Value For Solar System.

[23Degrees]

Recent article on scoop dealt with this. Comments are more in line with reality than the article IMO.

[url]http://appraisalscoop.com/[/URL]

 

[Lee Lansford]

The OP might ask himself (herself?) "Is this the hill that I want to die on?"

Given what the owners have before them and their assertions, the appraiser who delivers the bad news via the new appraisal...well, I'll leave it to your imagination.

 

[Raoul]

Sweet, is the electric company actually sending a check or are they crediting the electric feed back.

Could you use a cost/savings adjustment for a clothes line as opposed to the electric clothes dryer?

Aren't they the same issue?

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Actually sent them an annual check.
Clothes line was an adverse condition due to the possibility of hanging...lol

 

[Terrel L. Shields]

[url]https://share.sandia.gov/news/resources/news_releases/pv-value-tool/[/URL]

The reason the "Market Approach" was renamed the "Sales Comparison Approach" is because cost, income, and sales are all derived from the market. The best way to value a solar system in the absence of data is with the tool above or something similar.

If you save $500 a month and the Gross Rent Multiplier is 120 then you will have added the same as you indicate they spent. Further, I believe I am correct to say that CA requires the utilities to buy the electricity back. If the savings is only $250 a month, then the value of the system would be roughly one-half. A more precise method would be to estimate maintenance and expenses (low usually) and additional taxes (if any) and capitalize it into a value. "Market Value" is not married to paired sales and the sales comparison approach. The methods of adjustments are well documented in the literature and income methods are well known and applied.

 

[Meandering]

[url]https://share.sandia.gov/news/resources/news_releases/pv-value-tool/[/URL]

The reason the "Market Approach" was renamed the "Sales Comparison Approach" is because cost, income, and sales are all derived from the market. The best way to value a solar system in the absence of data is with the tool above or something similar.

If you save $500 a month and the Gross Rent Multiplier is 120 then you will have added the same as you indicate they spent. Further, I believe I am correct to say that CA requires the utilities to buy the electricity back. If the savings is only $250 a month, then the value of the system would be roughly one-half. A more precise method would be to estimate maintenance and expenses (low usually) and additional taxes (if any) and capitalize it into a value. "Market Value" is not married to paired sales and the sales comparison approach. The methods of adjustments are well documented in the literature and income methods are well known and applied.

All of that is fine, but "savings" are not income.

Savings will vary just as competent management varies, and should be stabilized to the market. Because the value sought is market value, not value in use based on one guy's expense/savings.

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[Terrel L. Shields]

Because the value sought is market value, not value in use based on one guy's expense/savings.

in the absence of market sales, the best proxy is income. The same applies to mineral rights. Timber cruises, etc. That value is lump summed upon the property.

Certainly in any commercial rental, it is the net income that counts for the owner. And for the renter, savings on utilities would translate into lower rental costs.

In a house that is super-insulated, we'd likely recognize it as a "quality" adjustment. Those houses, likewise, are dissed by appraisers far more than owners or solar installers / geothermal installers, etc.

Under the current administration, I think we will see a push to recognize those values just as Fannie mae /FHA recognized them back in the 1970s when the government required lenders to lend an additional amount up to $7000 (i think if memory serves me well) for solar improvements in a purchase. That "energy efficient items" line. That's why it was put in the grid.

Frankly, I believe building codes will be strengthened to require all homes to be superinsulated, passive solar designed for each lot, and I believe it is a good thing. After we reach that break point, then the issue of whether or not energy efficiency is recognized by the market will be replaced by the recognition that the lack of such is a defect in the design.

 

[Appraising4u]

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Terrell, you are right. The electric company (PG&E) pays the owners for the energy the property produced over what they actually used and then have to turn it in as income for taxes. This is where the "income " part comes in.

Your post is interesting. I was thinking about this issue all day as I was driving around. how would a paired sales analysis even work to extract market value? Who is to say the comparable properties solar is as extensive as the subject's? What if the comparable property only has $30k worth of solar and still receive a $300 PG&E bill, that wouldn't be comparable with the subject and its high producing energy.

 

[Meandering]

in the absence of market sales, the best proxy is income. The same applies to mineral rights. Timber cruises, etc. That value is lump summed upon the property.

Correct these are tangibles. There are X numbers of black Cherry Trees and X numbers of white oak trees. There are approximately x tons/yards of coal in the ground, these are no different than saying there are X numbers of film at the photomat and any competent management should be able to sell X within X at $X - $X for a return of $X over the time frame.

this is not true when Harry homeowner has 6 little kids a $1,000 a month electric bill and puts in a $60k solar system for a $0 a month electric bill. And Andy Rooney's widow buys the house but spends most of her time in Florida with the grand kids and would have had a $30 a month electric bill but now has a $0 a month electric bill.

You need the market data to stabilize the income to typical.

Certainly in any commercial rental, it is the net income that counts for the owner. And for the renter, savings on utilities would translate into lower rental costs.

Yes, but that is contract rent, a definite income stream that is measurable and considered to be sustainable within certain parameters over the length of the lease and can be market tested for reasonableness.

This is not true of solar panel "savings".

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[Appraising4u]

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The cost of the system (assuming it is owned and not leased) is "sunk"; the contributory value of the system (if it exists, and there may be one) is dependent on anticipated net-savings of utility bills. There may be an additional "I'm Green" appeal in certain markets.
So the relationship between cost and value is based on the future benefits (savings) as judged by the market and not based on some percentage of the actual cost. Don't rely upon someone offering a set-percentage (Note that Mark Hurlock's 30% is based on a subject-specific market analysis/extraction, and not some arbitrary number).

I recommend you use the search function on this topic; there is a lot of good information contained in prior threads.


Also, I will caution you (and you may think I'm being overly cautious, which is fine ).
Presuming that your license level listed on this forum is correct, the value analysis of the system you are talking about could be considered "complex". By definition, a license-level appraiser cannot complete complex assignments (for FRT work, in California) without supervision and cannot become competent (even though USPAP allows it, the licensing provisions do not): complex assignments for a licensed-level appraiser would need to be done with a certified appraiser.
If you complete the assignment and the borrower is unhappy regarding the outcome (rightly or wrongly), and turns the report into the state, then the state will make a determination if the analysis (and the assignment) is complex or not. Even if you do everything letter-perfect (and I'm fine with assuming you will ) and the results are credible, the state is faced with having to decide if the assignment is complex. Obviously, if the state finds errors with the report, it would be easier to conclude the assignment was complex from the get-go.
So, take my advice for what you think it is worth, and be careful on how you proceed.

Good luck!

Dennis, I understand your concerns and I too have thought of that.. I don't know if the fact that the subject has such a significant amount of solar will actually make this a complex file. The subject is in a higher end residential tract surrounding a golf course. There are always comparable sales around, I just haven't found any with solar. Yes, the homes are larger than the typical home in Bakersfield however, they are under 1 mil.
The last person that appraised the property is also an AL, and she gave across the board adjustments for the solar. Does anyone think that fact that the subject has a solar makes it complex and therefore, out of my league?

 

[Meandering]

Does anyone think that fact that the subject has a solar makes it complex and therefore, out of my league?

If you had comps with solar panels,

would you still have the question?