How do you value Solar in a home appraisal?

[George Hatch]

I get that, not saying I know more about appraisals than an appraisers... just that there were 3 different methods used and it seems like the real answer is 'it depends' which is frustrating as that doesnt make sense to me.​

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I dont sell systems btw. Not really sure where that part came from unless you mean to say thats just not a part of your job. Saying so implies to me that you think I do, but who knows text doesnt really show intent as well as talking.​

I wasn't aiming at you directly, really more to consumers at large. As appraisers we are constantly being approached and challenged on our work from all different directions. .Everyone wants what they want. There's nothing wrong with people wanting what they want but our responsibility remains to call balls and strikes over the plate, independent of what anyone else wants, including our own clients.

As I say, these same issues are present to one degree or another with a bunch of "atypical" features, not just with solar. I can't operate off of costs when analyzing the contributory value of a pool or an RV garage or the professional grade PitMaster BBQ setup in the outdoor kitchen. I gotta do all those the hard way, too; by looking to see how such setups have affected value before.

I'll put it this way; I mostly wouldn't buy a property for its view amenity but that doesn't alter the point that in my day job it's important for me to take note of how most market participants do value that attribute. And likewise it's critical for me to emulate their thinking on the view amenity to the best of my ability. I don't have to be a believer - or a disbeliever - in the topic of views in order to faithfully and competently quantify its affects on the pricing. That's what we're here for.

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Which brings us back to your first comment about how frustrating it is for you that the ACME EASY BUTTON apps aren't the shortcut that that they market themselves as, and the costs don't necessarily translate into the values.

Just because we can put a monkey into a silver suit doesn't make they/them an astronaut.

As I keep saying, the definition of market value upon which these appraisals are based is intended to reflect the perspectives of the market participants in terms of what we think will be the "most probable price" that ensues. Not the highest price we can support, but the most likely to occur if we put this property in front of 10 or 50 equally motivated buyers. That's a perspective that has nothing to do with what the lenders think, what the govt is pushing for, what the lovers love or the haters hate. But what the actual decision makers - the buyers and sellers - are doing. We get to that via comparing these properties to each other, not by inputting an equation into a calculator or tallying up the costs and equating that to be their reaction.

 

[George Hatch]

I'll say one more thing. It may seem self-serving on our part but if you had asked us these questions before you committed to your project you would have been in a position to proceed in a more informed manner. If any of us were local to your area and had direct access to the data it is a simple process on our end - a process we have a lot of practice and experience with - to develop those conclusions. So an appraiser coming in and who is working to specs won't be doing a whole lot of guessing. It's a very knowable answer.

 

[MoistMitten]

The sales comparison approach required for most residential appraisals is to determine market reaction to the various features of a home. The major issue I can see with trying to determine actual market reaction to your system is it's size. Will be difficult to determine reaction without similar systems to compare

Thank you that makes more sense to me. I suppose demand will have to be determined at the time.

 

[MoistMitten]

I'll say one more thing. It may seem self-serving on our part but if you had asked us these questions before you committed to your project you would have been in a position to proceed in a more informed manner. If any of us were local to your area and had direct access to the data it is a simple process on our end - a process we have a lot of practice and experience with - to develop those conclusions. So an appraiser coming in and who is working to specs won't be doing a whole lot of guessing. It's a very knowable answer.

I do appreciate that. In this situation I would have likely made this move regardless as I personally find value in it for rental purposes. I put in 100k into a house including purchase price and now its valued at 300k without the solar. My attempt to show my understanding was from the perspective of knowing where to put value in most situations when it comes to a whole home remodel, but I also dont know where the solar will fall into the equation. For now I just enjoy not paying for electric which is enough for now.

 

[George Hatch]

Okay, so that's all the motivation it takes to justify your decision making. You don't need any more reasons than that. Which that's exactly how it goes with these other attributes we run into. In terms of our day job, the reasons WHY they do what they do is strictly subordinate the WHAT that they are doing.

 

[MoistMitten]

Found some appraiser training on this if anyone was interested.

 

[George Hatch]

I took those courses and passed the exam 35 years ago. Not to mention the point that I sometimes use that mode of analysis in some of my assignments when necessary. When I do use that mode of analysis I generally write the model up in Excel from scratch and on the fly, that's how familiar I am with the various elements of that methodology. And I don't skip the elements that these PV calculators skip because (unlike most of their users) I know what I'm doing with it.

Every appraiser licensed at the Certified General level has to understand this and several other modes of cash flow analysis; it's a core competency for some of the properties we appraise.

I don't know what it is you do for a living but I can well imagine your reaction if it's something I know nothing about but am presuming to suggest that you should learn about it. That's what you're attempting to do here.
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Your initial screengrab explains why the results of the cash flow can only indicate to the value if the discount rate (the conversion factor) is extracted from the market. Which the defaults they use those solar calculators are not doing - they start with an arbitrary rate that they picked; not one that they extracted from your local market.


The primary way we extract those rates of return from the market when appraising most property types is by finding sales that have that feature and compare them to comparables which don't.


So we STILL have to make comparisons in your local between the HAVES and HAVE NOTS. We still have to figure how this attribute plays out among the market participants in your area.

Face it. The only appraisers who think relying solely on those apps is the only way to figure out the value of a solar install in the market are appraisers who literally don't know what they're actually doing with those apps, which they're not supposed to be using apps they don't understand.

 

[Cob]

There is NO logic or correct way to get the answer you are looking for, it's a loading question. How much are my solar panels worth or how much am I going to get back when I sell. You shouldn't ecpect to come on a forum like this and get a direct answer that is logical. I live in Texas, 10-15 years ago, home owners with solar panels got money back from their local electric company, now SO many people have them, that they get back about 80% less. As appraisers, we simply don't know or can't give you a straight answer, we don't know, you won't find out until you try to sell the property, then you and your Realtor and the buyer's Realtor and buyer can pull out your calculator and do all the math you want and use all the logic that you want as to why the solar panels are or aren't worth what you or they think.

 

[Lycabull]

Not sure if this is the class I took, but the AI has a great course on this. Much more to it than most would suspect. I could be wrong, but I was thinking the person who taught the course also wrote the book.

On Demand | Residential and Commercial Valuation of Solar

www.appraisalinstitute.org

 

[Tim Hicks (Texas)]

No matter what course you take, what book you read, what sources you use, it is still only worth what the market is willing to pay for it in each individual market. I saw an article the other day saying the value of solar was 2-4% more than those without solar. I also saw several articles that said the average cost of a solar panel system was $15-17,000. I have not seen one sold for less than $40,000 in the past few years.