Does a Rooftop Solar System Affect Real Estate Transactions?

Man homeowners feel that having a rooftop solar system will make it easier to sell their homes. That’s not always the case.

The biggest issue in buying or selling a home with a rooftop solar system has to do with ownership. Just because a solar system is on a homeowner’s roof does not necessarily mean that system belongs to the homeowner. It sounds complicated. But once you understand how system ownership is determined, it makes more sense. It all depends on how the system was purchased.

As a reminder, there are four ways to purchase solar panels: cash purchase, loan, lease or Power Purchase Agreement.

Cash Purchase

Homeowners who purchase a solar system outright with cash own the system. That’s the simplest scenario in a real estate transaction. A solar system purchased outright is considered “real property” in real estate language. Therefore, it can be appraised as part of the home’s value.

Loan

It’s the same with a rooftop solar system that was purchased with a loan that has been paid in full. That system belongs to the homeowner. If the homeowner is still making payments, ownership will depend on the contract the homeowner signed with the lender. Most lenders allow the homeowner to claim ownership while they make payments. When you do this, these systems can be appraised as part of the home’s value.

Other lenders may place either a lien or UCC-1 Filing.  UCC-1 filings are technically not liens. However, they are often treated by title companies as a lien. If the system is secured with a lien or UCC-1, the lender may claim ownership of the system. This may impact whether or not the system can be included in the appraised value of the home. As rooftop solar becomes more common, these appraisal practices and underwriting guidelines will continue to evolve. Make sure you work with your lender and title company to understand the specific guidelines in your area.

Reminder –  sellers are responsible to pay off any loan tied to a property prior to a sell. Solar is no different.

Buyers who are willing to take over the loan on the solar energy system will need to qualify for both a mortgage and a loan for the system. This may affect your debt-to-income ratio.

Power Purchase Agreement or Lease

Under a Power Purchase Agreement or lease, the homeowner pays for the right to use the rooftop solar system for a specified period of time. But, that homeowner does not actually own the system. The system is actually owned by the solar provider. That provider typically places a UCC-1 lien against the system. When you finance a rooftop solar system this way, it’s actually owned by a third party. Consequently, the system cannot contribute to the appraised value of the property.

Sellers with a solar system obtained through a Power Purchase Agreement or lease have certain guidelines, too. They must either transfer their systems to their new residence or “buyout” their contract. The specifics vary by solar provider, so be sure to read your contract.

Buyers looking to purchase a property with either of these types of agreements need to make sure they get a copy of the solar contract tied to the property. That way they can decide if they are willing to take the contract. This process may add to the timeline, but it’s definitely worth the effort. Power Purchase Agreements and solar leases are a great way to take advantage of all the benefits of solar.  Most noteworthy, you can get all the benefits with virtually no up-front costs, and at rates typically lower than those offered by the utility. So don’t let the added complexity scare you away.

Last comment, the pandemic has increased consumer interest in the environment, recyclables and solar. Marketers should take advantage of this and target green consumers.

 

This information comes from https://www.vivintsolar.com/blog/buying-and-selling-homes-with-solar

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