A Day in the Life of Appraising Iowa-Nebraska-Florida

December 8th, 2022 2:38 PM

As a Certified Appraiser in Florida, I have had several occasions to appraise homes with solar panels.  Solar panels are becoming more and more common.  First, before valuing a solar system it is key to determine the ownership of the panels.  Most mortgage lenders, secondary market participants, and government mortgage insurers/guarantors have specific guidelines on giving value to Solar Panels. If the homeowner does not own the solar PV system, or it is leased, used as collateral for a personal property loan, or subject to a power purchase agreement (PPA) they are not considered real property and should not be "valued" as part of the real property. If the panels are owned and unincumbered, there are three approaches to determining the contributory value to the property. Income (GRM,Discounted Cash Flow), Cost, Sales Comparison.


The income and cost are relatively simple if you have all the data you need. The problem is getting the data. I use the homeowner, past utility bills, manufacturer, utility companies, county permits and a website called SEIA.  A great website PVValue.com does all the calculations for you. You simply plug in the data/factors, and it calculates the cost and income for you.  If we could base adjustments on these approaches, it would make valuing a home with a solar system very simple (as long as you have the factors). 

Keep in mind, appraisers are regulated by state and federal guidelines, and in addition appraisals are reported using lender guidelines.  The amount of electricity a PV system produces over its lifespan can be estimated by the appraiser by using the exact specifications of a specific PV system or obtained from the installer. It is not always possible to get the exact specifications of the subject or comparable PV systems as it is usually not disclosed by realtors in the MLS listings, and often not retained by a homeowner. If the details of a specific system cannot be obtained by the appraiser, the appraiser must outline the steps taken to attempt to collect the information and make extraordinary assumptions regarding the system or comparable homes. Fannie Mae and Freddie Mac regulate most of the mortgages and the guidelines are very clear that value cannot be given by these approaches alone and must be supported by the market. The market value approach requires that the appraiser demonstrate the impact on value based on paired sales analysis.  This can be a challenge given the lack of data.  There is an exception to this guideline, and that is FHA Insured loans.  In fact, FHA has a policy that a Solar System Purchase can be added on to the loan outside of the home’s value.  They also recognize there is a lack of data, and FHA guidelines support using the cost or income method.

If you are a homeowner or a real estate professional and want to include the contributory value of the subject’s system, please have a record of these items for the appraiser to assist them in the appraisal process.

PVValue.com in put factors: Address, Ownership type, System Watts, System Age, Warranty Period, Derate %, Degradation %, Discount %, Rebate % Array Type, Array Tilt, Array Azimuth, Inverter Size, Inverter Warranty Period, Age of Inverter, Replacement Cycle

Website Link https://www.seia.org/us-solar-market-insight

Posted by Alycia Hamaker on December 8th, 2022 2:38 PMLeave a Comment

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