Solar Value

[Terrel L. Shields]

So I am just confused as to how the appraiser comes up with these numbers and when I spoke to him he refused to explain any of it.

That's because he didn't know the answer.

An adjustment is warranted when savings is involved, be it solar or whatever. Passive Solar in the 1970s was a huge design issue and it cost an extra 10K or so to build the right design. Usually that was a rather contemporary looking building, with a super insulation, perhaps heat sinks in the form of black barrels in a sun room, throbe walls etc. All that cost money and many appraisers mistook it for "quality" and did not (could not?) differentiate these energy saving features from the "quality" issue. I fear solar panels suffer the same fate. But any ordinary knucklehead knows that if you are saving $200 a month and that is double the payment on the solar system, that $1200 a year saved needs to be capitalized into an adjustment... But I suppose we have a few knuckleheads here that are...well, "special" shall we say?

 

[Mikeyvee17]

the Income Approach is the most accurate approach

I disagree.
The income approach takes into account three things residential folks regularly never address
1. competent management.
2. anticipated future benefit.
3. risk

Competent management would study, have some knowledge and weight the facts that out west, and in Hawaii and other sunshine favorable areas, net metering is being disavowed, and higher rates are being put in place to remove the "savings" to individual homeowners. More and more commercial endeavors are coming on line for both wind and solar production.

The anticipated future benefit will last only as long as there is an unfulfilled government mandate for a percentage of renewable energy. Believing the utility will not seek to fulfill that mandate through it's own equipment in the near future is a fools folly.

Considering the risk posed by these two principals within the Income Approach as heightened risk,

that impacts the current income (discounts) in the future should demonstrate to the appraiser and everyone else,

that what is being "saved" today is a fad that will not last the life of the loan, or even the half life of the loan to warrant paying a price premium above what others without solar are receiving.

.
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Why pay a premium for other improvements if they are not expected to last forever? The system can't have it both ways. You can't give value to one thing and not another just because the appraiser "feels like it"

what is the value of an in-ground swimming pool that is 10 years old? That pool doesn't save you money like a 7.5 KwP solar system - if value can be assigned to a pool it can be assigned to a solar system.

 

[Meandering]

Maybe this explains it better.

 

[Meandering]

Maybe this explains it better.

View attachment 27121

Why pay a premium for other improvements if they are not expected to last forever? The system can't have it both ways. You can't give value to one thing and not another just because the appraiser "feels like it"

what is the value of an in-ground swimming pool that is 10 years old? That pool doesn't save you money like a 7.5 KwP solar system - if value can be assigned to a pool it can be assigned to a solar system.

No money is saved by bumping the price.

it is not a "system" we don't assign value,
we read the market, analyze and report the market, based on knowledgeable participants acting in their own best interests without incentives.

The current solar program is an incentive, which,

we all already lived through in the 1970s, so we also have historic data to back up,

that those who had 1970's era solar panels removed them and wait for this,

had to pay special disposal fees to get rid of them,

and never replaced them.

And while it's true the technology is now better than it was in the 1970s,
it's also true that,
technology will be better next year, the year after and just about every year for the next 15 years,
as solar technology is not yet settled science.

So because you bought a 2nd generation color TV and it still works,
does not mean anyone will pay you anything for it today.

Same story.

.

 

[Mikeyvee17]

That's because he didn't know the answer.

An adjustment is warranted when savings is involved, be it solar or whatever. Passive Solar in the 1970s was a huge design issue and it cost an extra 10K or so to build the right design. Usually that was a rather contemporary looking building, with a super insulation, perhaps heat sinks in the form of black barrels in a sun room, throbe walls etc. All that cost money and many appraisers mistook it for "quality" and did not (could not?) differentiate these energy saving features from the "quality" issue. I fear solar panels suffer the same fate. But any ordinary knucklehead knows that if you are saving $200 a month and that is double the payment on the solar system, that $1200 a year saved needs to be capitalized into an adjustment... But I suppose we have a few knuckleheads here that are...well, "special" shall we say?

You seem to be the only person that sees the value of this. I save myself about $75-100 per month on electric AND I switched to an electric hot water heater so if we are being fair and accurate, I need to calculate how many gallons of oil my old 40 gallon water heater was using that now since I have solar, no longer need to pay for.

 

[Terrel L. Shields]

The income approach is the only approach to value that relies upon the same element of comparison as the sales price...money. It is why you buy instead of rent. It is why you worry about "cost" and won't spend more than it costs to build anew. Ultimately all approaches to value are "income" based because all rely upon money. Dinero. Yuan. Real. Euro, Big Bucks... Show me the money.

 

[Mikeyvee17]

Short answer,
You spent money to save yourself money.
Why would someone over pay because you saved yourself money?
They won't save anything by overpaying, so it is a wash, because they get no "enjoyment" from solar panels.

Pools, and patios provide personal enjoyment and utility which can add to market value.

No one gathers in front of the solar panels for a family photo.

While you might gain some value to your ego for spending that money to put them on your roof, that does not translate to market value.

Do not post your report here.

Just read the definition of market value that is pre-printed in it.

.

Really? I see why I don't like my appraiser...

I didn't spend money for my "ego" I spent money to save myself money. And if I sell my home, the next home owner will not have an electric bill so how is that not passing on a benefit?

What are you doing to save yourself money? What are you doing to save the environment?

Should I post the numbers of how many pounds of CO2 I am not spewing into the atmosphere? Will that help you give me a "fair" value?

You may disagree with solar, and that's fine but don't mock me and say "no one will hang out in front of my solar panels"

Do some research, don't be bias for once - it will do you good.


It's because of people like you that people like me get screwed and get turned down for refinance programs because you can't see value in something so you apprise my home fictitiously low. At the end of the day, you win, just like my appraiser, getting paid to NOT do his job. And the banks win because they don't have to lower my interest rate.

Funny how it all works right, the tax payer bails out this industry and you are still sticking it to us!

 

[JTip]

I personally would pass on a house with solar and go with the one offering a good geothermal system.

But any ordinary knucklehead knows that if you are saving $200 a month and that is double the payment on the solar system, that $1200 a year saved needs to be capitalized into an adjustment...

You just threw in a BOATLOAD of money so you can enjoy a small monthly bill. You will be in the hole for years....

 

[Mike Kennedy]

May I ask where you are getting your information about the systems only lasting half the life of the loan? My panels are from SunPower, if any label drops below 80% efficiency they are to be replaced. This is for 25 years,my loan is for 15. I plan on using my solar credit rebate from my utility company to pay down the loan even faster. So if I pay off the loan in 7 years. I have full benefit of the system for 18 years before the warranty expires.

Is the solar loan 100% assumable by a potential buyer?

p.s. the last two homes which sold within the past 5 years with "best thing since sliced bread solar" along the Hudson River here in the Lower Hudson Valley region of NY (hour and half NW from NYC) (both Contemporary Style w/5500sf and 8575sf above grade living area) built in the early 1990s with then "new" solar. Both sales contract prices (revised downward - I appraised them), and purchase loans, were contingent upon removing the antiquated, depreciated equipment resulting in $0. incremental value.

Both listing agents reported atypical extended exposure time (days on market prior to sale) with an atypical volume of serious buyers, many walk-thru "prospects" simply wanted to see what the hub bub about solar AND what recent improvements had been made to the homes to use as a potential basis for listing their own homes. Impact: negative, both homes required substantial, and multiple reductions in original List Prices before they sold. Additionally, keeping tabs on the "solar" influence as an Appraiser, review of Listing Activity includes monthly review of new listings to ascertain the prevalence of solar, and it's impact on marketability. Characteristically, to date, EVERY single house to come on the market (in my region), experiences similar reductions in Original Listing price due to potential buyer reaction and the unsupported overly-optimistic aspirations of both potential sellers and listing agents who price them "because that is what the owner wanted to list at, if I didn't I would not have gotten the listing". Hardly justification for reliance upon either List or Contract Prices. As market nuances reflect the actions of typical LOCAL buyers, results in other markets may be different.

Of further note: regularly appraising in the neighborhoods of both homes, and able to view both from the road (as well as "fly-over" google maps) neither new owner replaced the removed systems with new solar systems. (further confirmed by contact with the selling agents who use recent buyers as a referral base for new ones)

 

[Randolph Kinney]

Between 2012 and 2013, 28 million Americans 15 and older moved — that’s 11 percent of the population in that age group. But when you take a closer look at who they were, you see there’s a lot more to it than age. The wealthiest individuals are the most likely to stay put: 7 percent of Americans with an annual income of $100,000 or more moved, compared to 13 percent of those earning $5,000 or less.

http://fivethirtyeight.com/datalab/how-many-times-the-average-person-moves/

The solar PV system payback time period may be longer than the time you will own the home before selling it and moving. The income approach is a static snapshot with the assumption that all things remain the same over the time period of the life of the system. How realistic is that?

The estimated yearly electric generation is ~8600 KwH. All of the components are warrantied for $25 years. I have 15 years on my solar loan from New York State, the cost is $108 per month

I have spent close to $60k on improvements which include the solar PV system.

So you have prepaid a portion of your electric bill for the next 15 years. If you move before your savings accumulate to equal the money spent on the system, you lose.

I am not saying the solar PV system has no value however, I am saying the income approach is not going to reliably reflect what the contribution to market value of your home is.