All Forum Posts by: Andrew Smith

Hi @Zachary Barton, per the link above, my understanding (that I have confirmed with brokers and appraisers) is that Fannie Mae allow appraisal of the full value of a solar system if it is owned or being purchased with finance. If the solar system is leased or it is a PPA then the solar system will not be appraised.

In mitigation of that there is the "subjective" which would relate to local views on the aesthetics of solar panels as well as how much of a reduction in ownership costs has been created as a result of the solar system.

I am sure you are correct in the latter subjective cost of ownership being increasingly a factor as utility costs rise inexorably. Additionally the California mandate that means all new construction must be equipped with solar means that the systems are inherently part of the appraised value of the home. The contrary then will likely result with older homes with no solar appraising less than those equipped. I would expect California's mandate to spread across the USA and globally.

I think this will let me link here. This shows the panels are appraised normally unless leased or PPA:

https://www.fanniemae.com/content/guide/selling/b2/3/04.html

Hi @Mayer M.

It's difficult to give good advice without seeing the specifics. Has the solar system been included in the foreclosure amount? If it's leased, there will likely be a lien on the home. If owned there will be a UCC1 filing as mentioned unless paid off.

Feel free to message me if you'd like and I can take a look.

@Raj G. The benefit of going solar at the same time as a roof replacement is that the Federal Tax Credit (currently 30%) applies to the roof as well as the solar system. In other words you receive a 30% tax credit on the solar system as well as a 30% tax credit at the least on the roof that is under the solar system (full roof 30% depends on the advice of your CPA).

Couple that with the roof now becoming a producing asset and offsetting the utility bill instead of a liability and the increase in appraised home value assuming the solar system is not leased then going solar makes a lot of sense at the same time as replacing/repairing a roof.

As @Roland Widmann said leases cannot be appraised. However an owned system - outright owned or financed can be appraised to full value and Fannie Mae has a document detailing that specifically. Beyond that it becomes subjective. How much is the cost of ownership going forward because of a solar system versus utility power. 

For a flip it would be much harder to justify as the system would be purchased all cash rather than financed (by the solar company at least). Solar adoption in Austin is maybe 1% right now compared to SoCal at 7%. That means you'd be "ahead of the curve" which is not always a good thing for ROI.

 Yeah for sure I did not comment on the tenants paying the bill as there are many opinions on that. Offering "free power" with caveats of reasonable use and raising rent to cover the nut of the system seems reasonable and pays for the system with OPM.

As far as net metering goes, there are battles going on right now in AZ to bring net metering back as a mandate. I think the CA solar mandate helps cases like AZ. We have seen public action produce fantastic results already in NV and FL.

For sure batteries are going to be a mainstay in the near future to counter this type of action by utilities as well as other avenues they are using like time of use penalties.

All of our systems are 100% battery-ready but we typically advise against right now because of economics. The Tesla is a backup battery rather than a daily use battery like Sonnen and LG. The latter (or similar) will be the way to go when manufacturing costs fall. This is already happening. Our estimates are 18-24 months for daily use batteries to become mainstream in systems. 

As a hedge, solar now is truly a great idea. It's like you could sign up for a gas card with no out of pocket 20 years ago and buy gas at that rate for 20 years then get free gas for life. The Federal Tax Credits are on a diminishing scale starting in 2019.

I am in the solar industry for full disclosure. 

 That's not me saying that it's the Fannie Mae appraisal guidelines. It's definitely a variable depending on local conditions. In California for example the savings are typically so high by going solar it could add more than the value of the system or make a home more easily sold in comps with non-solar homes. In other areas it may have less impact or be detrimental if the local market has negativity towards solar. In that latter case, I think that will change in favour of value add as solar adoption continues to increase across the country.

In your case in AZ the value proposition for solar is not as high as local utilities fight net metering. Savings in CA is almost a given. In AZ it is less likely though it enables a rate for power to be locked in for 20 years at today's rate and then become free power. In either case I can't think of a better way to improve a home in terms of ROI as there is zero out of pocket cost, savings and/or locked in power cost and dollar for dollar appraisal of the home improvement at a minimum.

Just to clarify the lease/ownership conversation. By far the most common ownership model is now zero down financed ownership. Any ownership of a solar system - cash purchase or zero down financed means that the solar system is able to be appraised for 100% and is written that way in the Fannie Mae documents.

Depending on local conditions a solar system typically adds value to a home as seen in studies by Lawrence Berkeley and the NAR.

Leased solar systems are not able to be appraised. Fannie Mae explicitly does not allow for appraisal of leased solar systems.

All in all then under most circumstances an ownership of a solar system is the way to go for tax credits, appraised value and ROI. Leases do make sense if the property owner has no tax liability and so cannot benefit from the Federal tax credit. An example would be a Church. No tax liability so no direct Federal tax credit benefit. In that case a solar company can own the system, use the tax credit and lease the system to the Church who would benefit with a lower monthly expense but not benefit from ownership.

The Federal Solar Tax Credits are available for any property. Currently at 30% they will be reduced over the next few years starting next year.

Financing the systems is trickier for multiple properties as the zero down programs are designed for the person on title in primary residences.

 Yes it is. The Federal Tax Credit is on a sliding downward scale though starting next year. Right now it's 30% and available on any property. Financing the systems is trickier though on multiple properties. The zero down programs are designed for primary residences and are linked to the individual on title.