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53 <br />Page 2 <br />Your engagement letter is for me to study the impact of solar farms on adjoining property values <br />This study falls under the appraisal definition of External Depreciation or External <br />Obsolescence Simply put, this is the influence of a feature outside of the subject property. The <br />influence may or may not exist. <br />External obsolescence is a key consideration in appraisal work and results from diminished value <br />to improvements. It is also one of the most difficult concepts to understand It is implicit in all <br />three basic approaches to value but is most often specifically addressed in the cost approach It is <br />separately addressed because it is independent of physical deterioration and functional problems. <br />External obsolescence can be categorized into locational, environmental, and economic The loss <br />itself results from tangible influences such as traffic, odor, view, and neighborhood, as well as <br />intangible influences such as economy and effective demand influences. <br />The basic premise is the principle of externalities, as stated in The Appraisal of Real Estate, tenth <br />edition "Economies outside a property have a positive effect on its value while diseconomies <br />outside a property have a negative effect on its value " <br />Two methods can be used to measure external obsolescence The procedure best supported by <br />market evidence should be selected An appraiser can either capitalize the income or rent loss <br />attributable to the negative influence, or compare sales of similar properties that are subject to <br />the negative influence with other properties that do not have the negative influence <br />In my research regarding Solar Farms, I found no sales of properties next to or near to a solar <br />farm I contacted several appraisal peers and none had any sales of properties near solar farms <br />This is understandable as Solar Farms are relatively new to the American Real Estate market <br />No direct market data was found to determine if any Economic Depreciation or Obsolesce does <br />or does not exist due to a Solar Farm <br />I then determined that the best course of action would be to determine Economic Depreciation <br />from externalities that can be measured with market data Two market studies I performed are a <br />part of this report <br />One, I measured the market reaction to a High Voltage Power Line Tower being in the rear yard <br />of a house, the side yard of another and across the street from another house in the same <br />development. I compared these three sales with a similar house in the development that does not <br />have a view of the HVPL Tower This study shows a market derived depreciation rate of 5% due <br />to the unsightly tower <br />