Solar energy systems have thrown a curveball to real estate professionals who are trying to educate buyers and sellers on leasing versus owning, and match appraisals to the value of the home.
Baker Electric Solar has seen more than 50 percent annual growth in residential solar installations in the last three years, company President Mike Teresso said, adding that the San Diego market is growing exponentially every year.
Nationwide, solar installations have increased by 38 percent in the past year as more people choose to lease instead of own the systems, according to Bloomberg.
Solar leases were introduced in 2008, and the number of residential systems financed through leases has increased to as much as 70 percent, according to GTM Research.
A solar panel lease can act as an anchor for homeowners because it predestines a buyer to take on that contract, said Chris Anderson, the Greater San Diego Association of Realtors 2014 president-elect and Realtor at Town & Country Realty Inc.
Teresso said all of the leases are designed to transfer, and the new homeowner picks up the remaining lines of the lease.
“Regions of California have reported that the buyers of properties have to qualify for the lease on the solar panels,” said Nikki Coppa, broker/owner at Guardian Agents. “They indicated that the qualification criteria for the solar panel lease assumption were more stringent than that of the loan for the purchase of the home. Their concern is that so many sellers do not know what they are getting into when they lease the panels -- and how it may impede their ability to sell the home.”
Anderson encourages those looking to lease solar systems to read the contract thoroughly. She said she has seen stipulations stating that the leaseholder must purchase the system if the solar company goes bankrupt -- which could mean coming up with about $50,000 within two years instead of a typical cost of $200 per month for the next 20 years.
A lease could be beneficial for a seller depending on how it’s structured, said Cory Shepard, general manager at Coldwell Banker West.
If a homeowner doesn’t plan on staying until the loan is paid off, he or she doesn’t have to worry about the value upon selling if the lease is assumable, which, Shepard said, a lot of them are -- some with no reduction in the principal amount of the lease.
Shepard said it’s important to weigh the payment on the lease versus the energy savings -- which can also help a borrower qualify.
Robert Anselmo, principal at Ambient Communities, said his company offered a program in which it prepaid the solar panel lease for the buyer.
The solar company will maintain the system but the buyers don’t have a lease to assume, which was attractive to his buyers, he said, and the lower power bill probably helped them qualify for a loan.
A homeowner with a solar system is going to see savings on his or her electric bill whether the system is leased or owned, Teresso said.
There are two types of customers interested in solar -- those who want to own the equipment and those who want to buy the electricity the solar is producing, he said.
For those who choose to lease, the return on investment is immediate, Teresso said, because the lessee isn’t investing in the equipment.
Those who have cash or access to a debt financing product can opt to buy the system, and the return on investment can be in as little as three to five years depending on the size of the bill and the roof space of the system, Teresso said.
The average total cost of the systems is $35,967, but subsidies lower the effective price to homeowners to about $20,892, according to “Understanding the Solar Home Price Premium: Electricity Generation and ‘Green’ Social Status,” a 2011 study by the National Bureau of Economic Research.
Buyers who purchase homes with preinstalled solar panels pay less than the cost of a new system.
Solar panels add an average 3.6 percent to the sales price of a home in San Diego County after controlling for observable characteristics and flexible neighborhood trends, according to the economic research study.
This corresponds to a predicted $22,554 increase in price for the average sale with solar panels installed.
Anderson said she recently represented a seller who had spent $47,000 on a solar system two years prior to selling.
His average electric bill was $500, largely due to his pool and air conditioning system, Anderson said, making solar panels a huge money-saver -- and the buyer understood that benefit.
The appraiser also understood the system’s worth, and Anderson said two Realtors valued the home at $375,000 and it sold for $415,000, thanks to a bump from the solar system.
Anderson, who works primarily in the Ramona area, said homeowners are choosing solar because there’s no natural gas in the area -- only electric or propane.
There were 7,358 single-family homes and condos actively for sale in San Diego County as of early June, Coppa said. Of those, 240 noted “solar” in the criteria.
“It really just is not a big thing down here yet. I don’t have buyers asking for it, nor sellers that have it,” Coppa said.
Jorge Ahuage, owner/broker at Ahuage Realty Group, said interest in the systems will increase when there is a faster return on investment.
Homes sold with solar are typically bigger, have more bedrooms and bathrooms compared with those without solar, and are likely to have a view and a pool, according to the economic research study. Neighborhoods where solar panels have been installed are wealthier, have more Caucasians, are more educated and have more registered Democrats.
Miguel Contreras, Realtor at Dominion West Properties Inc., said his buyers are more interested in energy efficient windows and appliances, and drought resistant landscapes than they are in solar panels.
Anderson compared solar panels with the appeal of a pool.
“It’s looked at as, ‘If I really like it, and it’s priced right -- then it’s great," she said.
Solar panel systems that are owned by the seller might make the property sell faster, Anderson said, but she hasn’t found buyers “giddy” about those with leases.
The California Association of Realtors is working on adding new paperwork regarding solar to its seller property questionnaire form, said Angela Ordway, SDAR’s 2014 vice president and Realtor with Berkshire Hathaway HomeServices California Properties.
The questionnaire will ask if the system is leased or owned, if the warranty is transferrable and if there is maintenance required. Ordway said it’s an opportunity for the seller to disclose about the system and provide more details to the buyer and the lender.
The new form is expected to be in place in early 2015, Ordway said.
Shepard said sellers can take it a step further and bring up all information related to the solar system at the time of listing -- that way, any potential issues can be handled before an offer is accepted.