Value For Solar System.

[KYLECODY]

I haven't read through the responses on here but I recently had one. The initial buyers of new construction shelled out the 50k, before tax credits, as an option, not a lease, and then ended up needing to move out of state. Here it saves you about 70% off your utility bill. Good deal but to recoup the initial costs would take over 10 years by my math to break even on cost. Great if you want to live in a home forever but who does that?

The realtor told me his dramatic opinion on how much it would increase the value of the home, blah blah..Luckily I had a model match, same upgrades, with solar that had just sold. No difference in value between it and other similar homes in the subdivision without solar...Market derived if possible, otherwise the arguments get way too confusing for most typical appraisers.

 

[KD247]

Who says you have to drill down and fine tune it to that degree. We're expressing an opinion. ...

That's right, and you're also correct that there will be different appeal in different neighborhoods. In some affluent ultra-hip neighborhoods, the contributory value could even be a multiple of the cost.

Ignoring, for a moment, the possible increased contribution of an entirely green home with an off-the-grid electrical system, I'd start by considering the value of the single component (the solar power system) by estimating a rough range of possible adjustments. The whole system could be added or replaced for $60,000 so that has to be the maximum adjustment. If it's functional and delivering savings and income equal of about (guessing here) $3,000/year then it's likely to have a minimum value of about $30,000. So, assuming some benefit and no significant disadvantages, it's probably worth somewhere between $30,000 and $60,000.

For a home that's worth somewhere close to $1,000,000 (another guess) that's only about a 3% spread between the minimum and maximum adjustments. This appraisal is likely to have so many other, more significant variables that I'm pretty sure a 3% decision gets lost in the noise. That's why I propose considering the home's entire energy efficient package as a single amenity, or even considering the whole ball of wax as part of the Quality adjustment.

 

[CANative]

Solar companies are struggling to sell these things. They have to come up with some pretty creative marketing programs and "deals." I don't think they're as popular as some claim and the novelty of being "green" and politically correct has been eclipsed by the problems in the economy and especially the housing market. And who wants to pay their utility bill in advance for 10 or 20 years? And pay for the interest on the loan on top of that?

Using income capitalization methods is probably just as bad as using cost analysis methods. But when there are no sales what are you going to do?

There is no correct or incorrect answer to an opinion. If you think your market is in love with these but can't find sales I say it's logical to assume people are paying at least what they cost.

 

[KD247]

A while ago, I installed a solar charging system on our camper. I was pleased that for $600 I could replicate the DIY kits that sell for more than $2,000.

It seems that the marketing of solar panels is changing. Not long ago, every local solar-supplies firm seemed to have a website that looked like an infomercial. The market was definitely focused more on sales techniques than the benefits of the product. Now, Home Depot and Lowes are selling panels and supplies. Even Costco has a complete 5200W grid-tied system for $13,000. After a 30% tax credit, my breakeven point would be about 5-6 years out. It's getting better, and if the payback period drops a few more years, I'd probably install one.

A couple of thoughts: as the panel prices drop and they become more readily available and easier to install, more people will consider buying systems. But, it's hard not to think that the judge's $60,000 system will soon have the same value as a 10 year old computer.

 

[VolcanoLvr]

KD has a good point:
"That's why I propose considering the home's entire energy efficient package as a single amenity, or even considering the whole ball of wax as part of the Quality adjustment."

I had a similar assignment to the OP's over a year ago. No sales with similar rooftop, grid-tied solar system. I wound up making a quality adjustment - making the home 'excellent' and the comps 'average' ... this was pre-UAD. The net result was an adjustment of about $15,000. Written info explained the reasoning. No call-backs.

The capitalization cost methods need a way to factor in maintenance and repair of the solar panels. They do wear out, or even damaged. So do inverters to convert the DC to AC, and the power panel intertie components. So the net present value may not be as high as the proponents suggest.

 

[NC Old Guy]

Maybe it has been noted elsewhere since I didn't read every post. Fannie had a simple form for this years ago. Figure out what the "savings" are, use the mortgage rate if I recall correctly, and discount the "income/savings" stream for 7 (as I recall) years. The 7 years recognizes that these items wear out, need maintenance, original owners move, etc. Simplistic? Yes. Any less accurate than some of the more convoluted ways of doing things? Probably not. I sometimes think that complexity is inserted to overwhelm the idea that perhaps it really isn't as significant as the PC community wants to think it is.

 

[CANative]

Electric bill $3600. With solar $800. Savings $2800. Mortgage rate 3.75. Value = $74,667?

 

[KD247]

Seven years of $2,800/yr at 3.75% = $17,000.

This is probably the most conservative estimate one could make and slightly less than my minimum guesstimate of $30,000 but not far off, considering the big picture. The small amount of savings (relative to the value of the house and the cost of maintenance/taxes/HOA) strengthens the argument that any significant value lies in the emotional appeal, not the electrical cost savings.

So, in a case like this, does the placement of the solar panels affect value? Is a solar electrical system worth less if it's hidden at the rear of the house? Is it worth more if it's visible from the street and the owners can show off an impressive array of panels?

A few years ago, while cycling, I enjoyed watching the construction progress on a fairly high quality house at the south end of Solimar Beach. It was interesting to see that they were putting solar panels on the roof, but when they almost completely covered a 100' long portion of the roof with them, I couldn't help but think, at that point, they were just showing off. Relative to the total cost of the project, it's hard to see how the energy cost savings would be worth the trouble.

 

[Meandering]

Here you go,

Accepted appraisal methodology.

Which might work until one of your comps is a "green" home and then you have to know, or research HERS Index rating converted into value for each of the comps. But in the mean time, here is the accepted methodology. So much for buy and selling houses.

Valuing High Performance Houses
http://www.appraisalinstitute.org/library/bok/highperformance.pdf

 

[Meandering]

Wait!

Here is a new tool to help you do it.

http://www.deadlinenews.com/2012/02/06/appraising-solar-powers-true-value/