Realty Executives of Flagstaff

Wayne McCormick

Wayne McCormick

Broker/Owner

Realty Executives of Flagstaff

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Solar Panels: Challenges and Solutions

(Published on - 5/30/2024 6:24:37 PM)

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 probably show almost all 1’s. For that reason, many agents avoid solar altogether while others may have had only occasional transactions. Why does there seem to be such a low opinion among agents for 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 however, is that solar panels are an amazing technology that has the capability of producing electricity for at least 50 years. With a little bit of understanding of the basics of solar, homes with solar don’t have to be such daunting transactions.  

The 3 Methods of Solar Ownership

There are three methods a homeowner can choose with their solar: it can be owned outright, owned with a loan, or leased. For a real estate agent, each one of these presents its own 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 May, 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 

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 that 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, be sure to explore these contracts and the best practices associated with them.

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