Valuing the Contribution of Solar Panels

Valuing the Contribution of Solar Panels

How to value the appraised property with solar panels


Valuing the contribution of solar panels on homes has become one of the trickiest aspects of our work over the past decade.

Attached is a very well written 45 page report that will help all appraisers better understand this issue, and perhaps lead you in the right direction when you encounter homes with solar panels. I strongly recommend that you print a copy for your library. Oh, and actually read it!

The basis of the report is how to value the appraised property with solar panels, when no comps have them – using paired sale analysis.

By the way, Solar PV means Solar Photo-Voltaic. This panels are designed to convert sunshine (or even cloudy daylight) into usable electrical energy. SPV systems produce DC voltage and current which can be stored in batteries, or run through an ‘inverter’ which changes the DC into 110 volt alternating current – which is what is wired in most homes wall outlets and lights. Solar PV systems can also be designed to ‘back feed’ the utility electric power grid if more power is produced by the installed system than the home consumes in normal usage.

Now, while this report well documents the procedures used to arrive at the conclusions, appraisers need to be very cautious about applying the ‘numbers’ in the report to your local current assignment. The authors are careful to explain this. Secondly, the data used for the analysis is from 2011 – 2013, so it’s not up to date.

Kudos to the 8 different appraisers in 6 different states who provided the paired sales used in the case studies. And to Sandra Adomatis, SRA, who was the primary author, assisted by Ben Hoen from Lawrence Berkeley National Laboratory.

By the way, a different ‘solar panel’ system is designed to heat water. That kind of system is not covered in this report.

Dave Towne
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on

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39 Responses

  1. Avatar BC says:

    They add no value in my area which is in Boston. They are common in lower income neighborhoods, but are typically leased (which makes sense sine many people live pay check to pay check) in the higher income neighborhoods many people do not like the aesthetic look which makes a multi million dollar home look UGLY! The only people making out are appraisal instructors who now have a new class which they can charge for! (No one buys a house for Solar Panels, it is always comes down to location & condition)

    • Avatar Craig says:

      I couldnt disagree with you more.  I also live in the Boston area (metrowest), and most arrays from homeowners I spoke to prior to purchasing my PV array are also purchased, not leased or part of a PPA.  Although I will grant you that in lower income brackets, lease/PPA is more common as the up front cost of a purchase is high before federal tax credits, SRECs, and so forth.

      I also disagree that PV is not a selling point or that it adds value to the home.  Since my PV installation, I have not paid a single penny to National Grid for electricity.  Quite the reverse, I’m running a substantial credit.  So I can truthfully advertise that a selling point of this home is never having to pay a utility bill ever again.  Factor in SREC payments, that’s an additional $2,000-$4,000 of income per year.

      As for aesthetics, you either love them or you don’t.  I don’t even notice them anymore, and half the people who’ve visited since the installation didnt even notice them and they are in full view facing the street.

  2. Avatar MCV says:

    @BC : It’s not about buying a house for the solar system. It’s about the contributory value in our report, just like pools, 3 car garages, etc… In Calif, Nevada and Arizona it’s a very big deal

  3. Avatar BC says:

    MVC I’m looking at it in my own little micro world.  I have no doubt that in warm weather sunny states where A/C is used year round they may have contributory value, however in my market area they are USELESS, same as a pool which gets 3 months a year use, but has to be maintained and causes higher insurance premiums and often causes a home to sell for less, than if it didn’t have one.

    I had a solar panel company come to my house  a few months ago, it would cost 21k to buy, with the tax credit it would be 14k out of pocket, even if it drops my electricity bill $50 per month, that is approx $600 per year it will take 15+- years just to recoup the cost, and if you remember that good old class about the future value of a dollar being worth a lot less 20 yrs from now, it is just a bad investment.  The green energy lobby is really cramming these things down the country’s throughout, but the old adage hold true.  “All REAL ESTATE IS LOCAL”

  4. Avatar Bill Johnson says:

    In CA it seems that every other house now has solar panels, however it seems to be a feature that people install when they plan on being there for the next 30 years (they don’t sale). In other words, even in CA and the micro world I work in, its very difficult to find a closed sale comp that has solar panels like the subject (Refinance). Builders include them and charge a premium, the general public does give them value. The issue becomes the $25,000 gross cost, minus federal, state, local, company give always, etc. and determining the true net cost versus the buyers reaction to the feature. As new, do they add value (worth more than they cost up front) or do they add value to the property while costing more than they add? Agents have no clue as to the value, leased versus owned, and solar companies advertise the benefit of adding value when often they don’t (net cost exceeds market value).

  5. Avatar Craig says:

    @BC.  Pools are worthless in the Boston area, as they are only useful a few months a year.  PV produce power year round.

    I’m not sure what size system you were quoted (details matter), but my PV system reduced my electricity bill by $200/month, which is a complete elimination of that bill.  Factor in SREC payments, and my ROI is approximately 10 years.  My TCO also includes the 25 year warranty on all components.  My house siting is also the worse possible orientation for solar, with the roof facing east-west where of course south facing is optimal.  And I’m still overproducing on the design’s best case estimates.

    What you also did not factor in is the rising cost of electricity.  Pilgrim is going offline, multiple coal/oil plants are shutting down, and this area lacks the infrastructure to import electricity from outside sources such as Canadian hydro.  You must already see that NGrid has doubled its rates this month due to natural gas shortages.  This will even further reduce the time frame of my ROI.

    No green lobby forced this down my throat.  I made the decision based on simple, fact based math.  ANd it’s paid off and then some.

  6. Avatar BC says:

    Wow, I guess some of you with solar panels are pretty sensitive about their worth!  My point is that in my market area, I do not see any contributory value and thus far have never made an adjustment for them.  If your staying in your home for the long term and are getting a nice savings, that’s great. Here in New England, the company told me that from November through March you won’t see much savings as the sun is so low during winter, for me it just seemed like a bad investment.

    I just installed a pellet stove in my family rm which I love, cost and installation was 6k.  If I were to list my house tomorrow, I doubt I would even get that back, but it keeps my oil costs way down provides great heat and is cozy.  If I were to get the panels, I doubt I would be up on my roof admiring my lower electrical bill.  Just my 2 cents.  Good luck out there.

  7. Avatar Craig says:

    You are absolutely correct that in winter months, the sun is weaker/lower and there’s a whole lot less hours of it, and hence production drops sharply.  Add in ~10 days when your panels will be covered by snow and produce nothing, and it gets even worse.

    That said, even in the weaker months starting in October-November, my PV production equals my home’s consumption, and that’s with running a home office which is by far my home’s largest power consumer.  Right about now is when that balance tips and I start to have to net import power from the grid.  However, given the large net metering credit my PV builds up in the summer months when production greatly exceeds consumption even with AC usage, I still have no electricity bill.  By February I’ve used up my credit with NGrid, but by then I’m back to higher production.

    SREC payments made to me are very tangible.  A pellet/wood stove which cuts your heating bills but has no direct income/value.  SREC payments are cash payments to the homeowner in the thousands of dollars range every year.

  8. BC, Bill, & others.

    1. IF you get the chance, take one of Sandy’s courses. I was a skeptic going in on her three AI courses. In fact, if they had not been free in my area I would not have taken them. AFTER taking them and passing the tests, I am a convert. BTW-though I AM listed in the AI’s Green Registry (non member section) MY AGA does NOT stand for Accredited Green Appraiser; it is and will remain American Guild of Appraisers. Anyway…

    2. Her courses previously did not deal with paired sales nearly as much as surrogates and income capitalization methodologies where there ARE NO nearby COMPS with solar. I’d heartily recommend taking all three of her AI Credit courses. Especially if you can find an energy sponsor underwriting the cost. She teaches all across the country. Get on Rey Cano’s mailing list at -he always follows this kind of stuff and tells us ways to save money.

    3. When we say a pool (or solar) contributes NO, or ZERO  value, we are not saying we couldn’t find any comps to support it. We are saying that we KNOW that the market does not pay or recognize ANY premium for solar similar to whatever our subject is; and that the absence of comparables is related to that ‘fact.’ Simply not being able to find data to support an adjustment does not mean that the market does not recognize a feature. As she points out it is just as wrong under USPAP to state “zero value” without adequate support as it is to make specific dollar adjustments without adequate support.

    Like BC says if the savings are only $50 a month there may NOT be contributory value . On the other hand if the savings are $150 a month ($1,800 a year) then there could be. Say you have a GRM of 200. That’s potentially $30,000. Its more complicated than that though. I’ve over simplified it. She teaches a particular discounted cash flow approach in her classes along with the FREE software and data sites to get the necessary information. I just think a GRM is an easier method to explain OR use. The DCF looks more impressive though.

    One of the reasons we find so little data in  many areas is that MLS and agents have not yet learned what is significant solar information for solar yet. As they do; and as the market gains greater acceptance of owned systems I think we’ll see better data. Heck, I think I can even make an argument for LEASED systems-though it becomes far more complicated; and before this article FNMA would not allow credit for them. I’ll have to go back and check now.

    As for PPAs, (Elon Musk hustle?); BEWARE! Same with any financing that is Bond or direct assessment based and becomes a superior lien to the first TD. A lot of the marketing for solar is similar to the aluminum siding hustles of the 1950’s. Essentially a good product with a lot of benefits, subjected to so many variants and cons that its actual benefits became lost in the concerns over consumer fraud associated with it. The PPA I looked at required me to buy ALL the power produced from the system regardless of usage and had a built in annual 7% increase. No thanks!

    I dare you to take her course and then drive down a street with PVAs or SPVs as they are now calling them. You will no be able to stop yourself from looking to see if they are monocrystaline or polycrystalline cells. Downright distracting!


  9. JH Colorado JH Colorado says:

    Paired sales and economic savings analysis is worthless for leased systems vs owned systems.  If the appraisers do not identify and match based on that core difference, they’re doing it wrong from the start.  Solar represents personal savings if the systems are leased, and does not represent anything near the similar real property value boost, as if they were owned systems.  It’s poor form to even consider them contributing to real property value, if they’re leased.  Don’t pay the bill and you’ll have holes in your roof instead of panels.  Like what’s the contributing value of a shed I still make payments on, from the rent a center….  Leased system solar homes are rolling the dice that product costs, banking allowability, and tariffs related to this technology will continue on within a narrow range of consistent consideration.  Just look at what’s happening in New Zealand and Hawaii as a good example of things to come.  When solar goes gangbusters, the energy companies propose awesome new legislation like charging customers based on traditional use, even if they’re now completely off grid.  Got to maintain the service infrastructure, for public well being, and all of that.  The only solar system which deserves a boost in the appraisal analysis, is an owned system.  Otherwise, it’s as much of a leased responsibility as it is a benefit, given the uncertainties over the long term.  How many appraisers have boosted for solar, on leased and non transferable systems?  I stopped by inverters r us the other day, and it makes a lot more sense to have non integrated solar, and build up your system over time.  Me and this other appraiser were joking around if we should look for a submarine or a tank deep cycle battery second hand.

  10. The big problem right now with paired sales is that real estate agents don’t know what they are doing when pricing homes with solar PV systems. When they are not pricing in PV systems, there will be no discernible contributory value.

    But once Realtors understand that there are logical methodologies, based upon the income approach, and apply them, we will begin to be able to extract a system value from paired sales. The best option for Realtors today is to hire an appraiser with the education and experience in valuing PV systems for estimating a contributory value for the system based upon the present value of energy savings over the course of the economic life.

    With regard to leased systems and PPAs, people are just signing long term contracts to buy power at a specific price, from a specific power company for a 25 year period. You will have to sell a new buyer on the benefits of buying power this way. But the benefits are very different from an owned system that transfers ownership with the home that does not require monthly payments to a third party for an extended period of time.

    • An even bigger problem is that the residential solar and building industry has not settled on a single common energy efficiency standard. Some MLS will report energy ratings by one system where others use different systems or the same mls uses multiple descriptors.

      Until that happens, the market is not going to settle into a definable market value for solar or any other kind of energy features.

      Anyone remember Gold Medallion? From the mid ’60s? Turned out to be a fad-but a significant one for about 10 years. I remember as an agent in the early 70’s people still were impressed by the Gold medallion by the doorbell.

  11. Avatar Richard Johnson says:

    How to value a RESIDENTIAL Photovoltaic System (not commercial)

    1- Collect sales of all homes in an area with OWNED systems. This might require some work…..that’s OK, we do this process for almost all adjustments in our reports, along with Market Analysis. (big data)

    2- Use paired sales comparisons for each of the sales with an OWNED system. You will need a credible number of sales with PV, say 10 or so. Select at least 3 paired sales for each of the 10.

    3- Analyze the Data, it will be the “Market Response” to PV in your area.

    BUT I DON’T HAVE ANY SALES WITH PV….. Oh, you mean the market has spoken in your area and the answer is that there is NO, or limited DEMAND for this feature? – There is your analysis – NO DEMAND = NO VALUE

    Doing Cost Method back-flips and mixing cost calculations into a Market Response Sales Comparison Method is the ultimate Apples and Oranges math problem…. stick with one Method, Cost or Market!

    What is the Question we are called to answer in almost all assignment?

    It is not, how much value can you impart to a feature because the foolish public isn’t willing to pay more for a home with PV, yes, they may be foolish or don’t like the math of a PV system, they ALL VOTE WITH THEIR PURCHASE OFFER, our job is to listen and report.

    • Avatar Jay says:

      Just because your market doesn’t have sales doesn’t mean there is no demand, is means there is no supply for sure. However, if you are going to try and claim there is no sales it likely means you either aren’t looking hard enough, absolutely zero solar sales is highly unlikely, or the people who have installed solar haven’t sold yet. There is a massive difference between sales and demand; at one point in the not too distant past there was no such thing as a crossover SUV so there were no sales so by your logic there is no demand and therefore, by your logic, they had no value, yet here we are.

      At the end of the day, every single analysis has concluded that OWNED PV systems add value to homes. FHA now requires you to properly appraise these systems as well because even they agree owned PV adds value.

      • Agreed.

        Some appraisers do this with everything they cannot easily segregate. The absence of data does NOT mean no market recognition. We either broaden our market until we can find quantitative data OR consider the impact qualitatively based on anecdotal information and broad regional or national market data.

        One of the best takeaways I had from my course taught by Sandy Amonatis was the use of surrogates and alternate methods.

        Oh sure, we can do the long drawn out approach emphasized assuming seller or the agent made all the specifics available about the system and manufacturer, but in the end, we have so many assumption based calculations I question whether it’s really more accurate than the ‘easy’ method.
        I’m not knocking the method. Just pointing out options.

        It’s also (IMHO) about $1,000 to $1,500+- extra work. That’s fine if I contracted for it, but not so great if I was told to expect an ‘ordinary’ cookie cutter and find 56 newest generation panels, back up generator and battery system in place. Where the only thing I am told (or perhaps shown) is a reduced bill of $75 a month versus a prior average bill of $350. No other information except what’s on the inverter. No age-only that it is ‘newer’. No documents at all. Or perhaps the assignment is right after local articles showing PG&E customers with solar and Teslas didn’t fare any better than those without solar. There’s A lot to be considered.

        I remind appraisers we are the experts. We often have to work in difficult data environments. We are supposed to use our heads-not ONLY RELY on purely paired sales data-driven science in markets where buyers and sellers don’t rely on such data.

        ALL SFRs have some rate that would be charged if they were to be rented. Whether its an owner dominated market or not. It is at least a hypothetical rental rate. That information can be translated into economic rent for both the subject and all comparables. (There WILL still be some EAs folks!).

        A gross rent multiplier can be developed for the comparable sales. In my area 144 is not uncommon (though it can be MUCH more or less too). $350-$75 = $275 monthly savings (owned system). $275 x 144 = $39,600. Say $40k. Sensitivity analysis needs to be considered. On a 4,000 sf $700,000 to $800,000 property $40k may be in the ballpark. On a 1,500 sf $250,000+- property its possibly going to be very high. Perhaps instead of a gross multiplier, a NET income multiplier is more applicable.

        In my $800k scenario, I’m adjusting $40k and explaining my assumptions. IF I have one or two solar houses, I’m golden because it should all reconcile. If not, I am left with potential across the board adjustments. THIS is where and why YOU are needed instead of an AVM. MAYBE $40k was simply too high; maybe it IS an over improvement. Maybe the seller simply paid too much for the system.

        My point is that there is enough state, regional and national data to credibly support either a point value or a probable value range. If not, then consider it qualitatively.

      • Avatar Richard Johnson says:

        Really?, FHA believes that PV ADDS VALUE? their words? knowing FHA, I think not, but they very likely addressed PV by restating their overall desire that Appraiser’s identify the contributory value of any feature, (real not personal property).

        We have lots of PV systems in my area, leased and owned so WE DO HAVE DEMAND for PV. In a market WITH NO SALES, as you identify, IS the definition of NO or VERY LITTLE demand, and again by definition, is very unlikely to be valued by the MARKET.

        • Respectfully Richard, you are simply wrong. Your statement is inaccurate. “NO SALES, as you identify, IS the definition of NO or VERY LITTLE demand, and again by definition, is very unlikely to be valued by the MARKET.”

          Use of the phrase “very unlikely” itself is an ambiguous opinion based qualifier without support.

          • Avatar Richard Johnson says:

            No sure of your point, how about the lack of this feature CAN indicate a lack of market demand, among other reasons. If the market has demand for a feature, you will find it, lets keep this common sense. Your point is not very clear, can you restate it in terms an underwriter could comprehend. You are trying to reference my statement and make a comment at the same time, please try again, thank you

            • Restate something in terms an Underwriter would understand? Not likely.

              I am simply saying that YOUR statement as quoted in my post is simply wrong. As for ‘common sense’ that is also something I find generally lacking among UWs. RE appraisal and practices are not based on ‘common sense’ UW sophistry.

              You made a factually incorrect statement based on an incorrect premise and assumption.

  12. Avatar Mitch Gibson says:

    Would it be considered malpractice for a residential appraiser to completely ignore the value that a solar PV system adds or reduces the value of a homes value? It seems obvious if you have two identical properties, located along side of each other, one has a solar PV system and the other does not, where the solar home saves the home owner $200 per month for the next 25 years compared to the home without, that the Solar PV home should have a higher value. My most recent appraisals of my home did not include any valuation. Nor did the appraiser ask any questions, such as when it was install, June of 2019, installation cost (probably irrelevant), or what it is saving me annually (highly relevant) as that value could be used along with a market interest rate to determine the present value of a stream of savings over the course of 20 to 25 years to find the value generated. Love to hear whether burying your head in sand is the right approach? Thanks

    • 1st Question “yes.”

      Re second obvious assumption…” Not necessarily” see following comments. This is one of those “It depends” kinds of questions re ‘logic’.

      Some systems (power purchases) obligate a user to buy all the electricity the system produces. There are annual adjustment premiums that have to be paid such as my own Mother’s LEASED system). That brings up the other issue. If a PV system is leased it is not by definition real estate. It is a personal property lease that simply is attached to the house.

      The majority of appraisers have NOT taken a credible solar course and should not be doing any real estate with any kind of solar systems attached due to competency requirements. Unfortunately, many either do them out of ignorance thinking the internet or blog knowledge is enough to gain the requisite competency. In other instances, the lenders tell them to ‘give it no value’ without ever defining whether or not it is real estate.(Directed assumptions)

      SUPPORTING a discounted cash flow valuation analysis could be an all-day ordeal with the end result that inadequate data is available to select a credible discount rate. Using the techniques taught in the BEST classes is in my opinion makes this about a $1,500 job IN ADDITION to the underlying appraisal. (It’s really complex and time-consuming). We cannot simply use ‘logic’. We must also find support for that logic and therein lies the real rub. Bad data (or lack of data). California Solar power market saturation is under 1% compared to other states in the 10% to 20% ranges. IF you are in a state with maximum saturation, DCF required data MAY be available. If you are in California, it isn’t widely available.

      Many if not most appraisers don’t understand (or accept) that they can hypothesize a market rent for the comparable sales in order to develop a credible GRM which in turn can be applied to your monthly savings as an alternative valuation technique. It’s the easiest method out there to use (& support) though the other methods certainly will baffle most readers beyond any ability to criticize. Did you supply the appraiser with your DOCUMENTED cost breakdown, manufacturer’s system specifics, and guarantees?

      Now the $64,000 question…”Is your system owned outright (free and clear) or are your savings stated net after lease-contract obligations?” By the way, that question alone takes your property from a non-complex to a complex assignment requiring a minimum of a certified residential appraiser to complete the job. The fine-line distinction between the exact nature of the ownership rights involved MAY even require a general certified appraiser with more in-depth experience in specific ownership rights affected by various lease types. NO AMC which actually orders appraisals EVER takes this into consideration when seeking the lowest bids to do the appraisal. They are supposed to, but none do. Actually, the appraisal fee is ‘price fixed’ by the lender at the time they took your loan application. LONG BEFORE the specific job was ever put out for bid.

      Your appraiser was hired on the basis of being willing to work for the allowed fee, rather than on their competency to do the specific job involved.

      IF you are willing to pay $2,500 for an appraisal next time, let me know.

      • Avatar Mitch Gibson says:

        System owned and not leased. From my research, there appear to be at least three valuation approaches; (1) Comparable sales approach, (2) Cost approach, and (3) Income approach. The Solar Energy Industries Association (SEIA) believes the Income approach is the most appropriate to determine the value of a home solar system. I utilized their PV Value calculator and compared it to my system results. I have a 10Kwh system that will reach the 1 year mark on April 29th. Their estimated system generation and values come very close to the results I show from my electricity bills. This is using the coordinates of my system and the utility rates. It is unfortunate that the appraisal industry has not adequately kept up with technology. Thank you for the suggestion on providing all documentation to the appraiser before the appraisal.

  13. Avatar Richard Johnson says:

    Not rocket science, if you have market data that shows the Market is NOT willing to pay more for a home with an OWNED PV System then the market value for that home is not impacted by the presence of a PV System. If you DO NOT have any market data, then go for it, hypothesize to your hearts content. Appraisal 101.

    • An absence of data does not equal the absence of value. It merely means it isn’t present; you can’t find it, or you don’t know how to analyze what is there. Surrogate sales data has long been accepted by courts as legitimate. Now, admittedly that is different than your post which followed the premise that data actually showed zero value.

      The savings are not hypothetical. They are real. Calculating what those savings actually are and the market value of those savings is the challenging part. ANYONE that has not taken a recognized course (or courses) on the valuation of solar energy is simply not competent to be doing it in the first place.

  14. Avatar Richard Johnson says:

    Michael, you are missing what I am say, if you have sales data, use it, if you truly have no sales data then yes, analyze added value using the great information that is out there. BUT please hear me – IF THE MARKET HAS SPOKEN, WE MUST LISTEN AND REPORT, that is what we do. If the market is silent then calculate.

    • I Concur. What I typically see instead is the opposite. Appraisers’ inability to calculate the proper adjustment being misreported as an absence of market recognition. Typically accompanied by those infamous words “…gave it no value.” as opposed to did not find data to support a specific adjustment or market perception of any added value.”

      Did not find is vastly different than does not exist.

  15. Avatar Richard Johnson says:

    I am enjoying this discussion, thank you for continuing to engage.

    I do agree with your point that too many Appraiser’s may be providing an insufficient statement as to why they did not give the PV value, “…gave it no value” is a conclusion statement that should follow “did not find data to support a specific adjustment or market perception of any added value.” We are on the same page, I use a statement that is largely a combination of both of these items.

    Let’s look at your point, Appraiser’s are writing in their reports that there is “no value for the PV” due to “inability to calculate the proper adjustment being misreported as an absence of market recognition”. This is a conclusion you have arrived at through what support? What this says to me is that you may be a Review Appraiser and are reading a report(s) completed by another Appraiser(s), they state there is no support that the PV adds value. As Appraisers we are suppose to make summary statements based on a review of the market, and your interpretation is that they just do not know how to “calculate the proper adjustment”. I am sure that you have spoken to Appraiser’s who have disclosed that they do not know how to use the Cost/Income Calculations and have inserted the expression you have noted here, and if there are truly no sales of properties with Owned Systems, the Cost/Income Methods will be applicable. But, you have to agree that if you cannot find sales with a feature, one primary reason may be that they do not value it, do not want it and as a result are likely not to pay more for a property WITH that feature. Supply / Demand concepts seem to be in play in this model, other forces too, but S&D in the lack of Market Support for a feature, you need to explain that a feature that the market does not show a demand, ( no PV in the market ) Again, please qualify how you arrived at the conclusion stated because that is also the statement someone having a bias would make, lacking any quantifiable data. Again, I apologize if you have the data to support your conclusion, but a State Board would likely respond to an Appraiser in the same manner I have asked, show me the work file, or this case, the data. Not an accusation but as Appraiser’s we must have support.

    Please provide support to your assertion to provide credibility or a basis of your conclusion. To have a counter opinion as you have made, you would have to do the same research as the OA within their market, see a lack of market response to homes with owned PV, or a lack of any sales with similar Owned systems, which would then trigger the Cost or Income Approach to identifying value of the Owned System. Today you are addressing those Appraisers that DO have sales, and in those cases have made observations after reviewing their data that, in their case, the market does not add value to the property with the installed owned PV. It’s all in the numbers and an unbiased review & summary.

    Another Concept of Value that may provide the discussion additional basis, Scarcity, defined as, “In economics, scarcity refers to resources that a limited in quantity. There are three causes of scarcity – demand-induced, supply-induced, and structural. There are also two types of scarcity – relative and absolute. I know we all know that the Solar PV Business is one of the strongest growth industries so there is plenty of Supply, Demand is likely tempered with location and the amount of Sun an area gets.

    I fully expect that my market will wholeheartedly desire PV when the electricity landscape goes through more changes, for us in CA it’s power shut downs, continuing & growing dramatic increases per kwh. I foresee the reduced marketability of homes without PV, that will result in Sellers adding PV just to be competitive in the resale market, along the lines of adding new flooring & paint to increase curb appeal and outshine the competition, once the market shift to Buyers Market occurs, that day is not today in my market.

    • Correction. While I’ve performed hundreds of review appraisals and even more training reviews in my career I don’t consider myself to be a ‘review appraiser’.

      I’m much more of a generalist. By preference I prefer oddball assignments.

      My observations come primarily from many dozens, if not hundreds of reviews of work voluntarily submitted by appraisers seeking help defending against state complaints from all over the country.

      It entails playing Devils advocate on every conclusion stated in an appraisal.

      Finding weaknesses OR inadequacies is the first step in helping an appraiser to defend themselves, or to help their attorneys. There’s an educational element as well.

      I’ve completed the three AI courses required for inclusion in AIs “Green Directory” (non member section). They covered the full gambit of high performing energy efficient buildings (including houses). They also covered many common though incorrect value metrics “found” or promoted by builders, brokers and solar industry salesmen.

      They covered the more complex valuation techniques involving DCF; as well as the much simplified use of Gross Multipliers applied to savings as legally accepted (numerous courts) valuation surrogates when direct sales comparables cannot be found, or insufficient system or contract (guarantees/warranty) exists for credible DCF.

      I’m not an advocate of solar use or conclusions that they always add value. Many don’t. Nor do I think one technique is always better to analyze them. Compensation is a huge factor.

      The current solar market is not unlike aluminum sidings sales of the late 1950s – early 1960s. Very much a buyer beware situation. Also, saturation levels vary from state to state. Accordingly data is not uniformly reported.

      That makes it impractical (if not impossible) to have one size fits all valuation solutions.

      It DOES however make valuation of solar a complex appraisal challenge. One in which far too many appraisers ignore the competency requirements, thinking they can glean enough boilerplate to get by…instead of declining the assignments they aren’t qualified by license level or experience to perform.

      In fairness, there is a lot of AMC-client arm twisting involved too.

      • Avatar Mitch Gibson says:

        So let me see if I understand… If an appraiser is unable to competently value a property and the amenities (such as solar), does the Appraiser Code of Conduct require that he decline the assignment? How does that work when this is assigned through a bank or at least where it is sent to one of these mass appraisal organizations (AMC) that randomly assign the appraiser.

        Curious, what happens when the appraiser stands by his square footage measurements, which are close to 300 feet less than the square footage of the home that was custom built. Having had an appraisal just 3 months prior, that appraisal was within 8 feet of the footage of my home. Somehow I lost 300 square feet of home and my foundation now has a crawl space. Our home was built on a slab.

        With regards to solar, I think it really depends on who you bought your system from and what is their reputation and track record. And, that is where I believe it is important for the appraiser to ask questions.

        • Avatar Richard Johnson says:

          I don’t know where your coming from, good luck in you life, I don’t have that much extra breath to engage you and the unique point of view.

        • The Uniform Standards of Professional Appraisal Practices (USPAP) specifically addresses what appraisers MUST do (& when) whenever they learn they are not competent to perform an assignment.

          Short answer, yes. They MUST decline if they are not competent. Exceptions exist conditionally, however FNMA rules require any (known) lack of competency by an appraiser be disclosed in advance.

          That can only be done if the loan officer or client AND their AMC Agency are also competent & adequately inform the appraiser before assigning the appraisal.

          In MOST cases, as orders are currently “processed”, the lack of competency is only learned after the appraiser sees the solar panels at the site.

          They ONLY have two options then.

          1. Withdraw.
          2. Affiliate with another appraiser that is competent. They of course must obtain client permission to do so before going any further.

          Usually the Lender-Price-Fixed-Fee will not be sufficient to cover the extra expertise of another appraisers material participation.

  16. Avatar Richard Johnson says:

    I appreciate your info, and great background. I should have not identified “Review Appraiser”, but more accurately, and Appraiser who also performs a substantial number of Review assignments. The good part is the number of these systems is increasing, so more data will be available, of course, the MLS data will not be a complete as we would like so lots of calls will be made.

    I still don’t see how these systems pencil out for most people, the average home is sold every 7 years or so. The PV system will likely just be paid off, or will be at escrow. Pre-paying the next 2 owners electricity doesn’t make sense, BUT there are some who buy a PV and never move, they will receive the savings, the others bought the idea of saving if they move at the typical number of years. The PPA is the worst, at a sale the new Buyer must sign on to the agreement or the Seller has to pay off the value of the system at that time as identified by a PV Appraisal, future business for you ?



    Great communicating with you.


    • No future business for me. I may have mentioned in passing that I think any proper “text book” analysis is about $1,500 worth of work IN ADDITION to the underlying appraisal costs. No one except commercial property owners are willing to pay that kind of fee so far. The only solar I do is incidental and infrequent (except commercial). I have friends that do them (as an advertised specialty), but I certainly don’t seek them out.

      I agree the economic benefits don’t pencil out in most cases. Concur re PPAs and HERO financing. My ONLY point is that appraisers should know how to do them before accepting work involving them.

  17. Avatar Richard Johnson says:


  18. Avatar Mitch Gibson says:

    Here is a comment from AMC in the Nashville ares..”Unfortunately in the TN market Solar Panels are not something that is common on homes. Because of this data cannot be extrapolated to prove that they are a market positive or market negative so they remain a “neutral” in most cases. If the property were in California that is a different story. Their MLS has a specific field for solar and because so many homes have it the appraisers can take large amounts of data and break it down so that they can support adjustments for solar. It’s going to be quite a while until that is the case in most other areas of the country.”

    Appears the Appraisal industry has failed its members. There are multiple approaches to valuing solar, which do not require comparative sales. The income approach, which would be easy to understand if you understand Math, Finance, Business or Economics. All you need to know is the stream of income or savings and the number of periods this stream of cash flows runs.

    So, if a home feature is not well understood and relatively rare then the appraiser ignore. If I have multi-story home and it contains a elevator, could no value?

    • 1. No AMC gets to impose its interpretation of data in appraisals on appraisers.
      2. California actually has some of the lowest percentile market saturation for solar in the country (1%?).
      3. Any failure is the individual appraiser’s…not the industry or profession. I was offered (& took) three FREE solar courses presented by the Appraisal Institute, subsidized by a California advocacy group called ‘Build it Green’. Sandy Adomatis, SRA and a nationally known expert on solar presented the course. I was a complete skeptic going into the course…and a convert coming out of it.

      There ARE other ways to value solar without solar sales comps. THAT is why competency is critical.

      PS DCF in RE appraisal is a bit more complex than you described, though its use is valid (& taught). GRM or GIM equally valid and much easier. Even direct capitalization of savings can be used. Each has to be supported. DCF looks more elegant but has so many potential variables that it becomes easier to challenge. Appraisers must be able to defend results. DCF has far too many variables that must be assumed. Appraisal is not limited to an accounting exercise when the value being sought is a specifically defined market value. The value definitions are not typically the same.

  19. Avatar Richard Johnson says:

    Hey Mitch, while our MLS systems do have the ability to display the PV systems, the Sales Agents have a high failure rate in properly using it. You want to know if it is leased, owned or PPA, you will have to call the Agent and get that directly from them. On a similar topic, how do you value an ADU? just curious.

    Hey Mike, CA is at 1%?, the SEIA puts us at number one in the nation in 2020 with 1,255,360 PV installations, we have about 6,883,500 single family homes, that adds up to about 18.2%

    • I read a solar panel impact map. Can’t recall where. CA was among the lowest nationally as a percentile. That doesn’t mean numerically we aren’t high. We have a statewide population in excess of 33 million (some estimates closer to 40).

      Industry associations tend to cite whatever they think best promotes them.


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Valuing the Contribution of Solar Panels

by Dave Towne time to read: 1 min