Buying a Home with Leased Solar Panels? What Do You Need to Know?

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Real Estate Agent with Sunset Properties, Powered by Movoto DRE #01485322
https://activerain.com/droplet/4HL5

 Buying a Home with Leased Solar Panels?  

What Do You Need to Know?

 

You found the home you love.  You're ready to write the offer.   You turn to your Realtor and ask "What about the solar panels?"  

                                     

Image Source: SunPower

I recently listed and and sold a property that had leased solar panels.  It added an interesting layer to the transaction.  Here are a few points that may be useful to anyone considering purchasing a property with leased solar panels:

 

  • You need a copy of the lease contract to review.  The seller should be happy to provide you with a copy.

 

  • The contact information for a solar company rep should be made available to you so you have the opportunity to pose any questions including those regarding the details of the lease transfer.

 

  • The solar lease contract should have buyout price and terms.  

 

  • The price to remove the solar panels may be the same as the lease buyout price.  Don't assume the panels can be removed and returned.

 

  • The buyer must agree to take over the lease on the terms agreed to by the seller.  *In a buyer's market, it may be possible to negotiate that the seller pay off part or all of the solar lease.

 

  • The buyer must qualify for and agree to take over the lease under it's existing terms.

 

  • The buyer must sign the lease transfer agreement.  

 

  • The monthly lease payment must be included in the buyer's debt to income ratio, so it's important to verify with the lender that the monthly lease payment does not affect the buyer's ability to qualify for financing.

 

It's imperative that buyers do their investigation and understand that to which they are agreeing.

 

 

🌻

Interested in Selling or Buying an Orange County, CA home?

I can help!  Contact me today to get started.

JILL MURTY | 949.355.5321 | JillMurty.com

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. TENNESSEE HOME TEAM 09/02/2015 02:04 AM
  2. Michael Dagner 09/20/2015 04:00 PM
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Rainmaker
1,951,137
Lottie Kendall
Compass - San Francisco, CA
Helping make your real estate dreams a reality

I'm glad to see your post features, Jill. This will become an issue that arises often as more people add solar panels.

Sep 02, 2015 02:18 AM #28
Rainmaker
389,824
Jill Murty, Realtor - Orange County, CA
Sunset Properties, Powered by Movoto - Laguna Niguel, CA

Thanks Debbie Gartner.  Solar panels definitely add another element to the transaction.

Thanks Rob Spinosa.  What's funny is that the monthly lease price must be included in the buyer's DTI, but lenders never include the monthly cost of electricity in the DTI.  The solar lease is a recorded document, but not an encumbrance.  Always best to check with the lender to verify it's not a roadblock.

Sep 02, 2015 03:22 AM #29
Rainmaker
389,824
Jill Murty, Realtor - Orange County, CA
Sunset Properties, Powered by Movoto - Laguna Niguel, CA

Jeff Dowler CRS - Good points!

The first thing I did was have title pull any documents associated with the solar lease.  The solar lease was a recorded document, but not an encumbrance, lien or title defect.  Of course, I spoke with the lender to verify the solar lease would not cause lender issues.  Then, I had a chat with escrow and they said they'd done transactions with that solar company and the transfer process was easy.

This transaction was not a part of the HERO program.  If a seller says they have some new energy efficient upgrades such as solar, new windows, HVAC, etc., it could be an indication the HERO program may be in play.  Always good to check and proceed accordingly. 

Sep 02, 2015 04:54 AM #30
Rainmaker
389,824
Jill Murty, Realtor - Orange County, CA
Sunset Properties, Powered by Movoto - Laguna Niguel, CA

Very interesting Nicole Doty - Gilbert Real Estate Expert!  Homeowners should be especially careful committing to solar if there's a high probability it'll be a deal breaker when it comes time to sell.

Thanks Lottie Kendall!  It's an issue that's becoming far more commonplace and we have to know how to address it.

Sep 02, 2015 05:02 AM #31
Ambassador
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Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

I was recently advised by my lender to NOT put them on my next house until after my mortgage is in place.  It's okay to build "for" them, but not with them.

Sep 02, 2015 10:09 AM #32
Rainmaker
389,824
Jill Murty, Realtor - Orange County, CA
Sunset Properties, Powered by Movoto - Laguna Niguel, CA

Tammy Lankford - It sounds as though there are different recommendations for a new build.  Good that you spoke with the lender first!

Sep 02, 2015 11:12 AM #33
Rainmaker
237,126
Mery Fernandez Empire Network Realty Luxury Brokerage
Empire Network Realty INC. - Orlando, FL
The Rise of An Empire, Let's Build Yours!

Hello and congratulations on your featured blog post! Well done and hope to see you have many more featured post.

Sep 04, 2015 12:20 AM #34
Rainmaker
389,824
Jill Murty, Realtor - Orange County, CA
Sunset Properties, Powered by Movoto - Laguna Niguel, CA

Hi Mery Fernandez Empire Network Realty Luxury Brokerage - Thanks so much!

Sep 04, 2015 01:39 AM #35
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Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Hey, Jill! 

I included this post in today's "Last Week's Favorites".  Enjoy the rest of your long weekend.

Sep 06, 2015 05:55 AM #36
Rainmaker
517,504
Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

Interesting post Jill. Solar panels are very rare here, so I have never faced this question. It would be interesting to see one of the leases. Does the lease tie the panels to the property? I have leased a lot of equipment for use in my previous business. Some of it was movable, some permanently attached. Every lease I signed stated that my company and I were responsible for the terms of the lease. They all stated that if I sold the business that the lessor  had to approve a transfer, or I was still on the hook for the terms of the lease. If the new buyer did not want the equipment I was still responsible.  

Sep 06, 2015 08:02 AM #37
Rainmaker
259,873
Janice Zaltman
United Realty Group - Boca Raton, FL
South Florida Residential Real Estate

Thank you Jill. Discussing solar panels and financing came up just this week so your post is timely. Want to know the ratio of those leasing to purchasing solar panels. Going to do some more research.

Sep 06, 2015 09:38 AM #38
Rainmaker
389,824
Jill Murty, Realtor - Orange County, CA
Sunset Properties, Powered by Movoto - Laguna Niguel, CA

Hey Patricia!  Thanks so much for including my post!  That's super cool.  You enjoy the rest of your weekend, too.  😎

Sep 06, 2015 12:47 PM #39
Rainmaker
389,824
Jill Murty, Realtor - Orange County, CA
Sunset Properties, Powered by Movoto - Laguna Niguel, CA

The solar lease contract required that the buyers assume the lease on the terms that the seller negotiated at the time of the agreement.  Further, the buyers were required by the solar lease company to qualify for the lease and sign the lease transfer agreement.

The solar company would allow the panels to be removed at a cost equal to the lease buyout price Tom Bailey.

Sep 06, 2015 02:21 PM #40
Rainmaker
389,824
Jill Murty, Realtor - Orange County, CA
Sunset Properties, Powered by Movoto - Laguna Niguel, CA

Janice Zaltman, Realtor, LEED AP Hollywood Beach Florida - If a tax credit is in play, the solar company gets it in the case of leased panels.  In a purchase situation, the credit goes to the buyer.  

I think a solar lease is attractive to people because there's not a lot of upfront money out of pocket, but I think a purchase is an overall larger benefit depending how the long the owners will stay in their home.  There are a lot of factors to consider.

The solar lease shows up on title but not as an encumbrance or lien and they did subordinate, but there's no guarantee that is always the case.  Also, the solar lease payment is included in a buyer's DTI, which is funny because lenders don't view an electricity bill in the same way.

It's important to check into the particulars at the very start of the transaction to make sure no roadblocks pop up.

Sep 06, 2015 02:50 PM #41
Rainmaker
1,346,113
Ryan Huggins - Thousand Oaks, CA
https://HugginsHomes.com - Thousand Oaks, CA
Residential Real Estate and Investment Properties

Solar is definitely an interesting topic.  I've heard the leased units have killed more than a few deals.  I was showing clients last weekend and they ruled a house out because of them.  No one wants to get stuck with someone else's lease.  It is definitely going to become more and more of a problem.  Too bad buying is so expensive.  Doubly too bad that the panels are so ugly and some of these companies do such a poor job of installing them (I've seen some installs that look like a Tetris game gone bad).  Really can be a turn-off for buyers.

Sep 06, 2015 05:08 PM #42
Ambassador
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Karen Fiddler, Broker/Owner
Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA
Orange County & Lake Arrowhead, CA (949)510-2395

They are a big problem here. I would probably not take a listing with solar panels, buyers don't want to get into those deals. 

Sep 07, 2015 04:44 AM #43
Rainmaker
389,824
Jill Murty, Realtor - Orange County, CA
Sunset Properties, Powered by Movoto - Laguna Niguel, CA

Ryan Huggins - Solar is going to be viewed as positive, negative or neutral depending on each prospective buyer as well as the terms of the solar contract.  

One buyer who offered on the listing with solar panels reduced his offer price after reviewing the contract.  His offer wasn't going to be the one the seller's accepted, but it illustrates a point.  

Another prospective buyer wanted the panels removed, but the cost to remove was the same as the lease buyout price.

It was a multiple offer situation, so the successful buyer would be one to accept the solar lease.  The winning offer was $26,000 above the list price. 

Sep 07, 2015 05:21 AM #44
Rainmaker
389,824
Jill Murty, Realtor - Orange County, CA
Sunset Properties, Powered by Movoto - Laguna Niguel, CA

Karen Fiddler, Broker/Owner -  Solar panels definitely add more layers to a transaction.  If you find yourself turning down any listings involving solar panels, send them my way.  I'm happy to pay you a referral fee.

Sep 07, 2015 05:26 AM #45
Rainmaker
690,556
Michael Dagner
Brokers Guild Classic - Denver, CO
Your Denver Homes Realty Expert

Hi Jill, many things to consider with todays solar.  Nice work preparing all these pointers!

Sep 20, 2015 03:02 PM #46
Rainmaker
389,824
Jill Murty, Realtor - Orange County, CA
Sunset Properties, Powered by Movoto - Laguna Niguel, CA

It's all about knowing what your signing up for.  Thank you for the re-blog Michael Dagner!

Sep 20, 2015 07:53 PM #47
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