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

[George Hatch]

"any property modification that generates savings/income streams will be considered by a buyer and that consideration will factor into the purchase decision. "

I don't disagree with "will be considered" but in my experience and in this region the dollar amount of that outcome varies considerably. A reaction of $0 is still a reaction. A reaction of treating it as a cost to cure is a reaction. My point being that I can't safely assume anything; I always have to look. Which completely guts the idea that I can arbitrarily rely on any calculator that doesn't include all these other considerations including the reversion.

Here's the irony; if I have the data to develop an opinion of the reversion at the end of the holding period then that's the same data I can use to develop an adjustment factor for use with my direct comparables. Which means I can skip the use of the calculator altogether.

Please address the significance to your assumptions of this observation: IRL the contributory of solar varies by locale and price range.

 

[alebrewer]

Yeah I actually liked you better when you were a First -Class A-Hole

Some would probably say I still am. Although I'm in good company here if that is the case.

 

[alebrewer]

"any property modification that generates savings/income streams will be considered by a buyer and that consideration will factor into the purchase decision. "

I don't disagree with "will be considered" but in my experience and in this region the dollar amount of that outcome varies considerably. A reaction of $0 is still a reaction. A reaction of treating it as a cost to cure is a reaction. My point being that I can't safely assume anything; I always have to look. Which completely guts the idea that I can arbitrarily rely on any calculator that doesn't include all these other considerations including the reversion.

I don't recall ever mentioning a calculator to assist in the decision? And again - I'm discussing REAL savings, not the PV system itself. Let go of the thought of it being PV for a moment. If there is a feature about the property that generates positive returns, what buyer wouldn't factor that into their purchase decision? It's just silly to say they wouldn't. It's the appraiser's job to quantify the impact that feature has in the market. It's plain lazy to say, 'Oh well, I didn't find any comps with that feature, so it must not add value.'

 

[George Hatch]

Again, I agree that ducking the questions because none of the direct comparables has a given feature is lazy. But I also think its a mistake to assume that an income or savings element WILL have a positive effect on the value. Often it will but (IRL) sometimes it doesn't. WRT solar and in this region that "sometimes" has previously amounted to 25+% so that is not an insignificant exception to the rule.

I tell people on almost a weekly basis that I try to refrain from having an opinion on their property until I develop it because sometimes what I end up with is different than what I start with.

 

[alebrewer]

My point all along... It's so intriguing how folks argue just for arguments' sake. Not that I don't appreciate a good debate, but this tends to get very tedious.

 

[Sadie]

Well, not quite - at least not without going into the penalty box. That said, and even though I CAN say mean stuff - I've tried really hard over the past few months not to. Not so easy on this forum.

True

 

[OSU Beavers]

How a Realtor would do it:

"These here solar panels will cut your electricity bills by $1200 a year. Which saves you $100 per month that you can put towards your mortgage. Right now a 15 year loan is at 3%, so $100 per month (runs amortization app) means you can afford about $15,000 more house. Therefore the value of the solar panels is $15,000. Shut up and fight me, I took an NAR class on this and I am Green Certified"

 

[Terrel L. Shields]

Yeah but you're a mineral rights guy, so you know that the rights to that gas might already belong to someone else.

In the case above it isn't owned by others. I know how to "do" mineral research and an OGL for these two wells was executed in the 1950s and was looking for oil. Gas was about 4¢ an MCF then and almost worthless except to run an irrigation pump. So no, I know that it was an intact Fee Simple as I appraised it. If not producing within 5 years the lease expires. Same with several other such properties I know. In fact, a month or so ago a fellow trying to sell his 10 acres and a house has just such a well which he runs a generator off during the hot parts of the day to save money. And I've appraised several others with gas wells providing back up or even fueling a poultry farm. Often someone drills a well for water and hits gas. Which was the case here where this back up gen is in place. In fact, he sold the house and land and a chicken farmer built new barns on the place and uses the gas for the barns.

 

[The Bob]

Just like homebuyers aren't appraisers (and yet most are capable of arriving at a reasonable estimate of MV via their own research/analysis, etc.), neither are they (necessarily) proficient at DCF - although I'm sure some, if not many, are. My point was - and still is - that any property modification that generates savings/income streams will be considered by a buyer and that consideration will factor into the purchase decision. They may not be using DCF, they may not know a 'market' discount rate, but I PROMISE that buyers consider factors that reduce their overall monthly outflow for a piece of property.

Case in point - I just bought a piece of property in Oklahoma that generates a meager return on an oil easement. I was willing to pay a bit more for the property than I otherwise would have, had it not had the modest monthly return(s).

To say that buyers don't consider those features is just silly.

However they are looking at it, their reaction is reflected in the prices they are paying. People (not you) get bent on appraisers not analyzing these things via DCF or not fully understanding how they work. I don't need to know that, just like I don't need to know how to install a pool or build a garage. I just need to know how the market reacts to those features.

 

[George Hatch]

Just so everyone understands where I'm coming from when it comes to my comments about being competent with DCF analysis, I will refer you to AO-33 Discounted Cash Flow Analysis. That information used to appear in USPAP itself as Statement on Standards #2, being one of the original SMTs in USPAP and therefore dating back to when USPAP first came online.

My comments are not based on my own interpretation of USPAP but on what the ASB has been saying about DCF since the outset. It is unprofessional to defer to the EASY BUTTON without understanding what it's doing and without disclosing in your report the assumptions which are being used.