Case Study: Your Home With a Solar Lease. Good or Bad?
The article below brings up some valid points about leased solar panels. But practical application is often more helpful, so here’s a true-to-life, recent experience in case study format.
The home owners have listed their home for sale. It is relatively new, has some very nice upgrades, is in pristine condition, in a sought-after neighborhood and desirable location. The home is priced fairly, and similar homes in that price range in the same town are selling in 2 to 3 weeks. As a matter of fact I was involved in the listing and/or sale of several of them, one being only a couple of streets away from the subject property. The subject property has leased solar panels. They are not unsightly but are installed on the front roof of the home. It is disclosed in the MLS listing that solar panels are present, leased, and the lease terms are included in attached documents. Also provided, was the name and contact information for a liaison at the solar company. The home owners can show credible evidence of greatly reduced energy bills, however, after factoring in the cost of the monthly lease for the solar panels, though there is still a return on investment, savings are minimal. This may or may not be a deal-breaker as reducing carbon footprint is meaningful to many home owners. Right from the get-go the home enjoys a flood of showings, several Open Houses are attended by multiple potential buyers. In the first 30 days no offers are received. Let me interject a bit of wisdom here gleaned from years of experience in the Real Estate industry: If a home receives a low number of showings, the culprit is almost always price. If a home receives lots of showings but no offers, the issue is very likely with the home. At this point, several showing agents have been contacted, most cite the leased solar panels as a major sticking point for their home buyer clients. A chat with the home seller results in his request for me to lower the home’s price. This entire scenario including inquires of the showing agents and price reductions, is repeated twice more before the home is finally sold.
It might follow that I would be adverse to solar panels. Not true. In concept I believe they are a brilliant idea, especially here in Arizona where we benefit from 300+ days of sunshine each year. Any hesitation I may have arises from the lease. Purchased solar panels, given enough time, may well be worth the expense. A monthly lease eats up your energy savings AND after 20 years when the lease has expired, the panels will need to be replaced. Read on for insight into some additional cautions regarding solar panel leases.
What You Should Know About Solar Leases
By Barbara Pronin
It is not surprising, given America’s growing thirst for energy efficiency and electricity cost-savings, that solar power has become a thriving industry – especially in sunny states like California, where generous subsidies are available. In fact, the U.S. Department of Energy projects that 900,000 homes nationwide will feature solar installations by the year 2020 – and solar leasing programs that require little or no money up-front have played a key role in that growth.
While there is general agreement that owning solar panels adds value to a home – the Lawrence Berkeley National Laboratory released a study in 2016 showing the installation of solar panels that are owned, not leased, enhances the value of the home by an average of $25,000 – the jury is still out regarding the value of homes equipped with leased solar panels, especially when the homeowner wants to sell.
When a homeowner enters into a solar energy lease – which typically carries a 15 to 20 year secured payment obligation – the lien securing payment on the lease is recorded at the County Recorder’s office and reported on the Preliminary Title Report ordered through escrow. When the home is sold, the lease must either be assigned to the new buyer, or bought out by the seller before the close of escrow.
There are times when such a situation complicates, or puts an end to, a possible sale. For one thing, the solar energy producer must approve the new owner before closing escrow. For another, not every potential buyer is a believer in solar energy, wants to undertake the financial obligation, and/or will qualify, credit-wise, to do so – and many sellers balk at paying off the lease contract or paying a hefty penalty for breaching the lease.
Ideally, at some point, solar lease disclosures will be mandatory on the part of a seller – or solar panels may be designed to move with the current homeowner. Until then, the escrow company will notify the buyers’ agent immediately when it’s discovered that a solar lease is in place so that the agent can work with their clients to negotiate a satisfactory resolution to save the transaction and/or avoid a closing delay.
Meanwhile, savvy real estate professionals can do several things to assist in the successful sale of a home with a solar lease in place:
- Call the solar leasing company to learn the options available to both the sellers and buyers.
- Encourage the sellers to pay off the solar lease, just as they might pay off the cost of any other upgrade, before or as part of any sale transaction.
- Become knowledgeable about the facts and benefits of renewable energy. Be able to document for a potential buyer how much the homeowner paid for power before and after installation and how they might benefit from assuming the current solar panels and lease.
Barbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade. Reprinted with permission from RISMedia. ©2017. All rights reserved.
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Bill Salvatore / Arizona Elite Properties
Residential Sales, Marketing, and Property Management
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