Hi everyone, hoping you can offer some thoughts on this deal. My husband and I are in escrow on a new primary residence that cuts both our commutes in half, is in a more established community, etc. Because the house needs some updating, we are getting it for less than what comps are in the area.
What worried us initially is the 20-year Solar City lease, with 2.9% annual payment increase escalatory, tied to the property. But after some back and forth we were able to get the seller to agree to pay off the entire amount due on the solar lease ($19k).
[Side note: I would have loved to have the seller buy the system outright, but in the contract, the system needs to have been on the roof for 5 years before the buyout is even allowed. And the system has only been on the roof for 3 years].
So now we'll be able to use the solar for free for 20 years (yay!). But of course the next logical question is what happens after the 20 years is up? Solar City offers two options: 1) Buy the system outright at the end of the contract or 2) Sign a 5-year extension on the lease (ha, yeah right!).
My thoughts are that we wait until year 20 and then buy the system outright. Solar City says they send a 3rd-party appraiser to determine the buyout price. After 20 years, the panels/inverter will be about 5-years from the end of warranty and should be appraised for far less than in year 5 (when a buyout is first allowed).
The one concern I have is that maybe the buyout price in year 20 might still be high (5-10k?). I figure that when push comes to shove, we'll have to buy the panels out no matter what, in order to remove the "fixture filing" Solar City puts on title.
What do you think of this deal? TIA!
Hard to understand, it's not a municipality but a company that is solar city.
I suggest you forget about it and enjoy the current situation, LOL.
You may not know it yet, but I bet you won't be there for twenty years, most move in 7 to 10. Hopefully it will appreciate and you can move on up, so just keep it in good condition.
You won't get a buy out price if they want it appraised at the end, I doubt it would be worth it as 20 years can be the life cycle of solar panels and then, I bet something cheaper and better will be available, so I wouldn't tie my thinking up about buying it down that long road.
BTW, Welcome to BP and congrats on your new home. :)
Is there an option to have them remove the system entirely?
It's been about six years since I was associated with the solar business, but back then, it was pretty obvious that solar technology was progressing by leaps and bounds about every 8 months. We were constantly getting more efficient panels and batteries such that when we went to provide warranty service on a customer three years later, the old technology wasn't even available to replace some components with. The odds that your system will be something you even want in 20 years is highly unlikely. You'll likely be able to get increased production for much cheaper then.
Could be we'll all be wearing this:
(Well, not me. But somebody)
Your house's roof and exterior walls could all be made of this:
Solar power and technology on your **roof** could be SO 2015 by 2035. Could be laughable as our clothes, cars and sidewalks may all be capturing solar energy at some point.
I agree that there's not much to worry about. Getting the sellers to pay off the lease and clearing up title was crucial. If you refuse to buy the panels or extend the lease, what happens? Don't they just take the panels back? Wait the 20 years and see if you still want them and if not, let Solar City have them. Will they even still be around by then?
I really don't understand why people agree to lease solar panels. Why not just buy them? The financial benefit has to be in the Solar Company's favor, just as leasing a car or apartment is in the dealer/landlord's favor in the long run. Not only that but a solar lease clouds your title and becomes an obstacle to selling. Some mortgage lenders won't agree to fund a loan because the solar lease takes priority lien so the lease has to be extinguished before they will move forward.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.