consider these pitfalls before you sign on
Everywhere you turn today solar panels flank the rooftops of many homes. Advancement in technology, falling prices and free energy has made solar power appealing. But, how does this investment impact your resale value?
While the costs have declined in the past decade, the residential systems still remain costly, and why most people choose to lease than purchase outright. The leases are long term contracts and the experts state it to be similar to leasing a car, no down payment and you lock in a rate for the full term, upwards of 25 years.
However, home owners who sign onto these deals are finding some snags when it is time to sell. Here a few of the pitfalls of this green technology.
- Buyers are reluctant to sign the contract unless the seller “buys out” the remaining lease payment stream – $15,000-$20,000 or more. Reducing your net proceeds.
- Buyers are concerned the technology will be obsolete before the lease term is up.
- Buyers question the actual savings in the end after paying the leasing fee. Any tax credit offered was already applied when originally purchased.
- Buyers question whether the solar company that installed the panels will still be in business to provide service for the life of the lease.
- Buyers will need to qualify for additional credit to absorb the solar lease payment. This creates a potential credit problem causing them to have a higher debt to income ratio affecting the mortgage program in place and affordability of the home.
- Sellers read the fine print. Lease contracts can have an escalator clause when energy prices increase.
- Buyers future mortgage refinance can be denied. Many lenders will not even consider a loan or refinance if solar panels are involved.
- Buyers are concerned their home assessment with solar panels will increase the tax bill.
With the rising popularity of solar, up by 50 percent per year since 2012, according to the Solar Energy Industries Association, many real estate professionals have already seen or experienced several disputes over solar panel leases.
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