Follow up on the Solar discussion from an Installer

[CANative]

Man, you need to calm down before you blow an artery.

 

[prasercat]

This conversation will soon change

Firstly, a number of companies are now offering a simple lease of the equipment (no up-front cost, no maintenance). The only thing one needs to consider is the lease cost in comparison to one's dollar savings for a particular area (which is still an undertaking, but makes the entire solution and decision less problematic). I understand that when the home is sold the new owner can choose to retain the system, replace it or have it removed as the solar installation is the property of the lessor and they will take it.

Secondly, we all know its coming, well most of us. In perhaps as little as 1 year or 2 years we will be seeing fuel prices skyrocketing as many countries now, including China and India and the US are all in an up-cycle. As liquid and gas petroleum skyrockets, so will the cost of coal, although perhaps somewhat slower. Coal is our primary electricity generator, in most of the world. Gas electric plants may be converted to coal to reduce costs. A new generation of coal home furnaces could even make a reappearance (gasp!)

However, out of this energy frenzy, the solar equation will no longer be looked at in present terms but rather as a hedge against a very uncertain energy pricing future which will be scaring the crap out of everyone.

Just as the stock market trades on the rumor and future events anticipated and even uncertainty, when faced with the next wave of skyrocketing fuel prices, there will be for the first time, a massive exodus to solar and other alternative energy simply due to UNCERTAINTY- regardless of whether it makes sense financially or not, since people at this time will finally have lost their trust in future energy prices.

Appraisers will be confronting this issue soon.

What is the VALUE given a particular property by the market to "HEDGE AGAINST UNCERTAINTY"! That may be the primary component of the value, although a clear financial incentive in terms of then present day savings shouldn't be far behind, if at all. We will need to look at pair sales, certainly.

The one thing that disturbs me about the Solar Equation is that it is just like any other piece of technology in our home. While homeowners as of the effective date may value the solar panels in a particular market in a particular way, it would only take a significant advancement or breakthrough in efficiency or appeal, etc., to wipe out that value the next day. So it will be a very dynamic and changing problem to solve. Maybe homeowner's insurance and even lenders will require the purchase of a rider to insure against obsolescence of the solar installation due to such advances to replace the system in such event to preserve its contributory value.

We will likely be getting our panels and most other alternative energy from China, since they can invest in technology without there being a financial incentive that is immediate. They are forward thinking and they plan for the future. Capitalism plans for the present - it is our weakness and it should be recognized. Governments should take this role and look to the greater good, but making unpopular or non-financial investments are not popular here. We have made some investments, but they pale in comparison.

 

[DMZwerg]

Please y’all … given that all this information is correct, why shouldn’t the appraisal come out higher than a home without solar?

Well, since the subject is compared to other properties and obviously 100% of properties in California have solar panels (based on what you stated this must be so as it saves them so much money there) then there is no need to adjust as they all have them. :icon_mrgreen:

But what if they don't? What if 100% of homes in CA don't have them?
Well, then the adjustment, positive or NEGATIVE, would be based on local market preference.

Just so you know, in some areas pools tend to be a positive adjustment, but up where I live they tend to be a NEGATIVE adjustment because they are only really useful 3-6 months out of the year (it is hard to swim in ice and most people do not use pools if the weather is under 70 degrees). Huge initial investment and a continual cost as well.
Like I stated on another thread, solar panels are EXTREMELY rare around here for similar reasons.


I would like to hear info actual data on numbers and percentage of homes & businesses in CA that do actually have solar panels. I find statistics like that interesting.

 

[CANative]

Just to make the OP feel a little better I would say this: While I probably wouldn't make an upward adjustment ("giving value") to a home with a solar system I likely would "reconcile" the market value indicators to the higher end of the range. This means that my opinion of value for a property with the system would be more than a property without the system.

 

[DMZwerg]

The biggest reason not everyone has solar is because there is a HUGE mis-perception on how it works and how it can save.

But that is EXACTLY what we appraise ... market reaction.
If the typical buyer does not believe it to be worth it he will not pay more for the feature and we appraise accordingly.

Even here with Y'all who are experts in housing and deal with it daily, some thought wind would blow it off the roof, others that hail would hurt it. People don't understand it and that is the biggest roadblock.

Appraisers are experts on the housing MARKETS, not construction or even all the newest technologies. That being said there are courses on green technologies and I would bet that some of the posters you ignored have taken them and know exactly what they are talking about in their local markets. Look at Metro's analysis.

There is an up-front cost issue, but when it is incorporated in the loan for the house that is negated. There are also 0 down loans that are available and other loan programs. In this economy it is difficult to get credit but the programs are there.

Actually, it makes all the difference because people are moving jobs and relocating more than ever therefore an item with zero or near zero return on investment at time of sale has to make up the difference in cost or utility during the time of ownership. If this website is correct and average home ownership is 8-12 years then solar needs to "pay for itself" in well less than 8 years to be economically feasible if Metro is correct and there is no appreciable reaction to existing solar panels.

Hope that helps you understand a bit better.

 

[Elliott]

Why would the income approach (capitalization no less) be dusted off for a single adjustment and considered the proper method?

I don't think any rational appraiser who was shown some good paired sales wouldn't come around to making an appropriate
adjustment, but appraisers should follow the market's reaction.

The data from the 80's and last energy tax credits program (solar, mass) was mostly a bust beyond the initial tax credits.
Lots of costs and design that resulted in maintenance cost that was eventually abandoned as non-economic.

 

[DMZwerg]

Here is a satellite photo of Shea high-performance homes at Scripps Highland that is mentioned in the report.
<snipped photo>
Notice all the PV panels on the homes in a block. I could do the exercise of examining the resale of these homes but that is not my job to prove what difference it makes. If there is a difference, maybe Eric can provide that information.

I note the one block had 16 houses.
Of the 16 houses 5 had solar panels.
I noticed two different roof "styles", 10 of one and 6 of the other, and the two may have different market preferences (or maybe not).
All the solar panels were on the 6 of the other style.

So, do you wait for #6 to sell to confirm a difference or do you compare one with solar panels to one of the other 10?

:icon_mrgreen:

So, to the OP: Appraisers have to juggle questions like that all the time.

 

[Spartacus]

Thank you all very much for your input on both sides of things. I came here to learn not to argue so I appreciate your honesty and all the detailed information.

Randolph,

I can't say that I see your point when you say they are massaging the Data. When they had a weak argument, they said they had a weak argument. When they were using a hypothesis, they said they were using a hypothesis. Science and studies are about using the data to draw conclusions then tell how strong those conclusions are or if they are wrong.

The one indisputable fact is that the solar homes sold 20% faster and for 17% more than comparable homes in the same neighborhood. This tells me that people want solar when it is available and are willing to pay more for it.

By the way, thanks for posting that pic. What an terrible neighborhood. No yard, and you could refill your neighbors coffee in the morning just by reaching out your own window.

 

[Spartacus]

Thanks for your comment Scott. Certainly rational. I agree that the market is the ultimate decider. However with less than one percent of the homes in California having solar, it is obviously difficult. We as installers would sell more if we had appraisals saying homes would definitely be worth more ... you as appraisers say we will do that if we see more data ... so it's a catch 22.

They won't do it unless you confirm the info is right but you won't confirm the info is right until they do it.

I have a feeling that the folks who go solar now and use the incentives available are really gonna make out. Electricity is going Nova and people here in Cali are going to have to do something or they will be paying $300 or $400 monthly for electricity soon. Once the incentives are gone who know's if they will refresh them.

 

[Spartacus]

Thanks for your responses Prasercat, I agree.