Value For Solar System.

[prasercat]

Oh come on Cat,

It's always a $4$ adjustment for the cost, then play with some depreciation to make that a value. Use the DCF to back it up, because every day the sun shines and every year it shines every day so why should there be any considerations other that the costs to install and the money saved?

I posted the link to the Appraisal Institute's guidance awhile back in this thread. That is approved appraisal methodology. Otherwise, it's just gonna have to depend on where you are and how your local market perceives it.

But I won't bet granny is so quick to shovel the roof in the snow to save some money. I wouldn't be.

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Playing devils advocate are you? I did read the entire thread and I do appreciate your posts and links provided.

I don't think DCF can be used to "back up" the depreciated cost contribution (when there is such a contribution) for single family homes, since income or indirect income ('savings') should not be value relevant.

When I mention depreciated cost, I mean the cost to acquire net of rebates, credits. Ken mentioned that many 60k systems end up costing only 10k or so to acquire - that was a great point. Any cost calculation would need to involve the actual acquisition cost of the particular system as of the effective date, which is really the point of the cost approach as the first step before applying depreciation and obsolescence. I know that, you know that.

You made the point earlier, which is, if the decision is not to apply the income approach/discounted cash flow due to property and/or neighborhood considerations, it would not make sense to apply the income approach for the valuation of the solar PV system, which I agree with 100%. Like the highest and best use analysis, there is a logical flow chart for PV systems and this should be the first test in considering the income/present value approach.

Personally, I don't care if AI wants us to use it for the solar on the attached DOG HOUSE too, DCF is not applicable to most single family home situations. I will eventually take their green course, but I thought I would let this subject mature a bit before doing so to allow the corporate sales pitch to evolve into buyer's remorse and a more realistic assessment.

Unless the house is off the grid, in which case the subject and most or all the neighbors will be using the Solar Voltaic system out of necessity, I am not convinced I'll be applying a contributory value for these PV systems with single family homes; and then it will be using the depreciated acquisition cost, not the present value calculated from the "savings".

If the single family home is in an area where power interruptions are common, I'd be more inclined to consider a contributory value for the PV system; as I would likely give the built-in emergency generator a depreciated cost contributory value in such areas.

 

[Elliott]

Off grid? If the comps are on-grid, why would there be an adjustment? Both the subject and comparable have electricity. The on-grid pays 12 cents a KW, and the off-grid has to establish a sinking fund for batteries and panel replacement.

If your comparing off-grid with off-grid, why would there be an adjustment?

 

[prasercat]

Off grid? If the comps are on-grid, why would there be an adjustment? Both the subject and comparable have electricity. The on-grid pays 12 cents a KW, and the off-grid has to establish a sinking fund for batteries and panel replacement.

If your comparing off-grid with off-grid, why would there be an adjustment?

I'm saying, for single family homes, if the PV systems are in an area where it is a necessity (off the grid market), then I would likely considered it as providing a depreciated acquisition cost contributory value to the subject. In markets that are on the grid (and in the absence of a clear market adoption) it is a redundancy to the grid and I would not normally apply a contributory value.

 

[Meandering]

Cat,

I agree with both you and Elliot.

We have enough sales here with solar panels, and geo thermal and back up hardwired generators to show market reaction and don't need to invent numbers that can not be stabilized to the market due to a lack of data.

But then again, this is an area with frequent power outages, snow, and less sun light than other areas of the country.

So to the desert dwellers, I tip my hat. But here, there is no contributory value in today's market. In a couple of years, maybe, but now, nope, not here.

I took the "green" class two years ago.

It was good for the information on the lead paint laws and the geo thermal issue, super insulation and other "green" concerns.

But when I walk into so many homes where they let their children write on the walls, I have to wonder about society in general anymore.




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[Mountain Man]

Valuing the Solar System would be a mighty big job... comp photos all the way out to Pluto would be a daunting commute too.

 

[Elliott]

I doubt AMCs would pay for the additional trip fee to the rock Pluto.

 

[KD247]

... If the single family home is in an area where power interruptions are common, I'd be more inclined to consider a contributory value for the PV system; as I would likely give the built-in emergency generator a depreciated cost contributory value in such areas.

It's kind of nit-picky, but for homes that are off the grid, or for areas with frequent power outages, wouldn't it simply be a matter of the benefit of solar panels offsetting the detriments of the location? Net zero adjustment in the Sales Comparison and an equalization of site cost in the Cost Approach. In those areas, I'd look at it less as an amenity and more as a cost of doing business (if you can apply that term to a residence).

The electric car analogy is a good one. Do buyers of solar powered homes pay any more attention to the cash flow than does the buyer of an electric car? What's the resale value like on electric cars? I'd guess that buyers pay an inordinate premium for new and want a significant discount for used, similar to how I think the market would react to new and used solar electrical systems.

 

[Mountain Man]

I doubt AMCs would pay for the additional trip fee to the rock Pluto.

Due date may be an issue too, don't think there's WiFi out that far.

 

[Terrel L. Shields]

I would think there a world of difference in Sunny Albuquerque and dark dank Pocono, N PA.... in terms of the angle and amount of sunlight... Never mind Marion's sunny disposition

I think we could all do a lot more "income" approaches on SFR considering a whole lot of markets are now at least 20-30% rentals and a high percent of them are rentals run by folks who are owners solely to generate income. We COULD do the income approach, not because it isn't applicable but because it ain't necessary....ditto cost. It may not be necessary but it certainly can be applied in almost any improved property. But that is off topic... I digress.

I still think an adjustment needs to rely upon the income (savings) rather than depreciated cost or paired sales. The lack of reliable data is an issue and the money saved can be estimated.... and the "down and dirty" way is savings x GRM...it works...maybe not as precisely as a DCF, nor the Sandia Labs calculus, but it works, it is defensible, and eventually we'll have to use it or something as more and more of these homes are sold. Passive solar? We've got to at least learn when a passive design exists. They are not always easy to spot if you don't know what to look for.

 

[prasercat]

I would think there a world of difference in Sunny Albuquerque and dark dank Pocono, N PA.... in terms of the angle and amount of sunlight... Never mind Marion's sunny disposition

I think we could all do a lot more "income" approaches on SFR considering a whole lot of markets are now at least 20-30% rentals and a high percent of them are rentals run by folks who are owners solely to generate income. We COULD do the income approach, not because it isn't applicable but because it ain't necessary....ditto cost. It may not be necessary but it certainly can be applied in almost any improved property. But that is off topic... I digress.

I still think an adjustment needs to rely upon the income (savings) rather than depreciated cost or paired sales. The lack of reliable data is an issue and the money saved can be estimated.... and the "down and dirty" way is savings x GRM...it works...maybe not as precisely as a DCF, nor the Sandia Labs calculus, but it works, it is defensible, and eventually we'll have to use it or something as more and more of these homes are sold. Passive solar? We've got to at least learn when a passive design exists. They are not always easy to spot if you don't know what to look for.

It would be helpful if the solar panels often went with the seller, and if the seller included them in the sale, it would be a concession. Then we would have a lot more data about what people are paying for this "option" by extracting them from the concessions.