How do you value Solar in a home appraisal?

[Joe Flacco]

There was a big push by an appraiser that is affiliated with LEED to add value for solar panels based on energy generation or energy savings. But at the end of the day, the sale prices have to show people are willing to pay extra for the feature, and at least in my area, for the most part, they do not. But that could be just because of the cost of homes in the market I cover. The depreciated cost of solar panels on a $1 million-$2 million house might be insignificant. But for homes that are $300k maybe it is more significant and any premium paid for it might be more obvious in the sales data. If there was demand for solar panels then you would be seeing more of it in new construction. Solar panel adoption is increasing but that is mainly due to California mandating solar panels for new construction.

 

[George Hatch]

What occurs to me is that the market psychology on this that can (perhaps) actually change in a relatively short period of time. The calculator models predict how market participants *should* act if operating solely off the dollars and cents, but with single family residences in particular the market psychology is a significant factor.

My point being that whatever conclusions an appraiser comes to in a given neighborhood this year, it could end up being different next year. As I say, some opinions are being affected by the individual's politics. That much is also apparent among some of the appraisers, including some of those who are studying the analyses and advocating for/against the adoption of these technologies. It's very important for professional appraisers working on an assignment to let the data speak for itself.

I wouldn't pay extra for a view but it's very important for me to recognize that a lot of people do pay extra for a view, and to do the work it takes to ascertain how much extra they are paying.

 

[Joe Flacco]

Also important to recognize that the people that do pay for whatever don't pay a dollar more than they have to.

 

[Mark K]

I did not read every post. If this was already addressed, sorry.

Does a calculated savings of energy cost have to be discounted back to a NPV for an adjustment?

I think it should based on a reasonable life span for the panels and a fairly high discount rate.

160 days of sunshine a year in Michigan.

Let me liquidate my nvidia and get on this guaranteed not to lose investment opportunity.

160 days of sunshine in MI? I'm skeptical. I lived there for 5 years (SW MI, Kalamazoo) and there were many weeks at a time where you didn't see the sun in the winter. Summer is about 3 months long and it wasn't sunny every day by any stretch of the imagination.

I'd hang on to NVDA, I am even though I'm up 800% in three years.

 

[Carnivore]

In NC, There are other considerations to factor in the value of PV Panels.

 

[MoistMitten]

My advice is to basically ignore the various calculator programs because in real life the contributory value of a solar install varies by location, and by pricing tier. The latter meaning the same install in the same local can have different contributory value depending on the different pricing tiers in which they're found.

The variance for locale isn't minor or trivial, either. Solar installs with the same construction costs are worth more in some local markets and less in others. The only way to reliably value them is to find other properties with an install and check their sale prices against other properties like them which lack the install.

You're not looking for a property that's directly comparable to your property. You're looking for a donor that can be used to identify an adjustment factor for the install, which you can then import for use with the local sales which - aside for lacking solar - really are otherwise among the most similar to your property.

As an example, if your home is 3000sf but you can find an 1800sf home with similar install located across town, that property isn't directly comparable to your property as such. But if you can find other 1800 sf homes in that other neighborhood you can compare their pricing to the w/solar property's sale price to see what difference the solar added to that sale price. Let's say that other property demonstrates a $20,000 premium for the solar, you can then import that $20k adjustment factor for use with your subject's local sales.

Obviously this process works better when you can find several sales of homes w/solar so you can see what the trends are.

The other thing that's tricky about solar is -as you mentioned up front - they don't all have the same capacity and won't all return the same levels of savings. So that makes it helpful to call a couple of the brokers in those transactions to see what the capacity is. Or, you can manually count solar panels off of the overhead imagery and get an idea of similar in size or larger than or smaller than when compared to your install.

I realize that's a lot to take in but it just underscores the difficulties appraisers run into when they encounter features which are atypical. "I feel like it should be worth $xxxxx" isn't what you ever want to hear an appraiser say.

Would you import the cost based on a per KW scale? Seems like that would make the most sense, but not sure if theres also a curve.

Appraisers regularly talk to agents to discover buyer and seller motivations. Not sure where you get the idea that agents are "normally" way off.

Based on my experience talking with them on ARVs... I normally undershoot for safety, they overshoot. Normally off by 50-60k

Something here doesn't wash. Op says they "save" $6000 per year. The average home in Michigan uses 800-900Kwh/mo. Using the highest rate in Michigan for a home using 1000Kwh/mo which is 25 cents per KWH. That would mean that the OP is using at least 2000Kwh/mo. Using the average rate of 19 cents per Kwh equals about 2600Kwh/mo. From what I have read. Michigan caps residential installations at 20Kw or the amount you actually use which ever is less. So either the OP has a very high usage for an 1860 sf home or something is amiss.

The math is based on gross output of the system. Its 16.8KW/h There output amount per year assuming average sun is 17,209KWh/year making it $4302/year in offset of actual. There are losses that I didnt take into account, but $4,302 is actual not the estimation of 6000. The 6000 number is without system losses based on the numbers. Sorry for the confusion.

You do not get paid out at 0.25/KWh excess is NET metered with any excess paid out at 0.09/KWh at the end of the year.

Again you need to consider full time EV charging being included AND heating and cooling is all electric. System size was hard to get approved as it is pretty large.

 

[Joe Flacco]

Would you import the cost based on a per KW scale? Seems like that would make the most sense, but not sure if theres also a curve.

Based on my experience talking with them on ARVs... I normally undershoot for safety, they overshoot. Normally off by 50-60k


The math is based on gross output of the system. Its 16.8KW/h There output amount per year assuming average sun is 17,209KWh/year making it $4302/year in offset of actual. There are losses that I didnt take into account, but $4,302 is actual not the estimation of 6000. The 6000 number is without system losses based on the numbers. Sorry for the confusion.

You do not get paid out at 0.25/KWh excess is NET metered with any excess paid out at 0.09/KWh at the end of the year.

Again you need to consider full time EV charging being included AND heating and cooling is all electric. System size was hard to get approved as it is pretty large.

Just list it for what you think it is worth. The buyers will agree with you, or they won't and they will let you know what they think it is worth.

 

[MoistMitten]

Just list it for what you think it is worth. The buyers will agree with you, or they won't and they will let you know what they think it is worth.

Of course thats an option, but I want to know how to properly value it. I know its at least 2x what I have into it, but realistically it seems like it should be more.

Im going to do some footwork to find a few local appraisals that had solar to find how they valued it. I found 2 past listings in the last 12 months.

 

[Artemis Fowl]

Again...How much value is your property tax assessor giving it?

 

[Joe Flacco]

Of course thats an option, but I want to know how to properly value it. I know its at least 2x what I have into it, but realistically it seems like it should be more.

Im going to do some footwork to find a few local appraisals that had solar to find how they valued it. I found 2 past listings in the last 12 months.

Very unlikely that someone is going to pay 2x what it cost you to install it.

I am in DC area, EVs are very common here, and people have money to install solar if they want. Still not a lot of people install solar.