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Solar Panels

Discussion in 'Urgent - Help Needed' started by Robert Barnett, Aug 21, 2006.

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  1. Robert Barnett

    Robert Barnett New Member

    0
    Sep 18, 2003
    Professional Status:
    Certified General Appraiser
    State:
    California
    I am working on an appraisal of a ranchette type property, the owner recently spent $40,000 for solar panels and $10,000 for a structure(carport) to set them on, unfortunately there are no sales with solar panels. The owners stated that he has a 10 year payback, (more like 12-15). What type of adjustment would be realistic in the Sales Comparison Approach? Anyone with experience in this area? Thanks in advance. I should also add the subject is on the electric grid and has a bi-directional meter that will run backwards when the residence power use is down. The owner calims to only have a $4 per month bill right now.
     
    Last edited: Aug 21, 2006
  2. ccooper

    ccooper Junior Member

    0
    Mar 9, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Missouri
    without any market data you'll have to make a judgement call. I think it adds value but it is difficult to say how much.
     
  3. Couch Potato

    Couch Potato Elite Member

    0
    Mar 15, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    I would think adjustments would be similar to other factors that affect energy consumption such as insulation levels, high quality windows, etc. The life expectancy and maintenance costs related to the panels should also be considered.

    You say there are no sales with solar panels. Take a good look at the reasons for that fact. Are there aesthetic reasons making them undesirable as a cause for not having sales? Does the market just not value them?
     
  4. Robert Barnett

    Robert Barnett New Member

    0
    Sep 18, 2003
    Professional Status:
    Certified General Appraiser
    State:
    California
    Cost too high

    I beleive they are not common in the market is the cost is too high $50,000 for a 10 year payback. I almost feel that no considerable value is added due to the long payback and upfront cost.
     
  5. Otis Key

    Otis Key Elite Member

    0
    May 15, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    If you intended to buy that house or the one next door, would you pay any more for that property with the solar panels?
     
  6. jonathan asbury

    jonathan asbury Member

    0
    Jan 20, 2004
    Professional Status:
    Licensed Appraiser
    State:
    California
    If there is no comparable sales data ask for a copy of the power bill before and after their panels. Maybe the monthly difference x 12mo. x 5 yrs would be a good starting place for an adjustment. $4 vs $120(?) per month sounds like added value to me.Just an idea and a starting point. ie $116 x 12 x 5 = $7000 adj. ???

    jonathan
     
  7. ttaM kooC

    ttaM kooC Junior Member

    0
    Apr 15, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    Excellent point. There may be many reasons why there are no (or very few) homes in the area with solar panels. Occam's razor would suggest that the most likely reason is that nobody wants or values them.

    One of the mental exercises I use in cases like this is to postulate that the percent of cost returned as market value for an amenity is roughly equal to the percent of homes that have the amenity. Years ago when I specialized in the area, I noted that almost all the spec homes in Beverly Hills were being built with pools, so one might speculate that the pools returned close to 100% of their cost in the market. Other (lower income) cities in L.A. County had maybe 2% of the homes with pools; one might speculate that they return almost no value in that market.

    Another approach is to ask, "If this home did not have solar panels, would the typical buyer of this home be likely to add them?" We can see how this mental approach works for other amenities, such as a remodeled kitchen in a 1950's tract; in my neighborhood, the answer would be a resounding "yes", so if my home had a remodeled kitchen I would expect it to return significant value in the market because the typical buyer would remodel the kitchen if it had not already been done.

    Just a couple of ways to think about it from different angles.
     
  8. Steve Owen

    Steve Owen Elite Member

    0
    Jan 16, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Missouri
    I would do this and then discount the savings at reasonbly expected long-term rate back to present value. What I suspect that you may find is that the savings over the ten year pay back period is roughly equal to the up front cost. Therefore, the panels might need a logevity much greater than the payback period in order to add any value now. Of course, the further out you have to go, the greater the risk because no one can predict the future.

    I disagree with those who said that just because there are no sales of houses with panels they have no value (and other similar statements). Here's one way that might not be true. Suppose you look around and find several houses in that market that have solar panels, but none that have sold. Would that mean they are not marketable, or would it more likely mean that people who install them then value them so highly that they will not sell their house?

    This is a difficult problem to solve without market data of sold homes having the same attribute. Discount cash flow analysis is one place to start....
     
  9. Dee Dee

    Dee Dee Elite Member

    1
    Jan 16, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Colorado
  10. Restrain

    Restrain Elite Member

    7
    Jan 22, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Florida
    Having done several "energy efficient homes", the discounting of the energy costs savings is the best way for a unique item. Set up a DCF, showing probable utility cost increases (probably get from state or utility co), their savings, etc.
     
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