Owned solar panels can be expensive, while solar panels under a lease agreement are much more affordable for homeowners. In buying a house with leased solar panels, you can either buy out the lease or take over the lease from the homeowner.
Moving into a house with leased solar panels gives you the advantage of not having to worry about repairs. It’s also nice that you outline your payments in your solar contract to budget your monthly expenses effectively. But the downside is that qualifying for a solar lease is not always easy and can cause a house purchase to fall through.
What Is Solar System Leasing?
This type of agreement is a manageable way for homeowners to experience the benefits of solar panels without worrying about spending thousands of dollars at once. If you are looking to buy a house featuring leased solar panels, know that the previous homeowner and their preferred lease company have installed a solar energy installation. Both parties have agreed on a price for the power generated from the system.
As part of this agreement, the company installs and maintains the system, and the lender makes fixed payments every month.
You Are Not the Owner
When you buy a house with leased solar panels, you will not be considered the system’s owner. The panel system was probably not even included in the price of the home. Instead, a third-party company owns the solar installation, and they can repossess the solar energy system if you do not continue making payments.
It’s also worth noting that you won’t claim the federal solar tax credit because it belongs to the leasing company. After all, the solar installation is only leased.
What Happens When You Buy a House Containing Leased Solar Panels?
You may think that taking the solar panels off the house can eliminate any problems with a lease agreement. However, this doesn’t work because the solar panels are leased to the house instead of the homeowner, although the homeowner needs to be qualified.
Homebuyers who want to buy a house with leased solar panels have two options.
Option 1- Take Over the Solar Lease
First, they can take over the lease from the homeowner, continuing to make the monthly payments for the remaining duration of the lease agreement.
Option 2- Pay Off the Solar Lease
The second option is for the homeowner to pay off the lease in full. However, the balance may be significant because leases can last for 20 to 25 years. Because of this, most homebuyers opt to transfer the solar lease instead of paying it off simply.
It is common for the sale of houses with leased solar panels to fall through. Many homebuyers refuse to sign a contract unless they buy out the remaining lease. They worry that the solar panels will not save as much on utility bills or become obsolete.
Lease Agreements Are Not Universal
However, it’s important to note that not all solar leases work the same way. This is why you need to check the lease terms, such as the remaining payments, age of the solar panels, duration of the lease, and which party will pay for any repairs.
Make sure you check the cost of the lease because leased solar panels can increase over time. Determine if you will be paying an adjustable-rate or fixed-rate lease. If the lease agreement involves adjustable rates, it usually has a 1 to 5 percent payment cap, so even if utility rates climb as is expected, you will still be saving money over paying regular electricity rates.
Homeowners Now Prefer Green Homes
Buying a home with solar panels is a dream of many people. The National Association of Realtors has reported that 59 percent of real estate agents had clients express interest in sustainable housing features. In addition, 69 percent of clients said that energy efficiency in home listings is valuable. Considering these facts, buying a house with solar power or leased solar panels is more common than you may think.
The Lawrence Berkeley National Laboratory also discovered that 77 percent of solar panel leases were successfully transferred to new owners. Only 20 percent of the potential buyers were scared off by solar lease agreements.
Factors to Consider When Looking to Buy a House Featuring Leased Solar Panels
A solar lease can help you save on your electricity costs. But before you transfer the lease and enjoy the benefits of solar power, do these things first.
Review the Documents
After receiving the documents related to any leased solar panels, take time to read them carefully. Even though it may not be as interesting as reading a book and facing complex legal terms, you must check every line and paragraph outlined.
Documents of Particular Importance
The documents you need to review include:
- Recent version of the solar panel loan
- Other solar system documents that are in the home seller’s possession
- Name and contact details of the lessor
When checking the solar lease documents, note the parts you do not understand or disagree with. As a future homeowner of a house with solar panels, it is your responsibility to decide if you still want to continue with the solar energy lease.
When In Doubt, Ask!
If you have questions, do not hesitate to call the lessor and discuss whatever queries you have with them directly.
Letting your realtor know about your questions is also a great idea. Although your realtor probably can’t give you all the information you need, chances are, they can connect you to an expert in the field.
If your concerns are with the contract, check with a lawyer. Whatever the case, do not skip this step. If you do not proceed with caution, you may end up regretting your purchase.
Check the Solar Panel Details
Aside from checking all documents, you also need to know which solar company manufactured the solar energy panels. Knowing the solar company will give you information on the available warranties and how long the equipment and parts will be covered.
Aside from the manufacturer, ask the homeowner about the solar company that installed the solar panels.
Finding out the size and type of the solar panel system is also important since it will help you determine how much of your bill it can offset.
Check Electricity Bills
It is vital to ask the previous homeowner for copies of their electricity bills. Ideally, you want to check at least a year’s worth of electricity bills so you can be educated on its variation over time. A longer period is even better to get a feel for how bills have changed over time.
If it helps, ask the seller for information like how many people lived in the house during the utility bills they provide and if they lived in the home all year. For instance, if you’re buying a vacation house, chances are, the utility bills will be low because the house wasn’t occupied for a long period.
Determine Whether You Qualify For a Home With Solar Panel Lease
Assuming you are okay with the terms of the solar panel lease and you want to proceed with your purchase, the next thing you need to worry about is qualifying for the lease. Although many companies lease solar panels, it doesn’t mean qualifying for a solar panel lease is easy. The credit score requirements are generally high to be eligible for solar financing. But the requirements vary from lease to lease, so contact your lessor immediately to find out what the requirements are.
This will give you time to compile the key information that you need to submit. The earlier you can qualify for the lease, the better. If you fail to qualify, the home purchase may fall through. Expect the leasing company to examine your debt-to-income ratio to ensure that you can handle paying for the monthly bills.
Advantages of Buying a House with Solar Panels
When buying a house with a solar lease, you are essentially swapping your electricity bills for monthly leasing payments. The best part of this agreement is you won’t have to worry about paying thousands of dollars upfront to install a solar panel system for your home.
When you get a home with leased solar panels, you will also not maintain the solar energy system. So if you encounter serious issues with the wiring or the inverter malfunctions due to heavy wind or rain, you are not responsible for repairs.
Aside from these benefits, you will also enjoy predictable payments with your solar lease. You will know how much you will pay every month because they will outline the amount in your lease contract. This will make it easier for you to budget your expenses.
Research Is Key When Buying a House
Whatever you decide on, going solar is an excellent choice if you want to save money on your monthly electricity bills. Solar panels provide long-term benefits for homeowners. However, before buying a house with leased solar panels, you must understand the associated risks and benefits.
What’s important is that you must not feel forced to pay high electricity bills just because you think you may move in the next 30 years. Keep in mind that buying a house with leased solar panels is less complicated than you may think, and it offers a lot of benefits as soon you move in.
If you have other questions about purchasing a house with leased solar panels, get in touch with us today and talk to a solar system expert.
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