Homeowner Owned Solar System Adjustment

[Valueseeker]

Hello again,

I didn’t know until i got to the inspection but This home has a solar system that cost 50k for the whole system(he showed the receipt for the system- yes he does get many rebates for and residual rebates for a few years ... just anecdotal info here)

He provided two years of statements of how much the solar generated. Basically he made 2000 last year (about 15Kw last year total).

Assuming there is no match pair would it be so unreasonable to adjust on the conservative side of things?

Let’s say (hypothetical only because I don’t have solid data on this yet) that the life span of a solar system is 15 years. Would it be so unreasonable to adjust for the remaining life of the panels and how much they would generate? An income dollar for dollar adjustment?

13 years left at 2000 a year. So around 25k. Crazy? They are not really unsightly as they are on the backside of the second story roof (colonial). This is assuming the kw rate is the same (even though we know this always increases over the year so this is a very conservative adjustment in my opinion)

I saw a post referencing the pvsolar site but I think basing the adjustment off what he actually makes is better. It’s less than a depreciated cost adjustment. Thought?

I really appreciate it everyone.

 

[Deleted member 134708]

I'll let others chime in on how to do income approach on it.

And I know you don't have any market extracted data so my post pretty useless.

2 out of the 10 houses I do has owned solar. $400k-$800k market participants pay $5-$10k more. I've never seen them pay more than $10k personally.

This is in sunny CA and through 1 reporters eyes.

 

[Tru Red]

All I know is here in California almost every appraiser I know, including myself, uses anywhere from $5,000 to a max of $10,000 for an owned system. Homeowners always say they paid anywhere from $20,000 to $50,000.

But......it's like a pool. They might have paid $50,000 but I have to use depreciated costs (typically 50%) and then at least another 50% accounting for the fact that many people don't want the cost of maintenance and have small children they don't want around a pool.
There are maintenance costs and other costs involved with solar such as the True-up cost.

Solar.........simply does not make economic sense. Yet. At least in most parts of California.

The only real person making money on solar is the sales person.

 

[JTip]

I have an outdoor furnace. I save $750 a year vs heating with oil.

Zero adjustment.

 

[The Nightfly]

I would interview agents of homes that have sold that have a comparable system, even if the houses aren't comparable. Get a feel if they add any measurable value in your area. Lacking any solid statistical data, you could opt for a qualitative adjustment in the reconciliation instead of a quantitative one in the grid, if you believe it contributes to value.

In MY area, they are essentially worthless on the market. Nobody (or very few) are willing to pay extra for a home with them. .

 

[Valueseeker]

I can understand where you’re both coming from. I just can’t see why it would not be reasonable to adjust based on what the system generates. They will be able to generate that in the future. Even if electric rates stay the same, they make 2000 a year on something they would have had to pay for. I don’t see this as a pool scenario since the relation has a direct effect to the homeowners pocket.

 

[Valueseeker]

My personal biases are taking over I guess because if I had the choice to live in one home or the same home with solar that makes 2k a year in electricity, I’d choose the 2k. I wouldn’t pay it’s full potential value for it but I’d pay something.

So if it made 25k over 15 years, I can see not paying that full amount but somewhere between 0 and that could be sensible. What that number is? There is my problem

This is a 400-600k price point home too

 

[Randolph Kinney]

Just a thought, paying for a solar panel is prepaying your electric bill for years in advance. Things change over time. What will the buyer pay depends on how long the payback period is. The longer time it takes to recoup the investment, the less it is worth.

 

[Carnivore]

One of the things often mentioned is the sell back of excess power your system generates. I see where over time this would be less valuable as more people enter into the Solar power selling back scheme. One thing they never talk about is Just who is going to pay for the Electrical power grid maintenance, upkeep and expansion.

Seems like you would have to capitalize out this improvement . The link below give you and idea of what you have to do.

https://us.sunpower.com/sites/sunpo...ate-residential-rooftop-solar-electric-pv.pdf

This was an interesting statement.

"Recent studies show that a solar system increases the property value by a substantial amount, often recovering 100% of the original cost."

If that was true, then throw in the supposed savings in your electric bill and it all looks positive. I have a problem with this and that is Solar Panels have to be replaced due to wear n tear etc also there is bound to be some periodic maintenance. Also some unexpected maintenance/repairs.

Oh well I just don't think we are even close to this being a common sight in the subdivision.

 

[Tru Red]

I can understand where you’re both coming from. I just can’t see why it would not be reasonable to adjust based on what the system generates. They will be able to generate that in the future. Even if electric rates stay the same, they make 2000 a year on something they would have had to pay for. I don’t see this as a pool scenario since the relation has a direct effect to the homeowners pocket.

I was using the pool only as a way to show how a simple depreciation formula might work.

Another thing I have found is if the value attributed to a home solar system in an appraisal report is over $10,000 to $15,000....underwriters and other reviewers seem to come unglued at the seams. Short of using my degree in economics and providing some very fancy mathematics in the report....I'll stick with what I'm currently doing.