How do you value Solar in a home appraisal?

[MoistMitten]

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

They dont provide a value on a property that has been fixed up without you selling the property again. I have done a cashout refi before the solar was on it for a value of 300k. Assessed value is 70k. As you can see that doesnt exactly yield anything note worthy. Also Michigan is exempt from paying additional tax on a system so it shouldnt be going up at all from the additional value added.

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.

It was 12k for a 16.8KW system... That is very likely the case in this scenario. When you DIY everything is at cost. If I was to use stats the average sized system is 7.2KW and average increase is 4% of home value. So based on the system size reducing down to a price per KW the system would be valued at 2.33x what 4% of the home value is. So that would be just under 28k of value.

Of course Im not sure what the 4% is based on so I assume its a rule of thumb. Which is why I was here to get the specific way to value them.

 

[MoistMitten]

Heres another method I just found... That puts the value at around $50-60k depending on the year and how they validate the 'amount' in regards to net metering.

 

[Joe Flacco]

It was 12k for a 16.8KW system... That is very likely the case in this scenario. When you DIY everything is at cost. If I was to use stats the average sized system is 7.2KW and average increase is 4% of home value. So based on the system size reducing down to a price per KW the system would be valued at 2.33x what 4% of the home value is. So that would be just under 28k of value.

Of course Im not sure what the 4% is based on so I assume its a rule of thumb. Which is why I was here to get the specific way to value them.

I think you are thinking too much into it and looking for too much precision.

Just list it for $328k if that is what you think it is worth. Maybe someone pays extra because of the solar panels or maybe someone will pay extra because they like the shrubs in your yard.

 

[George Hatch]

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.

The models I've seen so far don't account for all the variables that go into the analysis, and most of the people operating those models don't understand how those models work and cannot replicate the results by hand. Most of the people using them and even teaching them have no training in it and are just operating off the assumption that the solution is right because it's automated. Which as far as the math itself goes is fine. However, these models are using certain assumptions which are subject to change.

Even minor changes in one or more of the assumptions upon which a model is based can have profound effects on the outcomes. Dont' lose sight of the point that most of the models are being developed by parties which advocate for (and often sell) the applications to consumers. Juist because a model gets published for use on a website doesn't mean the person who loaded those assumptions into that model was operating in an impartial and unbiased manner. It can happen that way but it can also not-happen that way and no layperson looking in from the outside would be able to ascertain the difference. I can just about guarantee that over 90% of the writers of any articles in the mainstream press only know what they've been told about the model. They're not commenting on the basis of competency with the model.

Moreover, the models serve to indicate to how market participants *should* act if they are adequately informed and operating in a strictly reasoned matter. That works for certain property types but it doesn't work with residential properties because part of those trends are related to the psychology and emotional needs of those market participants. As appraisers we are trying to emulate how the market participants *actually* act which is often out of sync with how they should act if operating solely by reason and logic.

A model that is based in part off assumptions that market participants will always act rationally with respect to an attribute or feature will tell us that spending $50k on a kitchen remodel will always return $50k in additional value upon resale, or that installing a 100k salt-water pool in the back yard will increase the value by $100k. Except as appraisers we understand from our prior exposure to how the markets operate that the difference for the kitchen or the pool will only rarely be equal to the costs. Or the savings, which in addition to the costs is also present with solar installs. In real life the reaction is occasionally equal to the costs or savings but is far more often less than, and occasionally it will be more-then. Our maxim for that is "cost does not equal value", and the parallel for solar is "savings does not equal value".

You are apparently operating in an area where solar isn't a hot seller when compared to other parts of the nation located in the sunbelts. That alone should indicate how unlikely it is that the typical buyer in that area will make their decisions solely off of the cost or the savings. Even if your property was located in Austin TX (sunny weather and liberal politics) I would still tell you to ignore the models and seek instead examples of the actual market reactions in that region. Maybe a prefabbed model works there, maybe it doesn't.

 

[Dublin ohio]

They dont provide a value on a property that has been fixed up without you selling the property again. I have done a cashout refi before the solar was on it for a value of 300k. Assessed value is 70k. As you can see that doesnt exactly yield anything note worthy. Also Michigan is exempt from paying additional tax on a system so it shouldnt be going up at all from the additional value added.

View attachment 88440

It was 12k for a 16.8KW system... That is very likely the case in this scenario. When you DIY everything is at cost. If I was to use stats the average sized system is 7.2KW and average increase is 4% of home value. So based on the system size reducing down to a price per KW the system would be valued at 2.33x what 4% of the home value is. So that would be just under 28k of value.

Of course Im not sure what the 4% is based on so I assume its a rule of thumb. Which is why I was here to get the specific way to value them.

Here is something to consider. If the typical buyer is going to go with Fannie Mae. They have specific requirements. Here is a link. It is under energy efficient improvements. Take particular note of what they accept for the basis of making an adjustment. It can;t be based on the income or cost approach. It has to be based on the sale comparison approach. But cost and/or income can be used as supporting data

B4-1.3-05, Improvements Section of the Appraisal Report (09/06/2023)

This topic contains information on reviewing the Improvements section of the appraisal report form, including:

selling-guide.fanniemae.com

 

[TerryRohrer]

I know its at least 2x what I have into it, but realistically it seems like it should be more.

The reason appraisers exist is because every seller and owner shares this belief, despite what done deals agreed to by buyers and sellers suggest. That isn't a shot at you...even appraisers spending every day sorting it all out will be prone to the same tendency in valuing their own property (if they are honest with themselves). I would find an appraiser in your area to provide you with some insight.

 

[George Hatch]

Having said all the above, my point isn't to criticize the solar installs in any way or to criticize their advocates. Nor to say the installs aren't worth the money or that they don't have any resale value. Alls I'm saying it that appraisers are supposed to be looking at the actions of the market participants as the indicator.

 

[MoistMitten]

re is something to consider. If the typical buyer is going to go with Fannie Mae. They have specific requirements. Here is a link. It is under energy efficient improvements. Take particular note of what they accept for the basis of making an adjustment. It can;t be based on the income or cost approach. It has to be based on the sale comparison approach. But cost and/or income can be used as supporting data

I think I read that so I suppose the answer is as George said before. Find as recent of a comp with solar as you can, get the value of the solar and rough size of the system, then scale to the adjust to the installed system.

Then use the income approach as supporting. I did find the section above from Appraisal Journal to be pretty fair as well, but again... Looking for the correct answer so I can comp things as realistically as possible.

Having said all the above, my point isn't to criticize the solar installs in any way or to criticize their advocates. Nor to say the installs aren't worth the money or that they don't have any resale value. Alls I'm saying it that appraisers are supposed to be looking at the actions of the market participants as the indicator.

Oh all good I appreciate the info! I know exactly what you are talking about with people valuing things at the cost they paid. Im about to be a licensed builder as thats where I find the best returns when working on a house can be added. I like the idea of adding panels as a way to get a return on investment which seems to be an easy sell on my end. I just want some accuracy on how I can value the systems, but I think the info above is a good take away.

 

[George Hatch]

One of the primary points I gleaned from taking that course (I took it at the local gas/electric company) was that the low hanging fruit for net zero outcomes is starting with building or retrofitting to get the igloo. Reducing or eliminating the leaking and wastage of the energy it takes to heat/cool, but also to reduce the load on the other elements of the infrastructure. For example, bringing water to the neighborhood and into the house uses a lot of power in the infrastructure, so one way to reduce the energy footprint is to reduce the water usage. A more efficient igloo with more efficient air circulation can get by with a smaller HVAC system and therefore required less power to maintain the air quality.

My take of it is that fretting the source of the power is ideally the last step in the sequence, not the first.

 

[MoistMitten]

One of the primary points I gleaned from taking that course (I took it at the local gas/electric company) was that the low hanging fruit for net zero outcomes is starting with building or retrofitting to get the igloo. Reducing or eliminating the leaking and wastage of the energy it takes to heat/cool, but also to reduce the load on the other elements of the infrastructure. For example, bringing water to the neighborhood and into the house uses a lot of power in the infrastructure, so one way to reduce the energy footprint is to reduce the water usage. A more efficient igloo with more efficient air circulation can get by with a smaller HVAC system and therefore required less power to maintain the air quality.

My take of it is that fretting the source of the power is ideally the last step in the sequence, not the first.

That is true its easier to remove air leaks, but that assumes you have that option. Realistically that would have been adding external insulation, but the house is already thick so I would have also had to redo all the lower windows.

In a DIY situation having around 60-70k for a reno it doesnt make sense to do that if the siding is good already, but you are correct if you can insulate and remove all air leaks thats the best way forward. Adding solar was 12k all in, and it would have been at least that to insulate and redo all the windows properly. So I just added a heat pump/mini split for the lower and upper levels and added solar to make it net 0. This is not the most efficient way to get there... but being a jack of many trades does have its advantages.