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

[J Grant]

If the only way appraisers can understand the DCF of solar panels is by taking a special class and understanding calculations, then the average buyer sure as heck does not understand it. A pro solar panel sales person gives a rehearsed spiel and print outs, as a stand alone retail sale of the solar panel as a detached point of purchase item.

I appraised a house recently where owner put in solar panels .(owned.) His house size was similar to mine, my electric bill average 190 a month. I asked him what his elect bill was with the 5solar panels, he said $40. Okay, a nice savings of $150 a month. Then I asked him what he paid, almost 30k with an 8k tax credit. After tax credit, he paid 22k . Will take almost 10 YEARS if he had paid cash to see it as a savings. However he financed it, was paying $120 a month financing. So his real savings, until he pays it off, is $30 a month. and will be 15 years till the loan is paid off

I bet the fancy DCF figures he got from the salesman were different than my figures.

The solar was an over improvement, a small modest house, old kitchen and baths and most buyers would rather have a new kitchen than solar panels. I hated doing that appraisal though it came out pretty good because though he had a dated interior, he also put in new siding, impact windows and a new roof. I reconciled it at higher side of value and made a small 5k adjustment for solar using a generator and other elect efficiencies from 2 comps.

 

[George Hatch]

When I took that Green Appraiser course one of the things they mentioned was the effect of the energy rates on the ROI. More expensive rates lead to a quicker time frame to break even. Less expensive grid energy leads to longer time to break even. They even mentioned the low energy rates in some areas of the s/e as being one reason why solar isn't more popular there.

Whenever I use a DCF in an appraisal it usually takes me a couple pages to lay out all the assumptions being made in that analysis. But the same rationale would apply regardless of what analytics an appraiser is using. If the machine is doing things you don't understand or using assumptions you're not familiar with then how can you consider your use of that output to be credible?

When I input an equation into my calculator and I get a result, that result doesn't become my opinion unless/until I decide that it is my opinion.

Now to be sure, there are some appraisers who have the competency to perform these modes of analysis, but that isn't all of them and so far that isn't most of them, either. Which is one reason why these modes of analysis cannot be considered a minimum standard in these assignments.

 

[glenn walker]

If the only way appraisers can understand the DCF of solar panels is by taking a special class and understanding calculations, then the average buyer sure as heck does not understand it. A pro solar panel sales person gives a rehearsed spiel and print outs, as a stand alone retail sale of the solar panel as a detached point of purchase item.

I appraised a house recently where owner put in solar panels .(owned.) His house size was similar to mine, my electric bill average 190 a month. I asked him what his elect bill was with the 5solar panels, he said $40. Okay, a nice savings of $150 a month. Then I asked him what he paid, almost 30k with an 8k tax credit. After tax credit, he paid 22k . Will take almost 10 YEARS if he had paid cash to see it as a savings. However he financed it, was paying $120 a month financing. So his real savings, until he pays it off, is $30 a month. and will be 15 years till the loan is paid off

I bet the fancy DCF figures he got from the salesman were different than my figures.

The solar was an over improvement, a small modest house, old kitchen and baths and most buyers would rather have a new kitchen than solar panels. I hated doing that appraisal though it came out pretty good because though he had a dated interior, he also put in new siding, impact windows and a new roof. I reconciled it at higher side of value and made a small 5k adjustment for solar using a generator and other elect efficiencies from 2 comps.

Believe me I have crunched numbers forward-backwards and sideways and so far I rarely see a set up that makes sense --90% are all financed and second liens on home at typical 8% 10 year amortization. I had one guy saying he was saving $500 a month on a large house and when I asked about his monthly payment he said $400.00 so in realty he was losing money as the Solar panels depreciate and normally are done by year
8 to 10 --I wish these lenders woudl call it what it is and only owned systems are ones who some poor paid cash for. One of the most unregulated businessmen in America and some Idiot was trying to sell my father a $35,000 system-I said to teh guy hey Dumbass he is 95 years old and he sits in a chair and watches TV and he will be dead in 5 years or less so get lost. Actually he only made it 60 days after that.

 

[alebrewer]

My take on DCF: Only CG's are competent to perform this level of advanced mathematics. I'm absolutely positive no CR would be able to comprehend the intricacies performing a DCF.

 

[J Grant]

My take on DCF: Only CG's are competent to perform this level of advanced mathematics. I'm absolutely positive no CR would be able to comprehend the intricacies performing a DCF.

And what homeowner could then lol

Market value is based on actions of well informed buyers but well informed does not mean they need attend advanced classes to decide wtf they are paying for lol

 

[George Hatch]

Half the course participants who take the income cap courses don't pass them, and half of the ones who do pass the course don't pass the licensing test, leastwise at the CG level. So there are a number of trainees, SLs and CRs out there who have been exposed to the material, including some of whom passed the course but didn't get the CG. Appraising isn't the only field where DCFs are used, either, so I'm sure there are some non-CGs who know their way around a DCF or who have learned on their own.

OTOH, while it is true that the CGs are trained and tested on the development and usage of the DCFs, if someone hasn't used a technique in the last 20 years they might not be tuned into all the details of its usage. I don't care about the license; I care about the individual working the process.

 

[J Grant]

I am all for solar if it works but that might be in future or roof tiles -

what makes sense for most people is doh turn your AC thermostat lower, don't buy a giant house with high ceilings and or install thermal/impact windows

One system that really impressed me seeing it in more homes is a new take on individual room wall mounted ductless AC - much more efficient, much more costs savings, you only need to cool or heat the room you are actually using, not the whole stupid house as in current AC systems.

The old style houses were naturally more energy efficient with smaller size, lower cielings, cross venitliatin and unit wall AC or heat in each room. We are not as smart as we think the old days were more green and energy efficient in so many ways, all food was "organic " in those days grown or raised on a farm not a factory big ag chemical center.

 

[alebrewer]

And what homeowner could then lol

Market value is based on actions of well informed buyers but well informed does not mean they need attend advanced classes to decide wtf they are paying for lol

Oh, God no! A homeowner has absolutely no business trying to perform DCF. It can only be understood by a CG and no one else. I think that's in the USPAP FAQ's.

 

[Sadie]

My take on DCF: Only CG's are competent to perform this level of advanced mathematics. I'm absolutely positive no CR would be able to comprehend the intricacies performing a DCF.

You are so funny. Credentials do not make knowledge, intelligence or the ability to analyze. What in the world do you think happened before there were any CGs? Did DCF analysis magically appear then? I think you just put this in to bait people. (It worked!)

 

[George Hatch]

And what homeowner could then lol

Market value is based on actions of well informed buyers but well informed does not mean they need attend advanced classes to decide wtf they are paying for lol

If you had the data to do it you could extract a GRM/GIM from sales data and apply that to your subject's income. That's pretty straightforward and it would be a perfectly valid mode of analysis. Bonus points for also being easy to explain to your readers and easy for them to understand and "repeat" on their own.

Some buyers of cell tower leases use a GRM without having to go into a long form income/expense + DCF analysis. The thing is that if you have the data to extract a GRM or a cap rate then you also have the data it takes to run a paired sales analysis with that property's comps to isolate the adjustment factor so you don't really need to use an income approach.