Residential rooftop solar leases have had a good run in the market, and why shouldn’t they…? They require no money upfront for systems that cost thousands of dollars while the financial and emotional reward is immediate. Problem is (and we’ve seen it before), when a business model is built to benefit only the companies while the consumer gets a the short end of the stick, eventually, the true “advantages” of owning that solar lease inevitably percolate to the surface.
A recent article by Bloomberg “Rooftop Solar Leases Scaring Buyers When Homeowners Sell” lists experiences of homeowners who have had a solar lease and faced various challenges when attempting to sell a house. Also, having received a few personal e-mails after people have read my previous article “Secrets of Residential Solar Lease – Sweet Deal or Disastrous Rip-off?” I’ve compiled for you a few more points to reflect on because frankly, I find that most people who acquired their rooftop solar via a lease were neither informed of these issues by a salesman, neither they ever considered them themselves. Here are the five of these conversation pieces that the solar lease companies would be happy to avoid:
1. Solar Lease May Hurt Your Home’s Value
Solar lease may not add value to your house. In fact, it can devalue your house. In general, people who own rooftop solar enjoy an added value to their home but not with the leases. Buyers shy away from them because they straight out don’t like the deal or simply do not understand it. Some appraisers say that to many potential buyers a solar lease is a liability rather than an asset, and may drive people away. In the Bloomber article, Dorian Bishopp blames the solar panels on his roof for costing him almost 10 percent off the value of the home he sold in March. According to the Bloomberg article Scott Vineberg, a SolarCity customer, received multiple offers for his home in Scottsdale, Arizona, home he sold in January, 2014. Unfortunately, the lease made the deal more complicated because the buyers were reluctant to take over the contract and asked him to pay off the balance in advance, that is 10 years of payments.
Check out another comment by TetonNiki in the same article:
My father-in-law signed up for one of these deals and when he passed away we had a very difficult time selling his house. Seriously, it is not my realtor’s job to pre-screen buyers for their credit scores!!! We lost quite a few potential buyers once they learned about the lease. We finally had to lower the price about $10K and wrangle with the leasing company to reduce the price of the system to the “real” market price (as opposed to the over-inflated lease price) and sell it to our buyer (who was savvy about solar thankfully). The family that bought the house then used the money saved on the home price to purchase the system outright. It was a total stressful nightmare on top of the death of a relative. And I have to say, the leasing company was very rude.
2. Credit Score Hurdle
What many solar lease owners may not be aware is that the new buyer of the house will also have to qualify for the lease in order for it to be “assumed.” There have been cases when a buyer’s credit score was a few points short of the solar company’s minimum, and the transfer was rejected.
3. Breaking a Solar Lease is Not an Option
In order to break it, you will be asked to pay off the balance in advance. If you do pay off the balance, it will be a full price of the panels – no state or federal credits for you.
4. You May Be Paying More for Solar Lease Than to Your Utility Company
It is entirely possible that over the twenty year lease, you’ll reach a point where you’re spending more on the lease than you would if you received a bill from your utility company. For example, we all know the family components of the house change. If you get into a lease when you have a large family and then your family reduces in size the lease costs now does not outpace your energy. The lease payment is more then the average electric bill because it was done on data when more people were in the home. In addition, it is a mistake to assume energy prices will go up over the next 20 years. Better energy technology, both from fracking and renewables, should increase supply and reduce costs over time.
5. Not the Same as Leasing a Car
Don’t be fooled when a salesman starts comparing solar lease to a car lease. While the dynamics are similar, the financials are not. Does the government offer to pay 30% of your brand new car if you buy it all cash? It does if you’re buying a new solar system but if you opt to lease then it will be the leasing company that does get the built-in tax breaks.
(Extra) 6. Just Hit Your Bank for a Loan
Banks are now offering loans for residential solar projects. Walk into your bank and ask to learn more about the terms. Solar Lease companies know this and the smart ones are shifting their strategy. Now that banks too want a piece of the pie, this makes buying a system more competitive than leasing one.
Proponents of solar lease say that these hurdles are “natural” as some buyers won’t be on board with assuming a lease that they don’t understand. They also claim that with time solar leases will become more common, and this will seize to be an issue. However, what they fail to see is that those home buyers, who have the resources to buy a house and can consider the full advantages and disadvantages of long term solar lease will clearly see that these leases are a bad deal, period.