Can I challenge a low FHA appraisal?

Question

Got a low FHA appraisal on a Pahrump property I am selling.  I know these appraisals are for 6 months. I am thinking of adding solar panels (owned not leased) to the property to improve value.  Question: If I do add panels is there any way I can have the home re-appraised before 6 months has elapsed? Can a low FHA appraisal ever be challenged?

Steve K. · Answer

I’d be curious to hear from actual appraisers on this, however as a solar professional in my experience appraisers will not immediately ad value for solar, despite the appraisal institute determining through a comprehensive study that solar ads $20,000 value for every $1,000 in annual energy savings. I’ve seen evidence of resale value and salability increasing with solar, but the appraisers I’ve spoken to have not considered it directly in their appraisals. Perhaps this will change in the future as sales comps increasingly support added value for homes with solar compared to those without. Lower operating costs are definitely a consideration I take into account when I’m looking at property, and I think most would agree that a house with $0 electricity bill is preferable to one with a bill. Since you just worked with an appraiser, why not reach out to them and ask if having solar would have made a difference in their recent appraisal of your home? Id be curious to know too.

Jacob D Adamczak · Answer

The investment of a solar array on a house will mean different things for people in different areas in terms of a higher resale value, so while you may have not seen it in your area, there are other areas where it is highly desirable and will command a premium.  In addition, "pigeon issues" is not a reason to not get solar.  There are some really sweet looking black panels that look great on black roofs.  Other times homeowners do not like the look and aesthetics are a valid concern.  I could give you a list of benefits besides energy offset just as you give a list of negatives.  Solar is an investment that should be carefully analyzed based on the area, energy rates, and comps among houses sold with solar just as you would analyze any other investment

Phillip Dwyer · Answer

@Joel Fischer Typically the contesting of an appraisal would have to be initiated by the buyer.

I'd be hesitant to add solar to a house you plan on selling as a means to get more at the sale.  I've rarely seen solar systems reach break even, so you'd likely be better allocating those dollars to some other improvement.

Phillip Dwyer · Answer

@Jacob D Adamczak  I agree with you about consumers really taking time to analyze all aspects before purchasing a solar system.  My earlier point was that a lot of people I run across only discuss the point of net monthly energy cost savings.

In the OP's situation, he's talking about making improvements to a property he's planning to sell soon so that he can net more profit at closing.  I think it's quite likely he could allocate the same dollars to other improvements that will add more value than solar.  I could be wrong, but he's in the market I play in every day.  Obviously, we don't know enough about the specific property to know how to maximize the profit, but I think my general assumption would hold up.

For a different situation where net gain on improvement dollars isn't the goal, I may have a different opinion.  There are plenty of good reasons to get a solar system.

Phillip Dwyer · Answer

@Joel Fischer  My comments on break-even assumed that you were going to install solar panels today and list the house to sell tomorrow.  I don't think you would make a profit in this scenario.  Others with hard data may chime in with real examples to refute my opinion.

Joel Fischer · Answer

Thanks for your input Phillip and Steve. Phillip when you state "you rarely see solar break even" what price are you assuming for an average 3-4 KW system? thanks again

Phillip Dwyer · Answer

@Steve K. I think a lot of solar proponents miss some key elements when thinking about how solar can impact value.  It's not just about net energy cost savings, although that's the easiest to measure.  Solar systems can negatively impact the aesthetics of the roof line.  Solar systems can cause pigeon issues.  Solar system attachments add additional roof penetrations.  The list goes on.

An appraiser can look at those net energy cost savings to derive value.  However, he or she also has to look at how the current market is responding to properties with solar systems.  If the sales data doesn't show buyers are willing to pay more for the systems, then it's hard to justify a bump in value on an appraisal.

Can I challenge a low FHA appraisal?

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