The solar industry is booming. There are currently more than 1.5 million residential solar installations in the U.S. and that number is projected to reach nearly 4.2 million by 2024. Solar panels have become such a popular energy solution that in May 2018, California regulators approved a plan to mandate solar panels on all new home construction. Soon, this type of legislation could come to other sunny states to reduce environmental footprints.
One way builders and homeowners are looking to install solar systems is through a lease or power purchase agreement (PPA) (i.e., a “solar agreement”) with a third-party solar provider. These solar agreements are currently available in a little over half of all U.S. states, and provide homeowners with a way to use solar panels without the upfront cost of purchasing a system. But solar agreements are known to create unique challenges when selling a home.
Some issues that sellers have experienced so far include:
- Buyers shying away from a house because of the solar agreement (due to things like lease length, lease payment, lease contracts, maintenance considerations, technology obsolescence and more)
- Buyers who may not meet the solar company’s qualifications to lease
- Potential issues involving the proper transfer of the solar agreement
If you’re working with a seller who currently owns a home with a solar agreement, you may be able to help them navigate complications with the sale. While every situation is different, here are a few steps to consider:
- Start early: If you represent the seller, ask them early in the selling process whether the property is tied to a solar agreement. The terms for transferring a solar agreement may impact the marketability of a property, and disclosure to potential buyers is important.
- Request a copy of the solar lease agreement: Ask your client for a copy of the current solar agreement. If they don’t have a copy, they should request it from their solar company.
- Seek advice. Unfortunately, misconceptions about solar agreements are common. It’s important that buyers and sellers fully understand the terms of their solar agreement, including its transfer rights and requirements at the time of the sale of the home. Many solar companies have dedicated representatives to assist with the lease transfer process, but you may wish to advise your clients to consult with an attorney first.
- Cover all your bases: When selling a home subject to a solar agreement, it helps to work with a trusted company like Old Republic Title. We can alert you to potential title problems, such as an unrecorded solar easement and other possible title issues that need to be addressed prior to closing.
- Keep lines of communication open: Early in the process, provide your closing team with as much information as possible about the transaction. What they don’t know could cause delays to the closing process.
- Highlight the Value of Solar Power: Homeowners should be encouraged to emphasize the financial and environmental benefits of owning a solar power system. These advantages include substantial savings on utility bills and a reduced carbon footprint, which can be attractive selling points for potential buyers.
- Get an Appraisal: A fresh appraisal of the home that takes the solar panels into account can add significant value to the property. An experienced real estate agent or appraiser can assist in this process to ensure an accurate valuation.
- Prepare Necessary Documentation: Homeowners should be encouraged to gather all documents related to the solar system, including warranties, service agreements, and details about the system’s ownership. This information can be helpful to potential buyers and increase their confidence in the purchase.
- Feature the Solar System in the Listing: The solar system should be prominently mentioned in the home’s listing. Homes with solar panels can sell for more than homes without, so it’s important to highlight this unique feature to attract potential buyers.
- Clarify Financing Details: If the solar system was financed, homeowners should be aware of the requirements and liabilities associated with this. An experienced agent can help explain these details to potential buyers, ensuring a smooth and transparent transaction.
If you would like to learn more about how you can guide the sale of a home subject to a solar agreement, or find out what information your closing team might need, contact your Old Republic Title representative today.