Appraisal value for solar electric systems?

jms_az

I just got a bunch of solar panels installed; peak generation is just over 10kW and this past week I've been generating between 70-80kWh/day. I'm very happy w/ my install, hoping for a payback period of 9-10 years.

Here's my next challenge: I want to stop paying PMI on my mortgage. I believe that the house value after installing the solar panels, and market value increase since we bought the place 20 months ago, is enough to push my equity above the 20% point. But I'm nervous about the appraisal, and it's going to cost me a few hundred dollars.

I talked to my mortgage company and asked them what method their appraisers use to evaluate solar generating system house value. They said they didn't know, they use a 3rd party service. I asked the realtor we used when we bought our house, and she asked around, but from what she told me, the realtors seem clueless about it. She did point me at an online appraisers forum, but there seems to be a lot of uninformed talking heads: http://appraisersforum.com/showthread.php?t=196627 This and similar threads have a lot of appraisers saying it doesn't really add much value.

I've read the 2011 Berkeley National Labs study (mentioned here http://geostellar.com/site/geo-blog/how-much-do-solar-panels-add-your-home-value) that seems to reconfirm the 20:1 value to annual savings ratio.

What can I do to ensure that I get a fair appraisal (how do I document estimated electricity savings when I just got the system connected a few days ago???), or find out ahead of time whether it's not worth trying?

Cariboocoot

Re: Appraisal value for solar electric systems?

In theory the value of a Grid-Tie PV system is based on the amount of electricity it can produce over expected lifespan divided by the capital cost. The kW hour rate should then be compared to the grid power to see if it is profitable/has a 'payback' time. If it is then the increase in equity of the home would be based on the profit returned by the system over its lifetime. Some would argue you'd need to project utility rate increases into that, as the GT system will provide electricity at a fixed cost over time whereas it is entirely likely the utility rate will go up.

But capricious is the nature of man, and there are some people who would view the GT system not as an asset but as a liability, fearing the technology. They're wrong, but that doesn't change anything.

I've had more than one real estate agent tell me that PV systems on grid houses detract from the value whereas on off-grid houses it is now expected!

In your case you are at the mercy of whatever the mortgage company determines, and good luck to you as they have little incentive to see things your way.

BB.

Re: Appraisal value for solar electric systems?

If the value of the GT array has been added to your property tax--It may be possible to convince your mortgage company.

Otherwise, how much to buy down the mortgage to the 79% level?

Housing prices have been "in flux" the last 6 years or so--Perhaps a reassessment (without the GT) may be enough to get you out of paying for private mortgage insurance.

For residential property in our area, Zillow seems to give pretty good (sometimes conservative numbers) when compared to hiring some firm or actual sales..

-Bill

jms_az

Re: Appraisal value for solar electric systems?

>If the value of the GT array has been added to your property tax--It may be possible to convince your mortgage company.

Nope. One benefit of Arizona law: it gets excluded from property tax. Although I suppose it may be in the county records; that's an idea.

Housing here has gone up quite a bit in the past year or two, so I'm hopeful.

pleppik

Re: Appraisal value for solar electric systems?

There's a lot of PV installations in Arizona, so I would assume that most appraisers have had to grapple with this issue at some point. If the 20:1 ratio is what appraisers in the field actually use, and you expect a ten-year payback, then the PV system should add more than its cost to the home's value.

Since the installation is so new, your best bet might be to wait a few months for the appraisal so that you have documentation of the savings. Or, if your installer did an estimate of the annual production, perhaps you can provide that to the appraiser.

erikkiehle

Re: Appraisal value for solar electric systems?

Before you buy an appraisal go back to your loan docs and check the terms for the PMI. On my loan there was a minimum time as well as percentage. Even if I bought down or the market value increased the PMI couldn't be removed for a set period of years. Double-check your loan terms before paying hundreds on an appraisal that may not help.

jms_az

Re: Appraisal value for solar electric systems?

Thanks, already went down that road. It's not too bad. If I want to remove PMI, my terms are:

- if I don't make any substantial improvements, I either have to pay down to 80% LTV of the original home cost, or wait 2 years from when i got the loan (and then pay appraisal to update home value)
- if I do make substantial improvements, I don't need to wait the 2 years to pay appraisal to update home value.