Are you planning to buy or sell a house with existing solar panels?
Perhaps you are in the market to buy or sell a home and ready to assume the benefits of a previously installed PV solar system, here are some tips on how to decide whether the existing system is an asset or a liability.
Should I buy a house with an existing solar system?
- Is the system owned outright and not subject to a lease or PPA?
- Was the system installed by a reputable installer who is still in business?
- Did they use quality solar panels and inverter from companies that are still in business?
- Is there a copy of the original contract and is the warranty transferrable?
If you can answer yes to all four of the above questions, then the answer is simple; yes, buy the house.
If not, then read on; find out which “red flags” to look for and what to expect from the system?
How was the system originally purchased?
- A system that is owned outright is not subject to any loans or leases and must be assumed at close of escrow – this is the best way to go and poses no “red flags.”
- A system that was purchased with a PACE loan (Property-Assessed Clean Energy Loan) and must be assumed by the buyer – RED FLAG
- Use this as leverage in the transaction. Consider if it’s worth a bit more money if the system is unencumbered.
- See what it will take to have the seller buy thee system outright before the close of escrow.
- Try to get rid of the PACE loan and do not close escrow unless you fully understand he liabilities you are undertaking. This isn’t necessarily a deal breaker, however, it’s not the best means to finance a PV system.
- The system was leased – RED FLAG
- Use this as leverage in the transaction. It’s not necessarily a deal killer, but lease agreements are certainly not in favor of the seller.
- Is the leasing company still in business? If not, this could be a deal killer.
- What is the remainder of the contract? Is the buyout fee reasonable (Doubtful)? What level of monitoring is provided and is it still functioning? A common mean the leasing companies use as a crutch to void their production guarantees is the monitoring device has lost connection and the homeowner ignores it.
- Who do the lease payments go to and do they have a local presence?
- Are you sending payments to Wall Street or to a regional company who is still answering the phone?
- Is there a lease escalator and are you aware of the sales tax billed on every payment?
- If you need service what is the procedure?
- If you are in the market to put solar panels on your home this is probably not the choice you would make.
- But it’s already there so… if you would like the house, then determine if the lease is acceptable to assume.
- Some leases are acceptable in that the cost of power consumption under the lease is still less than what you would pay your local utility company. If this is the case then don’t let it stop you from buying the house of your dreams.
- The system is a PPA (Power Purchase Agreement) – RED FLAG
- Again… Leverage.
- Consider the remaining term?
- Will you use the power delivered?
- With a PPA you’re paying for it regardless. Be sure that the system is sized right for you.
- Again, who do the PPA payments go to and do they have a local presence?
- Are you sending payments to Wall Street or a regional company who is still answering the phones?
- What is the current rate?
- Is that tax rate favorable with today’s rate plans?
- You will most likely be on a “Time- of-Use” (TOU) plan and offsetting the least expensive power sold by the utility.
- Check closely. Rates can vary and usually contingent upon your utility plan.
- Escalators? Is there a lease escalator clause that can potentially change the agreement price?
- Are you aware of any sales tax billed on every payment?
- What level of monitoring is provided and is it still functioning?
- At least with a PPA it’s in the companies benefit to maintain the monitoring.
- But can they bill expected production if you connection drops?
- If your system needs to be serviced, what is the procedure?
- If you are in the market to put solar on your home, PPA is not the choice you should make.
- But it’s already there so… if you like the house, then determine if the cost per kw is acceptable.
- If the cost of the power under the PPA is still less than what you would pay your local utility, then don’t let it stop you from buying the house of your dreams.
- Who installed the system? At Palomar Solar & Roofing, we proudly put our name and contact information on the system plaque.
- Can the home seller tell you who did their installation?
- Is the installer still in business? What is their reputation?
So many red flags – do I really want solar?
Let’s take a quick moment to remind you of the benefits of solar. First and foremost: It makes sense financially. Investing in a PV Solar System is one of the best investments you can make as a homeowner and if done right, through a reputable company such as Palomar Solar & Roofing, peace of mind and an overflow of benefits will shortly follow. Many believe the primary reason to go solar is for the environment. Here at Palomar, we prefer to look at the financial benefits of solar and if it’s good for the environment, that’s a bonus!
Do homes with solar systems sell faster?
Simple answer is… “Usually.” Of course if your house has a PACE loan or a lease, you may experience the opposite. What if the panels are facing the street and located in a haphazard manner as to be an eyesore. This is why it is so necessary when choosing your solar company to ensure that you are hiring a company who will be honest about all variables. At Palomar Solar & Roofing, we know that our systems are installed right and take aesthetics as well as proper sizing into consideration. If a system is installed properly, by a reputable contractor with quality components, then yes; your PV system will add value to your home. It will also allow the homebuyer to close escrow with peace of mind rather than pulling out of escrow at the discovery of any “red flags,” due to the previous home owner cutting corners.
What is the value of my solar system?
Did we mention benefits? One of the many benefits following the installation of solar is that it has great potential to increase the value of your home. But keep in mind that value is truly contingent upon the current market and method in which you’ve purchased your PV solar system and it absolutely matters which company has installed your system. The cream of the crop has risen in the solar industry and in our opinion, there are only a few companies who can really offer peace of mind. If you’re buying a home that these companies have installed on, you can feel comfortable knowing that warranties are going to be upheld and at a minimum the job was done right. Do your research on a solar system that was previously installed on a home you have taken interest in. Once you have identified which company has installed the system, research the company and ensure reputability.
At Palomar Solar & Roofing, we provide each system with a full set of documentation; from the contract to the installation plans and warranties. We are proud of our work and our reputation shows it. When looking for your solar installer, know that these intangibles are what make a difference between a system that is an asset to you and your home, versus one that could make selling your hoe an experience you’d rather forget.