Solar Value

[Meandering]

No problem, but this issue comes up time and again. And I am convinced most appraisers diss it because they don't want to go thru the effort of estimating the contribution. But is it invisible... NO adjustment? If it is as "bad" as Randolph said, then perhaps a negative adjustment should be made. But to simply ignore it because, well, because we have always ignored it.

Give me those sales above and let me adjust ALL the features that need adjusted and then ley me see if there is a positive correlation or not. ... An ideal issue for a regression analysis. Perfect.

The AI method is the only one out there that is written down. No one has argued in print to "ignore" solar (except here.) And it is supported by the evidence (Denver report)... So, in the next 20 years as solar likely grows to no less than 10 million units; geothermal increasing is used; and LEED and HERS rated homes are selling... we will have plenty of evidence whether or not those items will "pair out" an adjustment. And I suspect many an appraiser is overlooking these items and making no adjustment because they don't even know what LEED or HERS stands for.

T,

Take the Op's admissions. in 15 years his loan will be clear and he'll have "10 years of free savings"


Some body please point me to the law that guarantees net metering and "savings" 25 years from now.

There is no guarantee net metering will exist for residential solar systems next year, never mind 25 years from now. By NY State law, the OP's net metering isn't even required, but is just being offered at "this time". How long before the OP's electric company meets the Federal mandated percentage for renewable energy? Next year? Five years from now? After the mandate is met, they don't have to offer residential people anything, and to restate that, they don't have to offer them net metering now, they only chose to do that.

As they are finding out in the west, people without solar are bearing a higher cost of the maintenance of the grid which is raising fees to everyone, including the solar people. There is no "savings" from those fees because they are flat fees not predicated on usage or not.

It is a fad, and has no legal "life" to promote anything beneficial to a homeowner, beyond the next call to the Congressional floor.

The tax incentive dies in a few months, and is finding little support in Congress to extend it.

Elections next year put the whole thing on the table again.

Too much risk for any possibility of reward 15 years from now.

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[Elliott]

There is no bigger red herring than a solar system for an appraiser. I'd think any appraiser, other than a neophyte, would be smart enough to quiz the HO about his system, ask about its efficiency rating, how much he's sending back into the grid, be amazed and take pictures of all those wires, blinky lights, microrelays, servos, and comment about the latest storm and climate change.

 

[Cigar]

Different utilities may do things differently but I see no mention in the math here of the "True Up" bill. Here in the California Bay Area there have been several reports of people paying huge yearly "True Up" bills, here is one in Hayward that came in at $7,000. I had a neighbor who installed them and I noticed that they were installing them on the wrong elevation of the roof, since he was an engineer I asked him why? He said he put them back there so as to not offend the neighbors which was nice, but I also mentioned some of the reports of huge "True Up" bills, he was aware of them but said he wasn't installing them to save money but to "save the planet". After a year he reported that his "True Up" bill was something over $600, he paid a small fee I think $10 a month so his total cost was $120+600+$2,400 lease payments for a total of $3,120 for the year. I have a similarly sized home two doors away and the electric portion of my utility bill now averages about $45 a month so I pay $540 a year, he's paying $2,580 a year to "save the planet". He got transferred to Mississippi of all places by the oil company he works for, he determined that he couldn't sell the house with the leased panels so he's rented it out and bought another home in Mississippi, financially he was in a position to do that and he'll also still have the house if he ever gets transferred back home.

I would also like to confirm something that Marion posted above, under IRS regulations if you make a $1,000 selling electricity to the utility you can't just deduct the $500 that you use and pay taxes on the remaining $500, the entire $1,000 is taxable income and since home utility bills are not tax deductible you can't just pay taxes on the remaining $500, the entire $1,000 is taxable and pretty hard to factor into the calculations because of different tax positions and rates.

 

[nicholz12]

This certainly points out the holes in the Sales Comparison Approach to value when valuing sf residential properties. Makes me wonder why the AI hasn't addressed type of situation decades ago, maybe they have?

I'd like some comments from AI instructors on this issue if there are any AI instructors out there viewing this thread.

 

[nicholz12]

The rub here is that an omission in a report doesn't actually speak to what the appraiser did and didn't do; it only speaks to an omission in the report. So neither you nor me nor anyone else can say whether the appraiser took any extra steps to "assign a value" (which by the way is not what appraisers are supposed to do).

As for exactly which extra steps the appraiser could have done, the requirement is to use the appropriate due diligence for the problem at hand. The specifics of that are generally based on the expectations of the intended users of the report (which in this case starts with the lender). The solution the AI endorsed is in no way binding on ANY appraiser, not even the AI members.

The AI's recommended solution amounts to a discounted cash flow analysis model - inclusive of PV$ elements - that isn't even taught to residential appraisers by anyone, including the AIs own courses. Appraisers don't get exposed to DCF analysis until they are being trained to appraise non-residential properties, which by definition are beyond the scope of practice for appraisers who are licensed/certified at the residential levels.

If an appraiser doesn't understand how the model works or - for the most part - what it's doing then they shouldn't even be using it . That's because using a tool that's doing something they don't understand presents a competency problem that arguably violates one of the dominant appraisal standards rule, the COMPETENCY RULE.

Appraisers are charged with identifying how typical market participants are acting, not with trying to be smarter than the entire market and telling it what to do. How that happens with a process that neither the market participants nor most of the appraisers involved actually understand defies all logic and reason. Use of such a model in appraising homes isn't a minimum requirement because it CAN'T be a minimum requirement.


As a matter of fact, if I was reviewing an appraisal report that included such a model I'd be looking for a complete explanation of how that model works and especially what assumptions were being plugged in, and how those assumptions were supported. Anyone using a tool that they didn't understand would get criticized for that and would be directed back to the drawing board until they could make some sense.


If the appraiser for your home isn't licensed as a commercial appraiser then there's a 95+% chance they probably aren't even competent to be using the AI-endorsed solution. That's just another reason why I don't think it wise to pin your hopes on the AIs position paper in your dispute with the appraiser. Even if the state tried to impose this requirement on the appraiser after the fact that decision would never withstand a judicial review in front of a judge.

The rub here is that an omission in a report doesn't actually speak to what the appraiser did and didn't do; it only speaks to an omission in the report. So neither you nor me nor anyone else can say whether the appraiser took any extra steps to "assign a value" (which by the way is not what appraisers are supposed to do).

As for exactly which extra steps the appraiser could have done, the requirement is to use the appropriate due diligence for the problem at hand. The specifics of that are generally based on the expectations of the intended users of the report (which in this case starts with the lender). The solution the AI endorsed is in no way binding on ANY appraiser, not even the AI members.

The AI's recommended solution amounts to a discounted cash flow analysis model - inclusive of PV$ elements - that isn't even taught to residential appraisers by anyone, including the AIs own courses. Appraisers don't get exposed to DCF analysis until they are being trained to appraise non-residential properties, which by definition are beyond the scope of practice for appraisers who are licensed/certified at the residential levels.

If an appraiser doesn't understand how the model works or - for the most part - what it's doing then they shouldn't even be using it . That's because using a tool that's doing something they don't understand presents a competency problem that arguably violates one of the dominant appraisal standards rule, the COMPETENCY RULE.

Appraisers are charged with identifying how typical market participants are acting, not with trying to be smarter than the entire market and telling it what to do. How that happens with a process that neither the market participants nor most of the appraisers involved actually understand defies all logic and reason. Use of such a model in appraising homes isn't a minimum requirement because it CAN'T be a minimum requirement.


As a matter of fact, if I was reviewing an appraisal report that included such a model I'd be looking for a complete explanation of how that model works and especially what assumptions were being plugged in, and how those assumptions were supported. Anyone using a tool that they didn't understand would get criticized for that and would be directed back to the drawing board until they could make some sense.


If the appraiser for your home isn't licensed as a commercial appraiser then there's a 95+% chance they probably aren't even competent to be using the AI-endorsed solution. That's just another reason why I don't think it wise to pin your hopes on the AIs position paper in your dispute with the appraiser. Even if the state tried to impose this requirement on the appraiser after the fact that decision would never withstand a judicial review in front of a judge.

The rub here is that an omission in a report doesn't actually speak to what the appraiser did and didn't do; it only speaks to an omission in the report. So neither you nor me nor anyone else can say whether the appraiser took any extra steps to "assign a value" (which by the way is not what appraisers are supposed to do).

As for exactly which extra steps the appraiser could have done, the requirement is to use the appropriate due diligence for the problem at hand. The specifics of that are generally based on the expectations of the intended users of the report (which in this case starts with the lender). The solution the AI endorsed is in no way binding on ANY appraiser, not even the AI members.

The AI's recommended solution amounts to a discounted cash flow analysis model - inclusive of PV$ elements - that isn't even taught to residential appraisers by anyone, including the AIs own courses. Appraisers don't get exposed to DCF analysis until they are being trained to appraise non-residential properties, which by definition are beyond the scope of practice for appraisers who are licensed/certified at the residential levels.

If an appraiser doesn't understand how the model works or - for the most part - what it's doing then they shouldn't even be using it . That's because using a tool that's doing something they don't understand presents a competency problem that arguably violates one of the dominant appraisal standards rule, the COMPETENCY RULE.

Appraisers are charged with identifying how typical market participants are acting, not with trying to be smarter than the entire market and telling it what to do. How that happens with a process that neither the market participants nor most of the appraisers involved actually understand defies all logic and reason. Use of such a model in appraising homes isn't a minimum requirement because it CAN'T be a minimum requirement.


As a matter of fact, if I was reviewing an appraisal report that included such a model I'd be looking for a complete explanation of how that model works and especially what assumptions were being plugged in, and how those assumptions were supported. Anyone using a tool that they didn't understand would get criticized for that and would be directed back to the drawing board until they could make some sense.


If the appraiser for your home isn't licensed as a commercial appraiser then there's a 95+% chance they probably aren't even competent to be using the AI-endorsed solution. That's just another reason why I don't think it wise to pin your hopes on the AIs position paper in your dispute with the appraiser. Even if the state tried to impose this requirement on the appraiser after the fact that decision would never withstand a judicial review in front of a judge.

Thank you for addressing the fact re 'discounted cash flow'... isn't taught to the residential appraiser. That's my concern, and the fact that we had the entire solar issue brought up in the 1970's without being addressed on how to handle this in an appraisal (other than sales comparison) really bothers me. It appears to me that on the residential side, the three approaches to value are insufficient at this juncture.

 

[Mike Kennedy]

The Fourth "Approach" to Value -

Client (lender, owner, etc.) - Here's ya bullseye - hit it or die. We don't care HOW u hit it - just HIT IT !!!

 

[Randolph Kinney]

No problem, but this issue comes up time and again. And I am convinced most appraisers diss it because they don't want to go thru the effort of estimating the contribution. But is it invisible... NO adjustment? If it is as "bad" as Randolph said, then perhaps a negative adjustment should be made. But to simply ignore it because, well, because we have always ignored it.

Give me those sales above and let me adjust ALL the features that need adjusted and then ley me see if there is a positive correlation or not. ... An ideal issue for a regression analysis. Perfect.

What about your DCF model saying $X dollars of value based upon savings? Now you say because sales exits, you have to analyze each one. And do what? Reconcile which approach is more credible. Lacking sales but ignoring critical data such as changes that utilities charge ratepayers and net metering is already showing up in my market. And it was already pointed out in the Arizona market where Arizona State University did the market analysis on a much larger sampling showing that solar PV sales all but stopped due to regulatory changes and proposed changes and the contributory value was minimal on past sales.

California is being negatively impacted by very high electric rates. It was a great selling tool for solar PV companies, why? The higher the rate, the higher the savings. And higher income people went for it enmass. That caused a profit problem for utilities. That shifted the cost burden of maintaining the grid and covering the overhead to everyone that did not have solar PV panels, especially the low income population. The political backlash was not programmed into the DCF formula, instead it was rate hikes and net metering forever. See below for the announced changes going into effect immediately.

 

[Mikeyvee17]

By the OP's own admission,
he is paying $108 per month just in principal and interest on the loan for the solar panels, to save $75-$100 per month, for 15 years over the life of the loan.

The numbers don't work.

Even if someone turns over a rock and finds a sale with solar panels, you would have to compare costs/expenses of that comparable's use of the solar panels to this one. And because the income is negative, now, not just a comp with solar panels is needed, but a comp with a negative contribution due to the cost/expense of solar panels.

It doesn't matter if this one as a 100MW capacity. If this one is in the shade most of the day, it will not produce sufficient savings to over come the expense of putting it there in the first place and this is the situation at hand.

If a solar powered comp is saving $300 to $400 a month, it is not a comp for one saving $75-$100 per month, even if the comp has a 15MW capacity.

The numbers have to work to add contribution, and, they at least have to break even for it to remain and still be at it's highest and best.

How can you ignore all what the OP posted?
$60,000 to purchase
$30,000 loan principal
15 year loan term
3.5% interest
(below current primary mortgage rates, far below rates for personal loans or secondary mortgage which is mega-unbelievable by it's self unless it has a balloon payment or adjustable rates)
$108 in monthly payments.

None of this math is correct.

It's a story to get what they want and to blame somebody else when they don't get what they want.

.

Except all of your numbers are WRONG!

Here are the correct figures (sorry for not posting sooner)
Initial Cost - $29,328
Less NYS Tax Credit - $5000
Less Federal Tax Credit - $8799
System Net Cost - $15,529

On-bill Solar Loan - payment $109 per month, term 15 years @ 3.49%

My electric bills throughout the year ranged between $110-$230 per month (higher in the Summer months)


It's not a story - those are the numbers, educate yourself!
http://ny-sun.ny.gov/Get-Solar/NY-Sun-Financing
Option 1, first bullet point and I QUOTE "The current interest rate is 3.49% for residential loans and 2.5% interest for small business and not-for-profit loans. Interest rates are subject to change."

 

[Meandering]

just face the facts.

The OP got screwed, the solar is costing him money every month and he now needs someone to blame for that.

In walks the appraiser.

It costs the same to build one solar panel to the next, given the same K rating. But, put it in the desert, and it's super efficient at hitting that K number much more often, year round, then if you put it in the north with snow and shade much more rain, and clouds. Nobody lowers the cost of the panels if you're putting the panels up north.

So where can better absorb the cost of the panels? It aint New York, or PA or Maine, or New Hampshire or Vermont, or Illinois or Michigan or Montana when compared to California, Arizona, Texas and Florida. But the AI can't say that. It'll be against the official government meme.

There is also a reason they don't build outdoor in ground pools in Alaska too.

The DCF does not work, as there is no reasonable expectation that net metering will be mandated/provided/allowed in the future.

Unless of course someone can show me legislation that insures net metering is available for at least the next 15 years, to cover the loans for these things. Otherwise, like the 1970's this is a fad, a distraction, and a money grab, no different than the 1970's.

..

 

[Randolph Kinney]

WHY NEW YORK HAS THE HIGHEST ELECTRICITY PRICES IN THE CONTINENTAL U.S.

A recent story shows helps explain why New York’s electricity prices are so high. Not only is New York a participant in the Regional Greenhouse Gas Initiative, which caps greenhouse gas emissions from power plants, but New York also imposes surcharges on utility bills to pay for “green” energy projects for the last five years and is proposing to extend the surcharge.

http://americanenergyalliance.org/2...st-electricity-prices-in-the-continental-u-s/

Congratulations! All you have to worry about is changes to net metering and if you sell your house before you pay off your loan on the solar panels and recovering the cost of the solar PV system through savings.