Owned Solar System/proper Docs?

[KYLECODY]

What specific documentation are you asking for when borrowers claim the solar system is owned? With all the kickbacks, government credits, builder paid leases, financing options, etc. it is hard to pin down their costs or actual ownership. I won't even mention trying to extract any market adjustment.

I ask for the bill of sale or contract. Short of that...Nothing I can do for them other than mention it.

 

[Michael S]

Whatever it cost new is irrelevant now, it's a sunk cost. It doesn't matter if the buyer paid $5,000 after rebates or $50,000 with no rebates. I would definitely confirm that it's owned and not leased. I would think the owner should have an invoice or something from the installer showing them paying for it.

I would be concerned with how large the system is, i.e. how many kilowatts is it rated to produce, and how much electricity it's actually producing. Most importantly, how much it's saving the owner. It could possibly be providing income if there's net metering and the average daily output is more than the home is using.

All things being equal would you pay more for a house that had an average $200/month electric bill or one where you received a check for $50/month? In this situation that's $3,000 a year a buyer would be saving. That's got to be worth something. Even if you just look at the present value of that income/savings over 10 years with a 10% discount rate it's about $18,000. If you drop that discount rate down to 5% (roughly what the buyer would be paying to borrow more to fund the higher purchase price due to this cost savings) it's about $23,000.

There are a lot more sophisticated ways of analyzing it with more detailed spreadsheets or trying to find sales data, but this is just a simple check of reasonableness that you can do in a few seconds if you know how much the system is saving in electricity on average each month.

 

[glenn walker]

Normally the term we own the solar system means it's not a leased system ( just like if a owner has a 25 year mortgage he says he owns the home ) I have found few owners who ever paid cash out-right for a solar system. In my area there is a loan or it's been covered in a program like HERO . You are in the State of Arizona so I do not know if they have a similar program. The HERO program in California places the cost of the solar installation into the owners property tax bill and it's paid over a 10-15 year period.

The real question to ask owners is was the system paid for outright cash or is there a loan or a government loan program involved. On the leased systems the lessor records a lien on the property which states the terms and conditions and the length of the lease. ( these are considered personal property by most lenders )

On the so called owned solar systems if the owner DID not pay cash there is a lien recorded against the property just like a second mortgage or trust deed. Where is gets real messy is Fannie Mae, Freddie Mac, FHA want's the appraiser to analyze the potential cost savings and extract an adjustment. This is when the fun begins. In my area a 2% to 3% adjustment normally does not seem to cause any problems with most lenders BUT you better have a few comparable sales that also have solar or it can get messy .

In Summary :
If you can clearly show comparable sales with solar systems are selling for more and buyers are willing to pay more for a solar home then try to extract an adjustment. If not I would clearly state the subject has a solar system BUT you were unable to find comparable sale with similar solar systems and therefore you were unable to extract a supportable and defensible adjustment. But you did consider the solar amenity in your final reconciliation and it's overall effect appears to be positive for sale or marketability.

Good Luck : These can be a real pain in the ***

 

[glenn walker]

P.S. One factor appraisers have not been using is we figure a monthly or yearly savings on the electric bill BUT rarely does the appraiser factor the solar loan payment into the equation. In my area rarely does anyone pay cash because the only way you can sell the system is to tell the homeowner it's not going to cost them anything out of pocket .

I have one older 800 square foot rental home with No AC and a floor heater and the electric bill runs an average of $40.00 a month in the winter and $55.00 in the summer. A solar sales guy was trying to get me to have a $25,000 system installed telling me it would cost me nothing. I said what about the $25,000 lien , even if the electric bill went to -0- it would take me years to pay off the solar lien.

P.S So far I have only found one homeowner who actually paid for their solar system. Most are financed or worse yet leased. The sad part is many of the X-mortgage guys I worked with in 2000 to 2008 are now managers for solar companies and they would have been selling aluminum siding if they were adults in the fifties.

 

[Riick]

are now managers for solar companies and they would have been selling aluminum siding if they were adults in the fifties.

Ah yes -- "The Cocoanuts" Florida Swamp Land in the 20's, "Tin Men" in the 50's, People selling Time Shares in the 70's, 2004 - NINA Mortgages (No Doc "No Income, No Assets")

 

[Terrel L. Shields]

It was described a few days ago as a solar "subprime" lender and the man was dissing the stock. Clearly, imho, a system that you are indebted on is saving you only the difference between the payment and the gross savings.

http://otgchannel.com/detail-jim_ch...company_is_like_a_subprime_lender_-80164.html

Jim Chanos is betting against SolarCity,... cofounded by Elon Musk.

The founder of Kynikos Associates revealed on CNBC's "Halftime Report" that he thinks that SolarCity's business model is similar to that of a subprime financing company... The company was founded by Peter and Lyndon Rive, and Elon Musk, their cousin, is chairman.​

The pro-solar press has mounted a huge effort to blunt that assessment and argues that their borrowers have FICO scores over 700 and none less than 640.

 

[glenn walker]

I have no opinion on Solar City as a company ** But Jim Chanos is correct ** Many of the X-Mortgage guys went to work for them and others after the banking meltdown. And you are saving only the difference between the payment and the gross savings. BUT every green seminar attended so far never addressed the fact that over 90% of all systems are 100% financed. The other issue is placing solar panels on older roofs that are near the end of their life. Maybe it's gotten better but even three years ago solar companies in my area were installing panels on 20 years roofs and when the rains came many had leaks.

I really want to see the green seminars and the appraisal groups that offer courses on solar get a grip on the fact most are not owned outright and that changes the entire equation. So far this appears to be a emotional sell and often no benefit to the homeowner. Solar at some point will be affordable and will make sense for many folk's but at this time very few solar homes I have analyzed after subtracting purchase cost or payments made sense.

 

[Meandering]

Whatever they are saving today, may not be what they are saving tomorrow as utilities are trying to hike the monthly payments for being connected to the grid, and after the utility meets the Federal mandated % of renewable energy, perhaps through a commercial solar farm, there no longer is a mandate to credit homeowners anything.

 

[Terrel L. Shields]

BUT every green seminar attended so far never addressed the fact that over 90% of all systems are 100% financed.

I don't know about the leak issue, would never think of placing them except off the roof personally, nor would I use them in any but the sunniest environs. The fact the lease affects the ability of the buyer to have 100% control of the property seems potentially to be the sort of deal killing impediment to closing a sale that would be hard to quantify but almost certainly would exist.

 

[hastalavista]

...But you did consider the solar amenity in your final reconciliation and it's overall effect appears to be positive for sale or marketability.

In my opinion this is the right way to handle this and many other property characteristics that the appraiser believes has an impact on value but cannot quantify that impact.

FWIW, when I do a DCF on the expected savings over a typical holding period for a home (8-years per the National Association of Homebuilders) the NPV has always been smaller than the adjusted sale range. In other words, my adjusted range between high and low sales may be $25k. The NPV of the savings worth less than that.

And, once installed, that cost is sunk; so it is only net savings, maintenance costs, and eventual removal costs going forward from that point.

Some of the solar industry's calculation-methodology calculate the value based on the expected remaining economic life. The presumption being that if you sell before that, whoever is going to purchase the system will calculate the future savings from that point and pay you that difference when they purchase it.
I'm not sure anyone will pay anything for a PV system with, maybe, 8-10 years remaining economic life and knowing that at the end of that period, they'll have a system on their roof that does absolutely nothing and will eventually need to be removed.