Solar panels - PV Value estimated energy value

[George Hatch]

FNMA does not allow appraisers to apply value to leased solar panels.

Since FNMA has already determined such panels are valued at zero, even if a contributory value before completely paid for, the next step is to get the report past the underwriters. Whether they understand it or not, a DCF is not necessary nor is "paired sales" necessarily always the only way to value these panels. If a sinking fund mirrors the behavior of the market then so be it.

And while many home buyers may recognize the value is not zero, often they simply don't want to increase the amount of payment they can safely make thus tend to discount in their head or they seek an alternative without panels.

IMO arbitrarily deciding the contributory of a leased array is zero also isn't the correct answer. That contributory CAN be (and has been) zero in many cases but it can also be a positive or a negative.

I understand their "we will accept" is an underwriting decision they are completely entitled to make. And appropriately so, no argument there. But I also don't think their underwriting decisions should be of effect on an appraiser's actual opinion of MV, assuming said opinion was actually developed using market data.

After a certain point their "we will accept" can be of sufficient effect on the value conclusion that it becomes more appropriate to refer to it as some form of Mortgage Value.

Was this attribute of effect on the sales price or not? It it was then perhaps there's an adjustment for the property rights appraised to be made in their somewhere, similar to when a home sells with furnishings or a tractor included in the sale price.

 

[Terrel L. Shields]

similar to when a home sells with furnishings or a tractor included in the sale price.

Personal property is not an affixed array of solar panels. They are clearly real property unless owned by someone else which can then be treated as TRADE FIXTURES.

 

[George Hatch]

I was going to cite the example of cell towers or billboard leases except those pay into the property interest instead of being a payment being paid out.

 

[Here's Johnny]

Absent market data for matched pair analysis, a DCF of the estimated savings over the estimated life of the panels (what is that, 20 yrs maybe) using a reasonable cap rate would be a credible basis for an adjustment, IMO.

Simple DCF: PV of $150/month savings over 20 yrs at 10% cap rate = approx. $15,000. 10% is probably too low and no ongoing maintenance or repair costs are included. But neither are tax incentives. $60K+ investment, $15,000 return. I can see some greenies getting a warm fuzzy feeling but for people that think with their brains instead of their hearts, this doesn't seem to be a good investment.

You're clearly not in California! Just installed solar with battery at our house in San Francisco. $30k before tax credit. Electric bill dropped more than $200 for just partial month and will probably end up around the $15 minimum transmission charge ongoing. Electric rates here are outrageous and they continue to go up. $0.42 to $0.62 per KwH. And you mean discount rate, not cap rate. Even in the current economy 10% is way too high.

 

[George Hatch]

The only way to develop a market based discount rate is to extract it from market data. Ideally that extraction would involve similar properties operating in similar markets.

Just the fact the resale value of these arrays varies from one market to the next should be considered instructive. WRT residential, all RE is local, right?

 

[Mark K]

You're clearly not in California!

Yeah, Thank God.

Electric rates here are outrageous and they continue to go up. $0.42 to $0.62 per KwH.

Price to pay to live in paradise. But yeah, if your elec is that high, solar is probably worth more than it is in most other parts of the country with reasonable elec rates. Hell, if it gets up to $1.00/KW, it might be worth more than it costs.

Even in the current economy 10% is way too high.

10% used only for example. Of course it needs to be market derived locally. With fairly low elec rates in this area (75% cheaper than yours), 10% may be too low.

 

[Here's Johnny]

Yeah, Thank God.


Price to pay to live in paradise. But yeah, if your elec is that high, solar is probably worth more than it is in most other parts of the country with reasonable elec rates. Hell, if it gets up to $1.00/KW, it might be worth more than it costs.


10% used only for example. Of course it needs to be market derived locally. With fairly low elec rates in this area (75% cheaper than yours), 10% may be too low.

FWIW - Homes in our neighborhood go for $2m-$3m (not so high in SF!) so draw your own conclusions: https://tinyurl.com/wnyf9x34