When it comes to solar homes and making energy improvements to a home, we know that they can add value because it becomes a sensible investment for the next buyer. Suddenly, the new buyer comes in and they’re benefitting from lower utility bills, increased comfort, and a reduced carbon footprint. However, a question we’re commonly asked is whether there’s a cap that exists. Could homeowners theoretically keep making improvements and keep boosting the value of their home? Or is there a maximum cap that prevents the price from rising beyond all normal reason?
In short, a market cap does exist. Before we go into the details for what this cap might entail for Phoenix and Arizona in general, we should first note that this cap will be different depending on where you are in the country. For example, the cap will be higher in locations that have expensive utility bills – like California, for example. In Phoenix, the rates of our bills are fairly respectable so the savings made after energy improvements aren’t quite as significant.
Market Cap
Regardless of the information and documentation provided to the appraiser, they’re unlikely to add more than 15% to the home’s value; in some cases, this could even reduce to 10%. Of course, this is still a healthy chunk and it’s extremely noticeable on larger homes with more value. For a home worth $800,000, an additional 15% would mean an extra $120,000 so this is important. However, it means that there isn’t an endless amount of money you can add to your home’s value.
Furthermore, another way to look at it is ‘per watt’. In Phoenix, the top end offered will be an additional $2.25 per watt installed on the roof. In some cases, this can be $1.50 or anywhere between the two. When looking to sell your home and talking to a listing agent, it’s important to remember this cap. In fact, it highlights the importance of the appraisal process; the appraiser needs all the information possible so you can push your home towards the 15% cap and get the most value.
Managing Expectations
If you, or anybody you know, is selling a home, we urge you to really take note of this guide and share it around. Often, we come across homeowners who are just expecting too much from their listing agent. After making some improvements, they expect too much from the valuation and sometimes the demands are completely unrealistic.
During the valuation process, your listing agent will take steps to ensure the valuation is as high as possible. For example, they’ll partner with Pearl Certification, they’ll be present during the appraisal, they’ll provide important information, they’ll provide any required documentation, and they’ll answer any questions the appraiser has regarding the property. When trying to get the best value, these small steps really help. However, there is a limit and you need to be aware of this cap so you can then manage your expectations accordingly.
Summary
f you feel confused or have any questions, feel free to get in contact with your listing agent and they’ll be able to tell you more about their experience with the cap. As mentioned previously, the cap tends to vary from one location to the next. The higher the utility bills, the higher the cap is likely to be because energy improvements have a larger impact. If you managed to stumble across this guide and you aren’t in Phoenix, research the cap in your own location and have a conversation with your listing agent!
