Solar impact

[The Bob]

I've only had 2. One was a Platinum Leeds Cert. house with a prior sale right after it was renovated to Leeds standard. Actually has a LEEDs plaque on the front. So that was fairly easy. Another was a re-fi and I couldn't find any impact one way or the other.

IMO, solar is similar to a pool. Limited utility and increased maintenance and liability. Another thing I would point out is that no Realtor I've asked has said the buyers listed solar and one of their "wants".

 

[The Bob]

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?

Tell you what. Send in a report that uses only the cost approach or DCF to value any feature you want. After they stop laughing, come here and tell us how that went.

 

[shrubberyvaluation]

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.

Solar took off because of government subsidies. AFAIK people buying a house with existing solar panels isn't getting tax benefits.

 

[shrubberyvaluation]

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.

If the subject has a prior sale with panels, that can be some indication also, by comparing the subject's prior sale to comps in the same time period without solar panels.

 

[Gobears81]

I would expand my area of consideration and consider any and all property types anywhere.

In the quest to derive support solely from sales data, we are thus violating the market area delineation AND consideration of sales that are not comparable. Not to mention my earlier point that not all solar systems are created equal. The OP posted about a light industrial property in Northern IL. The utility burden of this type of property, where they may have motion-sensing lights that could be off most of the time and the temperature at a less "comfortable" level than a hotel or an office, so any extracted adjustment wouldn't hold weight. Or if one has to go to Wisconsin to find a light industrial sale with solar, the utility rates are different, so it may be more desirable in one location vs another.

There are accepted methods of deriving adjustments that are not strictly based on extraction from other sales.

 

[Dublin ohio]

Something else to consider is local and State incentives for commercial applications. I read where the State offers tax breaks and if Com Ed is your supplier they offer rebates. That could have changed but it is something to consider

 

[alebrewer]

Tell you what. Send in a report that uses only the cost approach or DCF to value any feature you want. After they stop laughing, come here and tell us how that went.

That really didn't answer the question, but thanks for playing.

 

[alebrewer]

Solar took off because of government subsidies.

which translates into (at least theoretically) savings. They didn't take off because folks think they look good. I get it, though. Don't believe a random poster that demand for solar is directly related to perceived savings. So instead, I posed the question to Formulabot. It returned 4 reasons - all of which, BTW, are related to perceived savings...

1. Correlation Factors:​

   1. Cost Savings:
      • One of the primary motivations for homeowners and businesses to install solar panels is the potential for cost savings on electricity bills. The greater the expected monthly savings, the more likely individuals are to consider solar panel installation.
   2. Return on Investment (ROI):
      • If the expected savings from solar energy significantly outweigh the initial investment and maintenance costs, demand for solar panels is likely to increase. Consumers are generally more inclined to invest in solar technology when they see a clear financial benefit.
   3. Incentives and Rebates:
      • Government incentives, tax credits, and rebates can enhance the expected savings, making solar panels more attractive. As these incentives increase, demand may rise correspondingly.
   4. Energy Prices:
      • Fluctuations in energy prices can impact the expected savings from solar panels. If utility rates are high or rising, the potential savings from solar energy become more appealing, potentially increasing demand

 

[TerryRohrer]

In the quest to derive support solely from sales data, we are thus violating the market area delineation AND consideration of sales that are not comparable. Not to mention my earlier point that not all solar systems are created equal. The OP posted about a light industrial property in Northern IL. The utility burden of this type of property, where they may have motion-sensing lights that could be off most of the time and the temperature at a less "comfortable" level than a hotel or an office, so any extracted adjustment wouldn't hold weight. Or if one has to go to Wisconsin to find a light industrial sale with solar, the utility rates are different, so it may be more desirable in one location vs another.

There are accepted methods of deriving adjustments that are not strictly based on extraction from other sales.

You will not find a single post of mine that suggests anyone should embark on a quest to support any adjustment solely from sales data. That is simply a red herring that implies a willingness to guess when data is not readily available. The notion that all support must necessarily come from the subject market area, from data strictly comparable to the subject, is unfounded. It is unlikely, if that were remotely accepted by appraisers, lenders, or investors, that such services as RealtyRates, CoStar, LoopNet, etc, would exist. It is almost certain that consideration of data not directly comparable to a subject is a more commonly used technique than DCF. But, I'm not going to argue theory endlessly. I understand the theory. And I'm not one who believes that telling a theoretical tale that is a reasonable road to credibility, but will agree, as a last resort, it can sometimes fly. But guessing is guessing regardless of what cloth it is spun from.

It is also a red herring to suggest that I am proposing ignoring all aspects of solar that might impact its value such as, a 2015 Federal government study found that only about 30% of commercial solar installations will likely break even. Couple that with reports that fewer than 3% of commercial properties have solar, and you have a pretty good indication that market participants are not flocking to solar for reasons that that motivate their actions. Couple those with the commonly known fact that the northern regions of the US are typically areas where solar installations are less efficient. Maybe the fact that Illinois is rated by EcoWatch as the fifth "best" state for solar incentives has some bearing on their installation. But that doesn't typically transfer to subsequent owners. But, those are easily ignored when you just consider local information, and certainly, exempting most or all real world data in favor of theories will reduce analysis and reporting times.

 

[Gobears81]

The notion that all support must necessarily come from the subject market area, from data strictly comparable to the subject, is unfounded. It is unlikely, if that were remotely accepted by appraisers, lenders, or investors, that such services as RealtyRates, CoStar, LoopNet, etc, would exist.

I suspect that you missed part of my last post because I pointed out why exactly support from this market (and the same property type) would be needed. I won't repeat myself, but how would you propose extracting a contributory value for a PV system that has differing characteristics than the subject's system and in a location with different rates? Unless you have sufficient data regarding the savings of the utilities and the life of the PV system for the sale, there would be too many variables to simply apply the same extracted amount to the subject property.

It is also a red herring to suggest that I am proposing ignoring all aspects of solar that might impact its value such as, a 2015 Federal government study found that only about 30% of commercial solar installations will likely break even. Couple that with reports that fewer than 3% of commercial properties have solar, and you have a pretty good indication that market participants are not flocking to solar for reasons that that motivate their actions. Couple those with the commonly known fact that the northern regions of the US are typically areas where solar installations are less efficient. Maybe the fact that Illinois is rated by EcoWatch as the fifth "best" state for solar incentives has some bearing on their installation. But that doesn't typically transfer to subsequent owners. But, those are easily ignored when you just consider local information, and certainly, exempting most or all real world data in favor of theories will reduce analysis and reporting times.

What this seems to boil down to is skepticism of solar. Many commercial owners that are installing these systems are motivated by the utility savings and payback, rather than environmental motivations. The owners of the properties with solar that I've appraised in the past are happy with the savings. I'm sure that skepticism is the reason that more owners haven't installed solar, but the owners can provide utility bills to prospective purchasers to support the savings.