What Should Palm Desert Buyers Know About Homes With Leased Solar Panels?
Solar panels can be especially valuable in Palm Desert, where air conditioning likely accounts for a large share of a home’s electricity use, but leased panels add another contract for buyers to consider. Buyers need to review the solar agreement, monthly payment and utility rate options, roof and transfer responsibilities, and whether the want to take responsibility before deciding whether the system is worth it.
Keep reading to learn everything prospective buyers in Palm Desert need to know about homes with leased solar panels, with a full breakdown.
What Does Leased Solar Actually Mean?
With a solar lease, a third-party company owns the equipment installed on the home. The homeowner makes a scheduled monthly payment in return for the electricity it produces. Under a PPA, or power purchase agreement, the provider still technically owns the system, but the homeowner pays for the energy at a contracted price per kilowatt-hour.
California’s consumer guide highlights that solar leases and PPAs commonly run 20-25 years. Selling the house does not actually negate that obligation. The contract has to be transferred or paid off accordingly.
Review the Full Solar Agreement
Make sure you can see and review the full original contract and any amendments early on during the process. The agreements should show the remaining term, monthly payments, how the transfer works or whether you can purchase it, the coverage, any maintenance guarantees, equipment warranties, and any end-of-contract options.
Be especially mindful of escalators on annual payments, which can make a lease that seemed cheap now seem like a burden, so the best alternative is to look not just at a payment that’s due now but one made out over the term that’s left.
Can the Buyer Assume the Lease?
Many solar companies allow a qualified buyer to step into the agreement, but that process is not automatic. The seller may have to apply for approval, a credit check may be needed, and the new owner may need to sign papers and move things along sooner. The parties should be ready to contact the solar company so it knows before the inspection period or a similar deadline.
If the buyer does not qualify or does not want the lease, though, the seller may have to purchase the system or prepay the contract and should identify who is going to pay for what in advance rather than leave the matter until the closing.
Compare the Payment to the Electricity Produced
A low electric bill doesn’t mean that the lease is valuable, so buyers should be sure they request at least 12 months of Southern California Edison bill statements and solar production and lease invoices so they can understand just how much power the house was using, how much the panels were generating, and what the owner was paying them in return.
Usage patterns matter in areas like Palm Desert, where a seasonal resident keeps the house a little warmer on average while they’re not home and uses less than someone who is full-time. Pool pumps, electric cars, older air conditioning systems, and thermostat settings can also be influential.
How Does a Leased Panel Affect Mortgages?
The lender normally looks over the lease/PPA as part of the underwriting. According to current Fannie Mae guidance, the payments on some types of leases do have to factor into the buyer’s debt-to-income ratio, but according to qualifying agreements under which the payments depend on how much electricity is generated, payments based on what is generated may not, and leased panels cannot count towards the appraised value of the house (the homeowner does not technically own them).
Buyers should be sure to bring the solar agreement to their lender before assuming they even qualify, since just because an amount looks affordable, it could still end up changing the offered mortgage amount.
“Leased solar isn’t inherently good or bad, but the key question is whether the buyer still can fit the financial and other considerations of the remaining contract into their financing preferences, intended energy use, and ownership plans. We make sure those numbers are reviewed if the buyer takes emotional control over the home before.”–Ron Saporito, Chief Executive Officer & Broker / Owner
What Can Happen to the Roof and Solar Billing Plan?
Buyers should figure out who pays to remove and reinstall the panels if the roof needs repairs and who has the obligation to have the work done, if there may be an option to purchase or to have a new roof installed before the solar contract is fully satisfied, and whether their unauthorized removal without the permission of the provider can violate the agreement or invalidate warranties.
Buyers should also confirm the Southern California Edison billing status of the system, as SCE states that transferring an existing connection does not automatically alter the qualifying period of the original array, which can be a key consideration if it’s enrolled under an older NEM contract, but that it should be able directly with SCE in order to confirm the details of their NEM contract and interconnection agreements.
Protect Your Purchase Power
A strong buyer’s offer requires the seller to provide the full solar contract, current payoff or buyout quote, transfer instructions, production history, utility statements, and warranty information, including the option of the buyer taking responsibility for assuming the contract or the seller satisfying it before the sale is final.
Leased solar can be especially valuable in places like Palm Desert, but only so long as the terms of the contract and savings for the next buyer make sense. Careful attention from the buyer’s real estate agent, lender, title professional, inspector, and solar provider can prevent getting handed not just the keys to the home but also an unwanted contractual obligation. Reach out to the professionals at Ronald Christopher & Associates for more information about leased solar panels in Palm Desert homes.
Frequently Asked Questions About Leased Solar Panels
Q: Can I require the seller to pay off the solar lease?
A: A buyer can request this, but the seller isn’t under any obligation to do so, and it’s more about individual contracts, market demand, and the ability for buyers to negotiate terms as well. It’s always best practice to get a current written payoff or quote so the buyer understands what they could be offered for the system in the given circumstances.
Q: Will leased solar increase the home’s appraised value?
A: Leased units generally shouldn’t add as much value under the Fannie Mae-endorsed standard for the area. The home maybe is appealing to buyers, but that’s not the same thing as actually being able to receive a higher appraisal on the property because of some kind of panel ownership agreement that the buyer also has to take responsibility for.
Q: Who repairs leased solar panels?
A: The provider typically covers equipment maintenance at a specified level, but coverage, options, monitoring, response times, production guarantees, and exclusions can vary. You may also need to find out who covers the removal of panels in the event that there is work done for your roof and what the situation is like in the event that the provider ceases to exist or has gone out of business in advance.
Q: Can I buy the panels after buying the home?
A: Some contracts give buyers an option at a set time or by a deadline, but the terms can restrict the sale or set prices based on a schedule, the value of the panels, or the contract. Buyers should always talk over any option to purchase with a provider so they don’t rely on what a seller has already told them about their particular contract and make sure they are aware that any applicable terms are in play beforehand.