Solar impact

[alebrewer]

But does it reflect in the pricing, there are all sorts of things that can save you money that buyers don't pay more for individually. Many times properties with leased solar panels sell for less.

We're not talking about leased panels here. IMO, leased panels are not treated as real property due to the ownership issues. Question: prior to the mushrooming of the solar industry, if you were a buyer, and were considering a home with 'owned' panels, and the homeowner showed you documented evidence of monthly savings, what would your decisioning include? Can't do a grouped sales analysis, cuz you can't find any other sales of comparable homes with solar. So you're stuck with the information you have at hand. Would your decision be based, at least in part, on the monthly savings? It should...

 

[Gobears81]

Without sales, neither can be reliably calibrated to the market.

Sales with supporting data are ideal, but if you don't have sales, then how would you value this - if not from DCF or costs? I recall reading a solar valuation framework that advocated using a 5% rate for the solar panel system, which doesn't seem appropriate unless we are in an ultra low-rate location/ market. Based on the R+G = Y framework, where R is consistent with the overall rate would be either consistent with that of the entire property or higher - due to being an improvement - the discount rate would thus be calibrated to the market. A response to this would justifiably be that this discount rate is market-derived for the property itself, rather than the market reaction to solar panels, and that point is valid. But, we are working with limited valuation data, and again, I ask what is a better approach.

No. It does not reflect what buyers are paying for that savings. Why do you think FNMA added this part...The appraiser must also analyze the market reaction to the energy efficient feature.

Discounted Cash Flow (DCF) is a valuation method used to estimate the value of an investment based on its expected future cash flows. The analysis projects how much money an investment will generate in the future, and then discounts that cash flow to arrive at an estimated current value of the investment.

Those statements are not incompatible, per above.

 

[shrubberyvaluation]

We're not talking about leased panels here. IMO, leased panels are not treated as real property due to the ownership issues. Question: prior to the mushrooming of the solar industry, if you were a buyer, and were considering a home with 'owned' panels, and the homeowner showed you documented evidence of monthly savings, what would your decisioning include? Can't do a grouped sales analysis, cuz you can't find any other sales of comparable homes with solar. So you're stuck with the information you have at hand. Would your decision be based, at least in part, on the monthly savings? It should...

It doesn't matter what I would do, it matters what a typical buyer would do. I think they look ugly and it puts wear on the roof, and it creates more hassle when needing to do repairs/replace the roof. Not everything is about DCF.

 

[alebrewer]

It doesn't matter what I would do, it matters what a typical buyer would do.

That was kind of my point... of course the typical buyer would factor monthly savings into their decision. Else solar wouldn't have taken off as it has - folks don't buy them because they're cute, or because they're trying to save the planet. They buy them because of the (at least theoretical) monthly savings.

 

[The Bob]

Sales with supporting data are ideal, but if you don't have sales, then how would you value this - if not from DCF or costs? I recall reading a solar valuation framework that advocated using a 5% rate for the solar panel system, which doesn't seem appropriate unless we are in an ultra low-rate location/ market. Based on the R+G = Y framework, where R is consistent with the overall rate would be either consistent with that of the entire property or higher - due to being an improvement - the discount rate would thus be calibrated to the market. A response to this would justifiably be that this discount rate is market-derived for the property itself, rather than the market reaction to solar panels, and that point is valid. But, we are working with limited valuation data, and again, I ask what is a better approach.


Those statements are not incompatible, per above.

At the end of the day you need to see IF buyers are recognizing that cost savings in the prices they pay. If they don't then how can you say DCF = MARKET value?

 

[alebrewer]

At the end of the day you need to see IF buyers are recognizing that cost savings in the prices they pay. If they don't then how can you say DCF = MARKET value?

Not necessarily 'real' cost savings - but 'perceived' cost savings. Buyers are decisioning on what they think they'll save. Doesn't matter if they actually save anything or not, the 'value' of the item is based on perceived savings.

 

[Gobears81]

At the end of the day you need to see IF buyers are recognizing that cost savings in the prices they pay. If they don't then how can you say DCF = MARKET value?

So how are you valuing them?

 

[The Bob]

In today's world, yes. Prior to acceptance en masse, not so much. And I prefer the term 'Illustrious Potentate' if its all the same to you.

Duly noted

 

[TerryRohrer]

Sales with supporting data are ideal, but if you don't have sales, then how would you value this - if not from DCF or costs? I recall reading a solar valuation framework that advocated using a 5% rate for the solar panel system, which doesn't seem appropriate unless we are in an ultra low-rate location/ market. Based on the R+G = Y framework, where R is consistent with the overall rate would be either consistent with that of the entire property or higher - due to being an improvement - the discount rate would thus be calibrated to the market. A response to this would justifiably be that this discount rate is market-derived for the property itself, rather than the market reaction to solar panels, and that point is valid. But, we are working with limited valuation data, and again, I ask what is a better approach.


Those statements are not incompatible, per above.

I have no doubt data is hard to come by. I doubt if that means nonexistent. I would expand my area of consideration and consider any and all property types anywhere.

 

[alebrewer]

So is discounting DCF as a valid approach to estimating market value the same mentality as discounting the cost approach as a valid approach to estimating market value?