CAUTION - Solar Loans May Prohibit Added Appraisal Value

By
Real Estate Agent with Value Added Service, 602-620-2699 SA5376460000

There's been a lot of confusion amongst the public and realtors especially about solar loans versus owned solar systems.  Homeowners are being told by solar companies that these loans help them to buy solar panels and own them.  This is a partial truth and may not apply to every system or homeowner scenario.  

 

Solar companies may not know the ins and outs of how to provide value in a real estate transaction for solar panels.  They know the benefits of solar systems, but may not have ever worked to sell a home with a solar system installed on a roof.  So it stands to reason they may not have all of the answers for valuing a system or whether it's owned or not.

 

When a homeowner receives the tax credits, rebates and incentives while using a solar loan the panels may possibly be owned; HOWEVER, the solar company MAY be filing a UCC filing with the State so that the home can be collateral for the loan of the solar array.   When the UCC filing is posted, that system now becomes personal property as it is not a fixture of the home and is not owned by the homeowner even though the financing tool is a loan.  No value can be given by the appraiser due to the UCC filing.

 

Then why aren't leased solar panels treated the same way since there is a UCC filing for leased panels?  No value is given for any solar panel with a UCC filing, per the March, 2015 Fannie Mae guidelines.   When the lessee does not receive any tax credits, rebates or incentives AND has the UCC filing, there can never be any value given when a home is sold with a leased system .  There is no up front cost, but the homeowner is making lease payments to the solar company.  Technically, the solar company owns the panels.  

 

Then how is the loan program allowed a caveat that they can own the panels?  When a homeowner with a loan, that includes a UCC filing, pays off the panels (hopefully no pre-payment penalty) and either pays cash or uses a different revolving credit line (HELOC) to pay off the solar loan, then the homeowner can request the UCC filing be removed.  WHEN THE UCC FILING IS REMOVED FROM STATE RECORDS  and the system was financed with a LOAN- WALA - THE HOMEOWNER NOW OWNS THE SOLAR PANELS!

 

Since it takes time to remove a UCC filing, it is wise to process a payoff well before listing a home for sale.  If a homeowner lists a home for sale and the UCC filing is in place, an appraiser CAN NOT ADD VALUE to the system as technically it's a leased system according to their guidelines and the panels are treated as personal property.

 

Owned solar panels are always a better way to go as a homeowner can now work with a qualified realtor and appraiser to calculate the value of the owned solar panels, which is added to a home's value.    The value is determined by using PVValue.com, and all of the data from the system, date of install, number of panels, and azimuth of the system.   The information can be conveyed to an appraiser using the Residential Green & Energy Efficient Addendum, provided on the Appraisal Institute site.  This site also contains a list of Green Qualified Appraisers by State.  Once on this site, click STATE to reorganize them in alpha order.

 

 

This GREEN Designee has been selling homes since 2002, and has acquired 3 green designations since 2008.  Working in the field of sustainability with vendors, builders, and trades along the way has provided MUCH knowledge to assist homeowners within the realm of green construction, including solar panels!

 

 

Posted by

Search the Arizona Regional MLS

Search for Homes

      

 

HomeSmart Elite Group                                  

8388 E Hartford Dr., Suite 100

Scottsdale, AZ 85255                                                         

(602) 620-2699   DIRECT

www.AZGreenRealty.com

www.GotGreen.info                  facebook   Google + twitter   youtube   linkedin   pinterest   

 

Comments (28)

Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

Hi Jan,
What a great subject for a post! There is a lot of misunderstanding of how solar systems affect home value in the loan process.

Aug 27, 2022 09:41 AM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Yes, Dorie Dillard Austin TX  and imagine that I see a LOT of misinformation in realtor posts on FB.  I can't tell you how many times I've had to share information only to be doubted!  As an instructor on this topic, it chaps my hide when they share that to consumers who are equally as confused!  Thank you for commenting!

Aug 27, 2022 03:53 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

I hope this post helps anyone who doesn't understand the financing differences with solar.  So much misinformation out there Debra Leisek !  Thank you for commenting!

Aug 27, 2022 03:53 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Exactly Patricia Feager, MBA, CRS, GRI,MRP !  I've received calls from homeowners who added leased solar panels to help sell their homes!  I hated to have to tell them that the leased panels don't have value, are hard to negotiate, and because solar panels are becoming cheaper and more efficient that the older panels are worth less than newer systems.  An array can be worth less than the payments of a solar lease! Thank you for commenting my friend!

Aug 27, 2022 03:55 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Thank you Grant Schneider .  Not every state has as much solar and you may never hear about this, but there are a LOT of people who are upset with their leased solar systems.  95% of residential solar is leased in Arizona! 

Aug 27, 2022 03:56 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

You're welcome Kat Palmiotti!  Thank you for reading and commenting!

Aug 27, 2022 03:57 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

You're welcome Nina Hollander, Broker !  LOTS of misinformation.  About a month ago, I was tagged in a question on a realtor forum on FB.  The question - "Does Solar Have Value."  I read every comment, all 386 of them.  I made a tally of every response!  Only 65 said that it might have value, could have value, or any similar response.  And this is generous as only a handful of agents actually knew what they were talking about.  Some said, "NEVER" in all caps!  So the misinformed are out selling homes with leased solar and don't know all of the ins and outs of even that transaction!  Hard numbers to see!

Aug 27, 2022 03:59 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Very true Caroline Gerardo !  You probably see a lot of rooftop solar panels in your market.  Also consider that not every agent understands that the inverters don't last as long as the panels; solar panels degrade 1/2 to 1% a year; and that newer panels are more efficient than older solar panels.  It's a lot to know, which is why you want to refer a listing with solar to an agent who understands it.  Reduce your liability and earn a fee for the referral.  Safer for everyone!  Thank you for commenting!

Aug 27, 2022 04:01 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

True Leanne Smith but did you know that not every underwriter looks at DTI.  Educated underwriters know that there is energy savings and that should be included and that DTI doesn't need to be included in the payment because of the energy savings.  With any leased system, ask the lender upon contract receipt if their underwriter includes DTI for a lease payment.  If they say yes, tell the buyer's agent.  Better yet, find a lender  in advance of listing a home for sale with leased solar panels that allows for the lease payment without needing DTI due to the energy savings of the panels.  Put that lender's info in the private remarks with the explanation and ask your broker for good language that doesn't give you an ethics violation.  

Aug 27, 2022 04:04 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Nailed it Carol Williams - the entire topic is a challenge for a lot of people, including agents.  Scroll to page 5 of this report for some interesting statistics! 

https://www.nar.realtor/sites/default/files/documents/2022-realtors-and-sustainability-report-04-26-2022_0.pdf

Aug 27, 2022 04:07 PM
Rocky Dickerson
Realty One Group - Las Vegas, NV
Superior Service!

Yes, I have seen a number of transactions with confusion on this subject

Aug 28, 2022 08:38 PM
Andrea Bedard
Thompson Company, REALTORS® 240.593.2860 - Silver Spring, MD
Fluent in Real Estate & German, M.A. ABR ASP CIPS

A Solar Addendum is one of the newest we have at our disposal. It requires the seller to disclose upfront if their system is leased or owned and gives the potential buyer an out should the lease/loan info not be agreeable. I sold one and negotiated for the seller to pay off the system at closing.

I just created an account at pvvalue.com  Thank you for sharing such a valuable resource Jan!

Aug 29, 2022 08:52 AM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

There are a plethora of companies to boot Rocky Dickerson and they aren't likely helping homeowners with solar as part of their sales process!  Good luck and let me know if I can ever answer questions Rocky!  Appreciate your review and comments.

Aug 29, 2022 02:22 PM
Sheri Sperry - MCNE®
Coldwell Banker Realty - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi Jan,

Great post.  A lot of the issues you talked about have come up in the homes I have listed or brought buyers to.  I had one issue where the seller leaked at the pipe from the solar panels into the roof.  Fingers were being pointed to all parties involved.  Nobody wanted to take responsibility for getting this fixed. 

Personally, I have found that solar panels can be more of a negative than a positive when selling a home.

Aug 29, 2022 02:27 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Good for you Andrea Bedard !  At least your solar addendum provides the opportunity to share information! Much like ours it sounds.  It's so important to understand the ins and outs as home owners rely on us to know this stuff.  And if an agent works on selling a home with owned panels and they are practicing outside their area of expertise..... you probably can guess who has the liability on this! 

 

Maryland is way ahead of most states on production built Energy Star homes thanks to your government entities!   

https://www.energystar.gov/newhomes/energy_star_certified_new_homes_market_share

Here's the latest that you probably already saw! 

https://www.seia.org/news/massachusetts-relaxes-net-metering-caps-residential-solar-major-climate-bill

Aug 29, 2022 02:28 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

I appreciate that issue Sheri Sperry - MCNE® as not everyone understands where liability lies.  If the solar panels are older, a solar company may deny responsibility for the roof.  And a roofer will point to the solar company.  Ultimately, I'd just pay to fix the roof and move on with the sale.  Let me know if I can ever be of assistance for you in your sales process of solar homes!  Thank you for commenting and for your review!

Aug 29, 2022 02:30 PM
Dr. Paula McDonald
Beam & Branch Realty - Granbury, TX
Granbury, TX 936-203-0279

Excellent topic and thank you for clarifying so many things. We are seeing a lot of confusion between agents and clients regarding the legalities involved.

Aug 29, 2022 02:57 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Thank you Paula McDaniel .  I figured it's time for a re-boot of information on this topic now that agents have time to read!  Thank you for commenting! 

Aug 29, 2022 03:05 PM
Lawrence Bland
DMV Realty & Investments, LLC - Waverly, MD

I found an article that might shed a little light on this subject, its from Fannie Mae.  https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B2-Eligibility/Chapter-B2-3-Property-Eligibility/1032991541/B2-3-04-Special-Property-Eligibility-Considerations-12-16-2020.htm#Properties.20with.20Solar.20Panels

Aug 31, 2022 09:27 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Thank you Lawrence Bland .  I would have posted the link from Fannie Mae on these 2 graphics but kept the post shorter.  Here they are: 

Fannie Mae guidelines

This is the document from Fannie Mae - reflecting the lien on the property with the UCC filing. 

Sep 03, 2022 01:59 PM