Friday, September 24, 2010

Home Appraisals and Solar Panels

This steamy summer's electric bills might well have steered some of your dinner-table conversations to ideas for making the sun work for you, rather than the reverse.

Yet solar panels remain expensive, and government-sponsored incentives for installing them seem to come and go. So launching the process may remain talk, nothing more.

Solar power also appears to be absent from home appraisers' radar screens at the moment, which is a problem for Isaac Lichtenfeld, who has a house in Sewell that produces 14 kilowatts annually.

Aside from saving about $280 in electric charges each month, the Lichtenfelds receive $9,100 a year from selling clean-energy certificates.

"As far as we are concerned, a total income of $12,460 a year," he said.

The system cost New Jersey, which encourages and supports alternative energy with credits and other incentives, and the Lichtenfelds - homeowners have to kick in their share - $86,000.

Now, the couple had been given to understand that solar panels, if done correctly, would add substantial value to a house. And, based on government and housing-industry documentation, I have written scores of articles over the years saying the very same thing.

But that fact hasn't been passed on to appraisers in the field. Isaac Lichtenfeld says he has been told that solar panels add no value because there are no comps - that is, comparisons of similar homes.

Lichtenfeld reports that state appraisal guidelines say the value of a property increases $20,000 for each $1,000 of annual electric savings, which in his case is about $67,000.

The Appraisal Institute, the national industry's standard-setting group, provides no such guidelines, however, even though a bumper crop of solar-related websites says it does.

That's because one site misreads something and other sites repeat the mistake. I contacted Ken Chichester of the Appraisal Institute in Chicago to determine the reality.

"One of the challenges that appraisers face in 'green' valuation is the lack of available data and standards," he said.

While the institute is an innovator on green valuation in many ways, "I'm unaware of any appraisal standards regarding valuation of solar electric systems," he said.

Although I can't defend appraisers in every situation, based on what Chichester said, when it comes to solar, they are without proper tools.

The absence of these standards, Lichtenfeld contends, is "constraining an industry."

He was looking to refinance, hoping to find a rate that was more in line with a mortgage for a house in an area where prices have declined since the boom ended.

When Bank of America offered him entry into the government-backed program that backs first mortgages up to 100 percent of appraised value, Lichtenfeld said, "With our 6.7 percent mortgage and advertised rates in the 4.5 percent range, it was music to my ear."

He was assured there would be no problem with the appraisal. Not so.

"The appraisal computed the first-floor square footage as 'invalid' (I am not kidding), and based the value of the house at the 2,479 square feet of the second floor of a 4,333-square-foot house."

The Lichtenfelds have $600,000 invested in the property, and he believes that, given six months, he could sell it for $500,000.

"We need the house to appraise at $375,000, and the appraiser claims it is worth $340,000," he said.

"The shame is that they decided not to charge my credit card for the appraisal, so I really did not have much to sue for other than pain and suffering," he said.

"It's been a couple of months now, so I am almost able to laugh at the absurdity.

"Not quite yet, though."


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