Unable to find comps which have "owned" solar panels. What to do?

[residentialguy]

I'm in a market where the overwhelming majority of solar panels on homes are leased and are therefore not given any value in the appraisal. I am appraising a property in which the homeowner owns the solar panels and am unable to find any comps in which the solar panels are owned. I see my best option as explaining the situation in the report and stating that comps with "owned" solar could not be located and that the contributory value of the solar panels is deemed to be negligible since the majority of properties in the subject's marketing area which have solar panels actually lease them. Any suggestions on how to properly phrase this are greatly appreciated.

So there has been no house sold with owned solar? It doesn't need to be comparable... you just need to find a house and extract value of that feature from similar homes that don't have it.

 

[Sadie]

So the typical buyer wouldn't be interested in the $400/month savings? I feel like I'm in some kind of alter world... Here I was thinking a typical buyer WOULD, in fact, be concerned about how much they're spending (and saving). Goes to show you how much I know.

A typical buyer here would not be realizing $400/month in savings. My neighbor breaks even with his panels. So, really no financial incentive. And some people think they are ugly and do NOT want them. You can't make a blanket statement like that, especially in residential real estate. Plus the thing depreciate so by the time you have recouped the cost, its time for new ones.

 

[Sadie]

If subsidies were stopped on solar, geothermal would make the most sense outside of a place like Arizona or S. California where the sun shines 90% or so of the time days. Both would be a killer combo. I suppose some people would eschew panels over the issue of fear of a fire or they are simply buttugly. But to me, in areas where solar panels are less efficient and energy costs are low, superinsulation and geothermal are a far better investment...they just don't get the tax break.

Ultimately what happens when everyone is on solar and the utility is losing money? How will the pay structure have to change? The "wholesale" price will have to drop to near zero, eliminating a lot of the "income" from solar panels.

In some of the sunnier states that is becoming a problem. It will be interesting to see how they solve it.

 

[alebrewer]

Like I posted In the Dominican Republic. Not debating the savings. But putting it in context.

YMMV means 'your mileage may vary'. It's a way of ending an argument.

 

[alebrewer]

You can't make a blanket statement like that, especially in residential real estate.

Actually, I can - and I did. Unless you know of some law that recently went into effect prohibiting that kind of statement?

 

[alebrewer]

Not around here we have almost no humidity and on a 1,500 square foot stucco box unless you are running the AC day and night in the summer your avg electric bill can be $80 to $100 a month. BUT the fat people out here need a constant 72 degrees and so they get solar and run their AC day and night which will generate a $500 a month bill at a level three price point and so the knocker off that $500 .00 down to $50 bucks but if not paid for and free and clear they also have a 20K to $40K Solar loan at 8% amortized over 10 years and that eats up half of their savings. In may cases its returned almost nothing until year 11 and by then the solar panels are at or near at end of life as most crash between year 8 to year 10. Guess who made the panels China and they no longer answered there phone and the panel warranty's prove to be worth less..

Out here Possibly one of the biggest scams ever pulled on the American consumer is expense solar systems.

To my pesky neighbors lose weight and put that plus size wife wife on a extreme weight loss program and then turn your thermostat up to 85 degree and when your electric bill hits $100.00 turn the thermostats up to 100 degrees and go to Pep Boys get a big automotive fan and sit your now thin wife on the patio with the fan and a big Ice pack to put on her head. After two summers those skinny bodys will have acclimated and no need for AC or Solar. Learn to live like people did up until 75 years ago - Porches-Patios -Open windows and be truly energy efficient. Note: To live on low energy it takes extreme discipline but after a while you no longer even need AC and thats what drive up electric bills but if you are a foody and fat you will need Solar gallons of water to stay hid rated and you will not survive the Angry Cat energy politicizes.
Once The Yenta at 5.9' tall got down to 120 LBS She now shakes like a Chihuahua if temperature gets below 85 degrees and when fat friends come over they leave in less than 15 minutes as they are dying of heat.
A win-win low electric bills and no plus size women at my house. Doctor says Yenta needs to gain weight and I am like no She has no diabetes heart problems unlike his nurse who is about 35 years old and 50 LBS over weight

The location of the property only affects the amount of savings from PV. It doesn't affect whether or not a buyer would be motivated by a property modification that saved them $400 a month (or whatever the savings turned out to be). My point was not to argue that PV saves owners $400 a month, but that a 'typical' buyer would be interested in what savings a PV system generated, and that their purchase decision would most likely be influenced by the magnitude of those savings.

My bigger issue is that several folks on the forum are willing to disregard any potential positive impact of PV systems simply because it's not easy to quantify the value. You know the old saying - 'there aren't any comps with this feature, so the feature must be worthless.' That's just plain lazy.

 

[glenn walker]

Actually, I can - and I did. Unless you know of some law that recently went into effect prohibiting that kind of statement?

Forget the Dominican Republic---Today news --Reconsider travel to the Dominican Republic due to COVID-19. .. Exercise increased caution in the Dominican Republic due to crime. Country Summary: Violent crime, including armed robbery, homicide and sexual assault is a concern throughout the Dominican Republic add in the $400.00 a month electric bills and solar is not going to save you LMAO

 

[Joyce Potts]

You start a file for every OWNED solar panel sale that includes emailing the participating Realtors as to contributory value and whether that was a significant feature considered by the buyer(s). So when I get into a development with no other owned solar panel sales, I have documentation from the larger / general market. So far, consistently, the contributory value is ZIPPO. Overwhelming, most lenders will take issue with anything other than a 'nominal' adjustment for owned solar. I don't care what the AI solar experts say. I will not apply creative capitalization formulas based on electrical bill cost savings WHEN I have market data supporting otherwise.

 

[George Hatch]

Well, technically there is - but the agencies won't allow it... It's the present value of the future stream of income/savings. That's exactly how a borrower would value it.

I challenge that. The online calculators conclude to what a buyer who is operating strictly off the income - and who is capable of performing that type of analysis - would do. But most of the calculators I've seen omit some important assumptions and used arbitrary assumptions which are not usually demonstrated in the resale market. And almost no borrowers have the competency with that type of analysis. Which also goes for some of the bankers and most of the SFR appraisers.

Income approach can't be done without reference to the value in the market. You can't build a GRM/GIM or a cap rate or a discount rate without an actual or assumed resale value, nor can you extract one from the market (which is always the most reliable way of getting to a GIM or Cap Rate) without such sales data. The calculators I've seen skip or gloss over that element, and the effects of that on the outcome are profound.

Just the fact that the resale values of these systems varies by both locale and price range demonstrates that solar is just as subject to the axiom that "all RE is local" as any other attribute. When performed competently, the results of an income approach will line up with the results of an SC because if it isn't then that means the GIM or cap rate or discount rate is wrong.

 

[glenn walker]

The location of the property only affects the amount of savings from PV. It doesn't affect whether or not a buyer would be motivated by a property modification that saved them $400 a month (or whatever the savings turned out to be). My point was not to argue that PV saves owners $400 a month, but that a 'typical' buyer would be interested in what savings a PV system generated, and that their purchase decision would most likely be influenced by the magnitude of those savings.

My bigger issue is that several folks on the forum are willing to disregard any potential positive impact of PV systems simply because it's not easy to quantify the value. You know the old saying - 'there aren't any comps with this feature, so the feature must be worthless.' That's just plain lazy.

You start a file for every OWNED solar panel sale that includes emailing the participating Realtors as to contributory value and whether that was a significant feature considered by the buyer(s). So when I get into a development with no other owned solar panel sales, I have documentation from the larger / general market. So far, consistently, the contributory value is ZIPPO. Overwhelming, most lenders will take issue with anything other than a 'nominal' adjustment for owned solar. I don't care what the AI solar experts say. I will not apply creative capitalization formulas based on electrical bill cost savings WHEN I have market data supporting otherwise.

Exactly of course every market area is differnt but solar does not produce an income stream and I have seen guys try to teart it like its an investment. Unless the owner pays 100% cash he/she os rarely beraking even on the cost for 7 to 8 years. Also states like California have pwoer sharing agreements which are not a lifetime contract and after it expires a owner can end up reallu getting screwed over. We have many blow off roofs out here and many panels fail on year 5 or 6. I now treat them like a small older built in pool but unlike a Pool there shelf life is gone in 15 years. Because I no longher care and people get upset I typiclly use $10,000 to $15,000 and I am done. Just because another sale has a solar system doe not make it a comp although people who have solar also tend to have other amenities that add to both looks of the home new dual pane windows-attic fans-newer insulation- new AC units with high Seers ratings etc. Where the drop off is hitting is at about 5 years and older as buyers are no longer willing to pay a premium. On those i still give $8K to $10K because the is they depreciate in value and expected life is 15 years max. Note: Power sharing agreements with Edison and PG & E are not permanant and a new owner can suddenly get sticker shock when teh agreement is changed or dishonered. PG & E Is now in Bankrupsty and nonbody knows if one day they will wake up and say sorry no longer honoring those agreements .