Solar Panels – Love the Panels, Hate the Lease
What You Need to Know Before You Sign Any Solar Panel Lease
As you probably know, I am a “green” advocate. I am one of the very first EcoBrokers worldwide and one of the very first NAR green Realtors. There’s an entire website dedicated to green, MyGreenTucson.com. I’m also a huge fan of solar panels and clean energy.
Unfortunately, I have had a few too many negative experiences with solar leases recently. As your Realtor, I believe it is my job to help you make the best decisions you can regarding your home. So, before you sign a lease for solar panels, here is what I know so far. Note: As I write this, I have two different solar companies’ leases in front of me.
The two solar companies are probably the two most well-known to the public and I am comparing their leases side by side. One is about 25 pages and the other is 30 pages. I say “about” because they have a few extra pages that really aren’t part of the legal documentation. Now, I don’t know anything about either company, their employees, or their reputations.
I am writing about the leases they require you to sign and my experiences in relation to selling homes with solar panels that are leased. First and foremost, before you sign a lease, have your attorney go over it with you. The solar lease could affect the pricing, value, and ease of selling your home in the next 20 years or the term of the solar panel lease.
Please Read the Solar Lease Carefully!
Both leases require the buyer to qualify to take over your lease. * WDIM? = what does it mean?
- A buyer can qualify to buy a home with FICO scores of 640 and even lower. One of the solar leases requires a minimum FICO score of 700 or 680 if you have 25% equity upon purchase. The other solar company does not state the FICO requirement. But, they did turn down my client who had a score of over 700. He had to make an appeal and was accepted after submitting all of the documents the leasing company required. This did delay the closing process of course and ultimately the buyer lost the home.
- As of today, that home has been on the market for over 7 months. The seller has dropped the price to $30,000. It is priced under market value. WDIM? A lot of people have FICO scores under 700 and you may be eliminating them from your buyer pool. Fewer buyers can mean a longer selling time and you may need to lower your price.
Most Lenders Will consider the Lease Amount in the Buyers Debt to Income Calculations
- WDIM? If the buyer can afford your neighbor’s home (without a solar lease) for $200,000 and your home is $200,000 with a lease, they may not qualify to buy yours. Fewer buyers…
The Buyer Qualifies & Then Comes the Lien
- One issue with selling a home with leased solar panels is the lien filed by the solar leasing company. I’ve had a few painful experiences with this already. It is important to know how the lien is filed by the solar leasing company. The lien may preclude you from selling your home if it will not subordinate to the new loan.
- WDIM? You may have to pay off the remaining amount of the lien in order to sell your home. Talk to a title agent or attorney about the lien before you sign any solar panel lease.
Leased Solar Panels May Not Add Value To Your Home
- I spoke to one of the top appraisers here in Tucson for advice. She said she does not give any consideration of value, positive or negative, for leased solar panels. Real estate appraisers are grappling with this issue now.
- Sandra Adomatis, an appraiser in Punta Gorda, Fla., wrote a book for the Appraisal Institute on how to value homes with energy-efficient features. “If you’re in a market where the market participants — the buyers in the market — don’t understand solar leases and they’re fearful of it, they may totally steer away from homes with a leased system. Today, it’s difficult to determine whether a particular house with leased solar panels is worthless,” Adomatis says. “There just isn’t a long history of sales involving such houses.” www.NPR.org
- Also read: www.bloomberg.com/news/2014-06-23/rooftop-solar-leases-scaring-buyers-when-homeowners-sell.html WDIM? Don’t expect to sell your home for more if you have leased solar panels.
Why is everyone pushing the solar lease?
- The solar panel lease is fairly new. Most homeowners who signed the leases have not yet put their homes on the market to sell. So, this issue is just barely coming to light. Also, the solar companies are offering very nice incentives to anyone who refers them to a client.
My Suggestions:
- Purchase the solar panels outright or if you have a solar lease already. You may be able to do an EBO as stated in your lease. An EBO (early buy-out) may come with a discount as well.
- If you need to sell prior to the end of the 20-25 year solar lease, have your Realtor and title agent do research before you list so you know what is best to do at that time.
- Have your attorney read the solar lease before you sign anything. You need to read every sentence as well and make sure you understand the entire document.
