Under Fannie Mae Selling Guide B4-1.3-05 regarding energy-efficient improvements, which statement is correct?
Correct Answer
D) Analyze market reaction; exclude third-party PPA equipment
For the cited Fannie assignment, analyze market reaction to energy features and compare them with comparable properties. Cost or income analysis may supplement sales comparison but does not justify a mechanical dollar-for-dollar equipment-cost or savings-PV adjustment. Third-party-owned solar equipment under a lease/PPA is excluded as personal property under the cited policy.
Why This Is the Correct Answer
Option D is correct because the cited guidance requires the appraiser to analyze the market reaction to energy-efficient features. It also states that solar panels leased from or owned by a third party under a power purchase agreement or similar financing arrangement must be considered personal property and not included in the appraised value. Both parts of this option match that guidance.
Why the Other Options Are Wrong
Option A: Add the full equipment and installation cost to the value
Option A, adding the full equipment and installation cost to value, is wrong because cost does not equal market value; the appraiser must analyze how the market reacts to the feature.
Option B: Ignore energy features, since the market does not price them
Option B, ignoring energy features because the market does not price them, is wrong because the guidance requires analyzing market reaction rather than assuming no effect.
Option C: Include third-party PPA equipment at its full replacement cost
Option C, including third-party PPA equipment at its full replacement cost, is wrong because such equipment is considered personal property and is not included in the appraised value.
Market reaction, not receipts
Value energy features by how buyers react, not by what they cost, and leave out solar owned by someone else.
How to use: Use this when a question asks how to treat solar or other energy features in a Fannie Mae appraisal.
Exam Tip
Check who owns solar equipment before deciding whether it belongs in the appraised value.
Common Mistakes to Avoid
- -Adding solar installation cost directly to value
- -Including leased or PPA solar panels in real property value
- -Assuming the market gives no value to energy features without analysis
Concept Deep Dive
Analysis
This question tests how the cited Fannie Mae guidance treats energy-efficient features. The appraiser must analyze market reaction to the feature, and third-party-owned solar equipment under a PPA or similar arrangement is personal property excluded from appraised value. Reject options that add cost mechanically or ignore energy features entirely.
Background Knowledge
Energy-efficient features may or may not add value depending on market recognition. Ownership matters: equipment owned by the homeowner may be part of the real property, while leased or third-party-owned solar under a PPA is treated as personal property in this guidance.
Real-World Application
A home has rooftop solar panels installed under a power purchase agreement with a solar company. The appraiser excludes the panels from appraised value as personal property and analyzes market reaction for any owned energy features.
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