John C. Carlson's Comments

Hi John,

The CSI calculator "Solar Advantage Value Estimator (SAVE)" has been online for a while. Tool is designed to estimate the Present Value of a solar photovoltaic (PV) system including the estimated value in annual energy savings.  If you have not seen it, here is the link.  They have ongoing webinar training.

http://www.gosolarcalifornia.org/tools/save.php

Hi John, 

Welcome to HEP site! 

These are tough times for appraisers. So far the only way I know to get a documented efficiency report (that the lender will accept) is to request that a HERS Rating be completed "as-is" and "subject to completion" on your subject. Remind the lender that RESNET was developed by the mortgage and builidng industry. The Rater can do a comparison file report on your subject as-is and subject to rehab. Check with RESNET they're in CA. Also, the Appraisal Institute has information on it and I hear there will soon be a site in conjunction with the Appraisal Institue and the DOE but I don't know where that is right now. You absolutely need contracts that includes warranties and maintenance aggreements from everyone. They may have to negotiate these contracts. This is part of the process that is known by the parties involved. Sales and renovations are negotiated, market value is not negotiable as that was already established. Commercial real estate always hinges on negotiations but it seems that the residential players always try to manipulate the system rather than doing the extra work going back and looking at the reality of negotiation. Sales people make good commissions, it's not my job to help them, it's my job as an appraiser to do an honest market appraisal to protect the bank and the public.

There are several approaches to value here but as you know market value is the one that counts for a loan. That's why regardless of pressure, valuation principles have not changed, the current economy and cost of money has and still has to be a factor in current "as-is" value and the assumption of a future value "subject to" completion or "after rehab".  Also, as you know if someone wants to put their own money into it that's their decision but for a loan the appraisal is part of the LOAN PACKAGE. With the absolute increase in energy costs and unknown energy lifestyles of the owners/tenants there will be a sliding scale on the ROI that will be hard to estimate and has to be disclaimed with assumptions. For the subject to value and with all things assumed from the HERS rating going forward, the HERS rating will give you the savings generated from the efficiency due to building performance and alternative energy  such as solar. Solar does have a relatively short life expectancy, but longer than the HVAC, based on the overall economic life of the property. However, these systems will be expected to have a longer effective life due to the increased durability of the building because fewer air changes per hour results in less HVAC cycling and longer unit life. Solar energy life expectancy is going to be partly determined by the quality & durability of the equipment and the amount of operational maintenance required for them that must be included in the cost and the ROI over the effective life. Ofcourse the effective life being the length of time the unit contributes to value, not the actual life. So if the alternative energy source is not maintained, damaged or becomes technically out dated or in any other way ineffective (shaded by trees / an addition to the square footage) reducing the output efficiency it reduces the overall effective life. Something to consider is the sliding scale value (as in excess land valuation) of the units efficiency in the ROI against the energy saved over the same period, however, both are an estimated depreciation ( I would look to Marshall & Swift Green Section).

The HERS Rating should give you a present and installed efficiency value on the alternative energy units contribution to savings if you ask the HERS Rater for both modeling files or a comparison file that reports on two scenarios of the same building. The Rater always works from a base building upward. The cooperation of the bank to complete and pay for a HERS Rating is crucial to your file information and the integrity of the value. Only a scientific modeling of the builidng can give you the information you need. When I do an existing home retrofit I usually give the owner a letter of the results of my final test and the increase in the buildings performance as a percentage but I also give them a spreadsheet I produced so they can tract their utility bills over the next year as compared to the previous year as this will account for the builidng efficiency, their change in energy lifestyle, if any, and the increase in energy costs; anything else is an estimate. Now that I wrote this I think I will add a disclaimer for the quality of products and required maintenance of the systems/products as to the projected expectations. Remember customers expectations as a part of the contract which, should include maintenance if the contractor elects and keep them informed of what was agreed! They always want to pay less for more! Sell slightly less and give them more, continually asking for their approval with good communication and very good service!

Hi John,

Welcome to Home Energy Pros! Feel free to join the conversation in the Forum and Groups. And share your energy efficiency photos, videos and upcoming events. If you're blogging about home performance, this is the place for you!

Thanks!
Diane, HEP Moderator