors, which is never good for interest rates.
  • While it may also have been a rhetorical threat, if Trump were to follow-through on mass-deportation goals, that could have an inflationary effect, as it implies an increase in the cost of labor.

With the exception of the modest increase in Fed rate hike odds, the overwhelmingly unified theme here is inflation.  In general, rates will rise for a few key reasons: lower credit quality, stronger growth prospects, and higher inflation expectations.  Of those three, inflation has vastly more power to rock rates' world, especially when inflation expectations suddenly change based on fiscal or monetary policy.  

If we strip out the inflation component of 10yr yields and isolate it on a chart with the non-inflation-related components, everything becomes clear.

2016-11-17 Inflation Components 

Keep in mind, of course, that this rate spike is made worse by the level of uncertainty over the ultimate policy path.  Bond markets have to account for a wider range of risks, and it's much safer for bond traders to be overly defensive of the worst-case scenario until it can be ruled out.  

In the coming weeks, to whatever extent such a scenario can be ruled out (or even toned down), we could see rates ease back a bit.  But until that happens, take a cue from bond traders: expect the pain to continue until it stops.  Don't try to catch the falling knife.  The chance of timing it right isn't worth the risk of losing a digit (on your hand or on rate sheets).

While we ponder rates' fate, why not add a layer of concern by asking ourselves what a surge in rates would mean for the housing market.  It was hard not to wonder about such things after this week's impressive surge to 9yr highs in Housing Starts.  The past few reports are just now starting to break the stagnant trend from 2015 to mid-2016, and even though rates aren't the final word for residential construction, a sustained rate spike will make it hard to build on the exciting new trends.

2016-11-17 Starts

Posted in Home Inspector
Nov. 12, 2016

What does President Trump mean for the housing market?

Political pundits around the country were stunned last night when Donald Trump secured enough votes to beat Hillary Clinton to become the next President of the United States. While supporters from both sides are still reeling from emotions, we woke up wondering what that would mean for real estate.

It’s common for the president to use housing as a vehicle to lead economic recovery, and with Trump being a licensed broker, real estate professionals have been keen to see how his policies would affect them.

“The last time we had real estate dealmakers as U.S. Presidents were founding fathers Thomas Jefferson and George Washington, who loved their property holdings and made sure the U.S. Constitution protected them,” Inman publisher Brad Inman wrote earlier this year. “That was a big deal.”

How will an impending Trump presidency change the real estate market? Here are eight possible outcomes.

Will he use real estate to kickstart the economy?

Trump has used real estate himself as an investment, and although he hasn’t said much about his housing platform, what he has said indicates that he’s interested in boosting homeownership.

Much of Trump’s platform has centered around deregulating the financial market in order to more fully revive it, and that alone could also give a boost to real estate.

What will happen to mortgage rates?

Many different factors affect mortgage rates — they change each day based on what the market is doing — and last night, we saw a little bit of market panic, which can be expected due to an unforeseen event (most polls showed a Clinton win).

However, as of this morning, they have already bounced back a bit.

similar effect was seen post-Brexit, with markets dropping after the unexpected vote to leave the European Union, but a few months later, it’s business as usual again.

The international economy also has an effect on the exchange rate, and there could be some disturbance as the result of an unforeseen event.

“Mortgage rates are falling because investors are seeing safe yields in U.S. mortgage backed securities, reflecting their confidence in the relative safety of the U.S. housing market,” wrote Trulia chief economist Ralph McLaughlin this morning in a statement. “Furthermore, the Fed is likely to delay a December rate hike because of global economic turmoil. Both effects mean short term win for borrowers, and we’ll likely see an increase in mortgage refinancing if rates continue to plummet.”

Could it become easier to borrow money?

One way that a Trump presidency could make it easier for consumers to own homes would be to lower premiums for FHA loans or cutting guarantee fees for Fannie Mae or Freddie Mac.

Neither of those have been specifically mentioned as priorities for his campaign — and Fannie and Freddie present their own problem, as seen below.

Will there be cutbacks in federal programs?

In the 1980s, Ronald Reagan cut back on many federal programs (such as mental health care) in order to trim the national budget.

Some programs, such as those involving affordable housing, might have more of an effect on real estate than others, but Trump has not indicated which programs he would be most likely to target for cutbacks.

“While local and state policies are likely to be unaffected, major programs — such as the Low Income Housing Tax Credit and Section 8 housing vouchers — could be on the table for reform,” said McLaughlin.

What about regulations?

This is something that Trump — and the Republican party as a whole — has been vocal about.

Banking regulations

In July, the party approved its 2016 platform. That platform includes significant changes to the Consumer Financial Protection Bureau (CFPB), and there has been talk of repealing the Dodd-Frank Act, which imposed regulations on lenders, and replacing it and the CFPB with something else.

Loosening regulation on lending could potentially boost homeownership by making it easier for consumers to obtain loans.

Building regulations

In August, Trump also told a meeting of the National Association of Home Builders, “There’s no industry, other than probably the energy industry, that is more overregulated than the housing industry … Twenty-five percent of costs to build a house are regulations. I think we should get that down to 2 percent.”

If construction is deregulated to some extent, this could mean more affordable homes for consumers.

Employer/independent contractor regulations

What happens to the Patient Protection and Affordable Care Act (PPACA, also known as Obamacare) and Occupational Safety and Health Administration regulations is up in the air now.

And if Republicans are successful in getting rid of some or all of PPACA or OSHA, then that could mean lower operating costs for small business, including real estate brokerages. It could also mean that agents are no longer required to purchase their own health insurance as independent contractors if PPACA is repealed or amended.

Will the mortgage interest deduction go away?

Last year, a tax plan that Trump shared specifically and explicitly mentioned that he would preserve the mortgage interest deduction.

Trump’s current plan (more abbreviated than the previous version) does not go into detail about the mortgage interest deduction.

Will there be reforms at Fannie Mae or Freddie Mac?

Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs), are currently under government conservatorship — and although figuring out what to do with the behemoths is bound to be difficult, it’s also likely to fall into Trump’s lap.

Posted in Home Inspector
Nov. 2, 2016

The problem with non-permitted additions in real estate

Non-permitted additions can cause huge problems. Last week I wrote about how I valued a garage conversion without permits, and I wanted to follow up with some expanded thoughts. As I mentioned, in this situation I gave value to a conversion because I was able to show the market was willing to pay for it. Yet it’s not always that easy, so let’s dig deeper.

Issues when dealing with a lack of permits:

1) Lenders & Appraisers: Here’s the bottom line. Some lenders don’t want to lend on properties with non-permitted additions. In short, a non-permitted area might have legitimate value in the market, but some lenders will tell appraisers NOT to give the space any value. At the same time other lenders are okay with value being given, but they want appraisers to show a few comps with similar non-permitted areas to prove the market is willing to pay for the space (that’s tricky to find).

2) Illegal: Does the addition conform with what zoning allows? This is a key question. For instance, if zoning only allows one unit and the seller has a non-permitted second unit that hands-down would never be allowed, it’s an enormous liability for an appraiser to be giving value to something like that. Likewise, imagine if an addition was built within the setbacks on a site, which would make it illegal and maybe even a safety issue.

3) Building Department Reaction: Is it likely the non-permitted area can become permitted? What is it going to cost? This is where it’s worth giving the building department a call. I don’t recommend mentioning a specific address at first so you don’t raise red flags, but call and maybe ask about a hypothetical situation to see what the cost and feasibility might be for getting permits. Remember, not all markets are the same either. For instance, since 1976 the City of Davis has had a program where building inspectors visit all properties before they close escrow to ensure there are no code violations. In short, you can’t get away with non-permitted additions in Davis if you plan to sell (but you can elsewhere).

4) The Struggle of Different Opinions: A friend gave me a call to talk through a situation with a garage that was converted into a second unit without permits. The appraiser gave little weight to the addition because of zoning issues, but the seller thought it should have carried more weight. There was a solid back-up offer on the table, but regardless of whether this addition was worth more or not, the thing I told my friend was there was no guarantee a future appraiser or lender was going to see the situation any differently. Owners in scenarios like this tend to say, “The lack of permits wasn’t a problem when we first bought the house”, but guidelines and what appraisers report might have changed over time. Moreover, not every appraiser or lender is going to see things the same way.

Advice about non-permitted areas:

1) Minimal value: Expect there is generally going to be less value for something not permitted than something fully permitted (thanks Captain Obvious).

2) Bigger is Bigger: Buyers seem to ignore smaller-ticket items that weren’t permitted, but the bigger something is, the more likely it is going to be a bigger deal that it wasn’t permitted. For example, there is a huge difference between a non-permitted covered patio and a 400 sq ft addition that was not permitted.

3) Glorified Storage: Keep in mind an appraiser might be instructed by a lender to count a non-permitted area as storage instead of living space. So that second story attic conversion might be really sweet, but an appraiser might end up treating it like storage instead of extra square footage.

4) The Easy Answer: Getting permits can help avoid future loan problems. Be sure to keep a copy of the permit too so any appraiser or buyer can see everything has been signed off.

NOTE ON GIVING VALUE TO SOLAR: This is off-topic, but there was a recent class on solar and it was apparently mentioned I do not give value to solar systems. That’s not accurate. However, I have said a LEASED solar system does not get value because it’s personal property. Just wanted to clarify. You can read this post and another for some thoughts on solar.

This post was written by my favorite Appraiser Ryan Lundquist  

Posted in Home Inspector
Nov. 2, 2016

Does a $20,000 solar system really add $20,000 in value?

Would you pay $20,000 for a solar system if you knew it added $20,000 of instant home value? That’s exactly what a solar salesman told the client of a real estate friend. Is that legit though? What advice would you give someone talking to this salesman? This is a timely scenario, so I wanted to share my friend’s question and my response. I’d love to hear your take in the comments below.

solar panels in real estate - sacramento appraisal blog - image purchased and used with permission from 123rf - 2

Real Estate Friend: I have a client that wants to add solar to his 1989 house and was quoted a price of $20,000. The solar guy told my client that it would add value dollar for dollar…doubt that. Let me know your thoughts.

My Thoughts: Where is this SALESMAN getting “dollar for dollar” from? Is he a real estate value expert? Could he prove the value actually? Would the system add $20,000 in value regardless of the neighborhood, state, or price range? What if the system cost $40,000 or $80,000? Would that add $40,000 and $80,000 respectively? It’s a great sales claim, but achieving dollar for dollar is not something that happens in real estate in every case. For example, a kitchen remodel might cost $50K, but that doesn’t automatically mean buyers are going to line up to pay $50,000 more for the house. Or a built-in pool could run $35,000, but we all know buyers don’t expect to pay full price in the resale market (sometimes they’ll go for $10-15K or so, right). Thus the cost of something doesn’t necessarily translate dollar for dollar to the value. When it comes to solar, it’s more of a marathon of value so to speak because there will be value recognized over time as savings happen (as opposed to an instant rush of full value at the present time). I am not saying the house could not be worth $20,000 more, but my BS alarm is beeping I am skeptical. Appraisers and the real estate community have to consider what buyers are actually presently willing to pay for the system. Granted, we have limited data, and solar is still an emerging field, but we have to study homes with and without solar. What sort of price difference is there? Also, how much money will the system actually save the owner each month? Moreover, when considering monthly energy savings, how much more home could a buyer effectively afford because of the savings? If I were your contact, I would read this solar Q&A I did, but I would also do the math. Will the savings from solar far outweigh the cost of the system? If not, what energy conservation steps might your client’s household make instead? Lastly, if the solar system is leased, it won’t actually add anything to the value because it’s more or less considered personal property.

From Gail DeMarco Realtor

As a realtor I have gotten to know Solar way to well.  It's defintely a challenge selling a home with solar and that's when unfortunately my sellers actually realize that what they have been told is not the truth!  The problem is the solar company sells the paper to a financing company and go ahead try to get in touch with them. Good Luck!  I've been on home multiple times 4 hours!!!

Posted in Home Inspector