Overcoming the Challenges Solar Creates for Real Estate

If you survey 100 agents in Arizona asking them to rate, on a scale of 1 to 5, how much they enjoy representing homes with solar, it would show almost all 1’s. For that reason, many agents avoid solar all together while others may have dabbled in it as they came across it. So why is it that agents who encounter solar on a home have such a low opinion of this renewable energy source for homeowners?

It boils down to the fact that many have had negative experiences and lost money, clients and buyers due to not understanding solar and its complexities.

The truth is though, solar panels are like magic! They are an amazing technology that makes electricity with no moving parts, last for at least 50 years, and reduce the home’s second largest monthly expense, behind the mortgage payment. With a little bit of energy spent on understanding the basics, solar homes don’t have to seem so daunting in a transaction.

All of the problems commonly encountered while going through a home transaction involving solar, can be summed up into 3 distinct challenges. When addressed, these challenges can be resolved and solar can be a benefit rather than a hindrance. They just need to be addressed correctly. Each challenge is a direct result of the method by which the solar panels are owned, but the secret to overcoming each of them comes down to just one thing. Whether you’re representing the seller or buyer, you need to help the buyer feel confident in the solar on that home. Easier said than done though, if you don’t know how.

The 3 Methods of Solar Ownership

There are 3 methods a homeowner can choose with their solar; it can be owned outright, owned with a loan or leased. For an agent, each one of these presents unique challenges. Some of those challenges unfortunately, due to misrepresentation on the part of the agent, have ended up in court.

Ownership Method #1 – Owned Solar

  • Challenge #1:
    • Listing the home openly and properly as a solar home so you don’t lose your client.
  • Solution #1:
    • Market the home as a solar home and showcase the solar as an added value feature in order to help sellers recoup at least some of their investment into solar.
      • According to Fannie Mae, Freddie Mac and FHA, owned solar adds value and should be incorporated into the valuation of a solar home. Appraisers require the correct documentation to establish a quantifiable value.

Ownership Method #2 – Solar with a Loan

  • Challenge #2:
    • Solar loans require a negotiation in escrow to determine if the loan will be paid off or assumed by the buyer.
  • Solution #2
    • When marketing a home, demonstrate the value with the proper solar value documentation. A solar loan is always part of the negotiation of the purchase price. A fundamental understanding of the value of the solar system empowers a better negotiation so that both the buyer and seller walk away happy. The two outcomes are to either pay off the solar loan or transfer it to the buyer.
      • Understanding the solar loan products and how to navigate them helps the savvy agent represent their client without exposing them to the liability of lending contract ignorance.

Ownership Method #3 – Leased Solar (Leased, PPA, Utility Owned)

  • Challenge #3:
    • Getting a buyer on board with assuming a 20-year contract. There is typically an increase built into it each year.
  • Solution #3
    • This challenge has two solutions. The first option is to help the home buyer understand how much the solar is going to save them each month on electricity and get the lease contract transferred into their name. The second, and better option, is to help the buyer buy out the solar system from the lease company, as part of the home purchase. This will add value later whenever they decide to sell.

To understand those three challenges and create buyer confidence in the solar on a home, it’s important to know that any given system will have between 1 and 6 contracts connecting the solar system to the home and its owner. These also need to be navigated in the real estate transaction.

Solar Contracts Agents need to Navigate:

  1. Utility Net Metering Contract
  2. Solar Loan or Solar Lease Contract
  3. Solar Warranty Agreement
  4. Solar Inverter Agreement
  5. Solar/Battery Installation Contract
  6. Battery Warranty Agreement

You can both minimize your liability and help the buyer of a solar home feel confident by learning about and understanding these contracts. To better serve your clients with solar homes, I recommend exploring these contracts and the best practices associated with them.

Cory Vanderpool
Owner of Sprk Realty
(480) 518-9906