whole home generator and the cost approach

[KJR2008]

Subject property has a whole home generator in an area where this is not typical of homes. I have mentioned in the overall quality rating of the subject property, but not given value as a separate line item adjustment. Should this be entered in the CA section and given some functional depreciation? Any thoughts would be appreciated, Thanks.

 

[Michigan CG]

Market participants. Call the five most respected Realtors in your market and ask them how much higher would they list a home with a generator than without a generator. You will most likely find 100% EO.

 

[Vetteman]

People generally are not willing to pay any more for a house with a generator. It may be a nice selling feature to an interested buyer...if the generator is in good condition. If it is older or has not been properly maintained, it is just another headache and more than likely will not function when called upon. After a hurricane, when the utilities are down for weeks or months, people are willing to pay anything for a portable mickey-mouse noisy gasoline-powered generator...if they can find one. Without electricity, a house is pretty much worthless.

 

[JTip]

What kind of generator is it? A gas powered one, propane/natural gas?

It's really not the generator itself, it's the connection to the house/breaker box that is key. How are you going to run your furnace without proper installation? You can't roll out a 110 extension cord to the hvac.

I just had my electrician get my home set up a couple months ago. $500 for the conversion, 6000 watts of power and I am ready to be off the grid. Any increase in value to my house? No, but peace of mind is priceless.

 

[Tom Woolford]

I always consider them personal property. Mention it, disclose no contributory value and move on. Considering probably only 1 out of 500 homes have them, its not a very popular feature, and likely is an overimprovement. That said, I have one. Working from home, 10 days without electric (2004 - Charley, Frances) was enough for me.

 

[Kevin Keck]

My guess would be no. Do you make single adjustments in the cost approach for any other similar items? Furnaces, built-in appliances, etc.?

 

[Restrain]

Can the house function without it? Can it be removed easily? I would call it personal property, comment, and move on. If you are in an area where these things are common (hurricane areas) then there should be sales with and without, but I don't think you can prove a contributory value given the nature of the market.

 

[incognito]

My guess would be no. Do you make single adjustments in the cost approach for any other similar items? Furnaces, built-in appliances, etc.?

???? One does not adjust for anything in the cost approach...

You will most likely find 100% EO.

EO? (typo?)

I always consider them personal property.

The law of fixtures dictates whether it is PP or RE. The law of fixtures can be region or location specific. In my area, (east coast of Florida in a thunderstorm, lightening and hurricane mecca) these generators, typically 15KV, are permanently installed, bolted to dedicated slabs, and hard wired to a transfer switch and the main breaker panel of the house. They have permanent connections to public gas (or rarely a diesel tank in more rural areas) This is real estate.

Should it be included in the cost approach? OF COURSE. All items of real estate need to be included in the cost approach under RCN. Line item? If you please, but it must be included...

And yes, it is likely that functional would be indicated. However, I would not be so quick to jump to conclusions. In areas with frequent lightening storms, frequent hurricanes, and frequent power outages, these can have true contributory value! In places in the Florida Keyes, the LACK of one could be considered CURABLE Functional!

 

[JSmith43]

Everyone knows EO stands for super-adequacy when typing and thinking in a hurry.

 

[Terrel L. Shields]

People generally are not willing to pay any more for a house with a generator

That might be a local situation. Our region has been blessed with 2 ice storms, floods, tornados, etc. for the past 3 years. Many of us have suffered power outages of from 3 - 20 or more days in those periods. The hospital in Joplin that was not destroyed ran on back up generators for over one week.... wouldn't you think that it was a functional inadequacy if a hospital did not have power back up? I certainly wouldn't want to be in the middle of an operation....

EO? A whole house generator is "On" the premises therefore is a functional, not an external issue. All the poultry farms in our area required them and they are automated to autorun if the power is lost and will run 5 min. after the power comes back on to make sure it lasts. They also "self-exercise" - every week the engine autostarts and runs for 20 minutes or so.

A "whole house" generator is generally an auto run system now. For some $7000 I can install at my power pole to start and run the entire house. 6Kva usually is adequate for most homes. They are fixed features that look almost like the AC compressor, thus I would not treat them as "personal property".

Yes, add it to the cost approach imho, but unless I can demonstrate that such features add to value explicitly and that addition is sufficiently large to be adequately measurable then I am more likely to "lump sum" with other "site improvements." as a judgment call.

In a poultry farm, lacking such a system is fatal to a contract, therefore would be a "cost to cure" addition to the appraisal. In a home, more nebulous but if the power has been out for over 3 hours in the past 2 years, I bet there is a market reaction to it and it is one hot "selling feature". If you adjuste for "fireplace" then certainly they are going to be as likely to add value as a fireplace in my region.