Buying House With Solar Installed

[Hansel07]

Hello, new guy here. I am currently negotiating on a house with a solar LEASE through Sungevity. Taking into account the bankruptcy of Sungevity along with the terms of the lease (15+ more years, 2.9% increase in lease cost/year) I have no desire to take on the lease. Sungevity actually pulled out of Arizona a few years ago and from calling around has no relationships with anyone to service their products. I have told the seller he will need to follow the contract and buy out the system. Seeing as Sungevity has only a few people still working for them, we are pushing two weeks to even try and get a number out of them. From my understanding of the contract it is all future lease payments plus pretty much any other fees they want to add on. Being a bit sarcastic, but that is more or less what the contract says. I am sure the seller will want to include the total payoff amount in the sale of the house and I am not too keen to pay this entire amount. I realize I will be getting use of the system in the future so am more than happy to pay something.

The system was installed the end of 2012. Per the permit, it is a 3.2 KW system with 28 65"x39" panels. The specific inverter and brands I am unsure of, but would tend to think Sungevity was not using top of the line items. I have spoken with the utility company and they say it looks as if the system is trying to cover the amount of energy needed during the peak hours. The house is still averaging an energy bill of $165/month. The utility company said they thought it was a 6.0 KW system. Per the contract with Sungevity the system was estimated to produce 8,196 kWh/year for the first year and 7,462 kWh/year over the term of the lease. Running this numbers this is assuming a 1% decline per year in efficiency.

We are located in the Phoenix metro area. I know there are many variables, but a range is more than fine. What would I be looking at total cost if I was going to put of a 3.2 KW system? What about 6.0 KW?

Thank you for the help and if you need more information please let me know.

[J.P.M.]

You are under no obligation to take the lease as part of the sale. Given AZ's current state of affairs with respect to PV/NEM, Sungevity's pullout, and that it's a lease, I'd back out until you see that the lease has been retired. You have nothing to gain by taking on that lease. Believe what the lease says in writing. All else is hearsay. If the lease is bought out and gets retired by the seller , even though Sungevity has a legal right to remove their equipment, they may choose to simply walk away. Wouldn't be the first time.

Oh, the joys of leasing. Looking at the home seller's situation, it's a textbook case of one of the many ways lessors screw themselves when they lease solar equipment.

[peakbagger]

I am curious if the best option is hire someone to take it down, put it in pile and send Sungevity a certified letter to come pick up their scrap.

Realistically I expect that its going to take quite awhile to unwrap that lease mess. I wouldn't be surprised if some other party doesn't already own the lease or will do so in the future as the bankruptcy is unraveled. I expect there is discount market on these ghost leases and some entrepreneur is going to pick them up for pennies on dollar and blackmail homeowners with a lien if they don't pay up some totally arbitrary charges.

Unless you have fallen in love with the house you may want to keep looking.

[J.P.M.]

I am curious if the best option is hire someone to take it down, put it in pile and send Sungevity a certified letter to come pick up their scrap.

Realistically I expect that its going to take quite awhile to unwrap that lease mess. I wouldn't be surprised if some other party doesn't already own the lease or will do so in the future as the bankruptcy is unraveled. I expect there is discount market on these ghost leases and some entrepreneur is going to pick them up for pennies on dollar and blackmail homeowners with a lien if they don't pay up some totally arbitrary charges.

Unless you have fallen in love with the house you may want to keep looking.

+1.

[Hansel07]

Unfortunately, my wife has fallen in love, so I am trying to figure out a way to make it happen. I absolutely will not take over the lease, that is a given. From my understanding of Sungevity's business model, they never actually owned the paper on the leases. There is a lien against the property by Robosolar I, LLC/Sungevity until December 2017. Obviously the lien would need to be cleared before any closing.

I like the idea of just getting rid of the system and calling it a day, but it is a tile roof and even if I could get the solar completely removed I would still require the seller to get the roof back to original condition. If the seller can get the payoff amount from Sungevity, which would make the seller the owner of the system, I believe we can then negotiate and get something completed.

In a perfect world, as an example, Sungevity would require $25,000 to get out of the lease and own the system. I want ballpark range of what a brand new system would cost as if I was putting it on today. Say, $15,000. Thus, I will tell the seller I will increase the offer for the house by $15,000. I'm not going to pay for his stupidity and having to break the lease. End of the day, the system is paid off and property of the house and we are in escrow to buy.

The house has been on the market almost 90 days and I know we are the only people who have made an offer. It is annoying the seller did not get all his information and options concerning the solar before he put it on sale.

[J.P.M.]

Unfortunately, my wife has fallen in love, so I am trying to figure out a way to make it happen. I absolutely will not take over the lease, that is a given. From my understanding of Sungevity's business model, they never actually owned the paper on the leases. There is a lien against the property by Robosolar I, LLC/Sungevity until December 2017. Obviously the lien would need to be cleared before any closing.

I like the idea of just getting rid of the system and calling it a day, but it is a tile roof and even if I could get the solar completely removed I would still require the seller to get the roof back to original condition. If the seller can get the payoff amount from Sungevity, which would make the seller the owner of the system, I believe we can then negotiate and get something completed.

In a perfect world, as an example, Sungevity would require $25,000 to get out of the lease and own the system. I want ballpark range of what a brand new system would cost as if I was putting it on today. Say, $15,000. Thus, I will tell the seller I will increase the offer for the house by $15,000. I'm not going to pay for his stupidity and having to break the lease. End of the day, the system is paid off and property of the house and we are in escrow to buy.

The house has been on the market almost 90 days and I know we are the only people who have made an offer. It is annoying the seller did not get all his information and options concerning the solar before he put it on sale.

As you wish, but I'd not increase my offer by as much as dime one. as a matter of fact, I'd use the lease to negotiate a better price by making it a detrimental feature. I'd tell the seller I like the house, but not PV, and after 90 days, and one offer (yours), that you may not be the only one with a low opinion of PV, and to clear the lease and get rid of the PV. In reality, either you want the system for a price or you don't want it at all, but the seller need not know that. You can negotiate from there. Once the lien clears, the system will have some value. How much ?? Opinions vary. Owners/sellers/real estate slugs think/claim a lot. Buyers/appraisers not so much. Some folks, in spite of protestations and some opinions to the contrary around here, do indeed think them worthless. Reality is, it varies and depends on what someone is willing to pay and how good of a negotiator they are. In any case, a used system has nowhere near the value of a new system under any circumstances. Knowledge of the desirability of residential PV, and a system's ability to provide long term reductions in electric bills helps the negotiator, as does what a new system may cost. I'd use ~ $3.00/Watt for a new system, and figure an owned system in situ might be worth 1/4 to 1/3 of that, or ~ a buck a watt, but that's a real SWAG on my part.

I'd say, "I'll take the house with the POS PV but for X $$ less than you're asking because of the PV."

Also, for buyers in cases such as yours, knowing they have the whip hand with respect to the lease, and no stake in what the owner screwed himself with, can help negotiations.

I'm absolutely ignorant of your market, but my guess is a house on the market for 90 days is priced too high or has desirability problems ( a leased PV system ??) anyway. I bet the seller's getting fed up with the whole thing.

Get rid of the emotion. There's always another house that's equally easy to like.

[sensij]

You might need to actually inspect the equipment to figure out what is there. A 3.2 kW system will not put out 8000 kWh, so either the lease is wrong, or the permit is. If it is 28 panels, the 6 kW number sounds right. The inverter should be obvious, and the panels will have a label on the backside that you might be able to see with a mirror. From what I've seen, Sungevity generally used good equipment and capable installers, at least a couple of years ago.

[peakbagger]

The problem with pricing a new system is that if you install a new system you get a 30% federal tax credit. The $3 a watt number can vary plus or minus 50 cents. So start off subtracting the tax credit as you aren't getting one if you buy the old system. The scam with leased systems is since the fed is giving a 30% credit the installer probably inflated the costs up front to maximize the rebate. The lease is probably on the books at an inflated price and whoever owns it is going to put a high price on buy out as it most likely that they sold the long term payments to some financial entity. If you can figure out the components you can go to any on line solar catalog and price up the major components.

[Hansel07]

Thank you for all the advice. It's unfortunate the seller didn't do his homework beforehand, but it is his own fault. I've tried advising him and his agent y as much as possible, but they just do seem to get it.

We have basically told him to figure it out and let us know, but we are not waiting around.

[J.P.M.]

Thank you for all the advice. It's unfortunate the seller didn't do his homework beforehand, but it is his own fault. I've tried advising him and his agent y as much as possible, but they just do seem to get it.

We have basically told him to figure it out and let us know, but we are not waiting around.

Trust me, they get it. They've figured it out. If you want the place, consider making a low ball offer and make it contingent on clear title, free of liens, and removal of the PV system.

There's always another house to turn into a home that doesn't have a PV albatross hanging around its neck.

[Mike90250]

as an example, Sungevity would require $25,000 to get out of the lease and own the system. I want ballpark range of what a brand new system would cost as if I was putting it on today. Say, $15,000. Thus, I will tell the seller I will increase the offer for the house by $15,000. I'm not going to pay for his stupidity

Have them clear the lien, and leave the panels in place, if they (roof) are not leaking The instant you get Larry with a Ladder up there, and the panels are gone, how do you reseal / restore the roof so it has a 20 year life ? Have the seller give you the panels free , clear and the system in working condition, Maybe lessen the pain with a $10K sweetener.

[azdave]

It's unfortunate the seller didn't do his homework beforehand,

If they had, they would never have agreed to lease PV.

I wouldn't offer less for the house but I also wouldn't offer a dime more.They made the bad decision to lease solar and then sell the home so they should pay the price for that decision.

In my opinion, PV only adds any real value to the selling price when it is free and clear and has a known production history to prove the value to a buyer.

[Hansel07]

Purely for arguments sake, but ballpark before credits and rebates using middle of the road components, what would a 6 KW system with 28 panels cost?

[peakbagger]

This has been answered. 6 KW *$3 a watt = $18,000. The cost per watt is typical and can vary plus or minus $0.50 (could be as much as $1) dependent on local labor conditions and deals on equipment. As discussed an installer who leases systems may front load costs to drive the on paper cost up to maximize the federal credit so the installed cost will increase. An example is the installer specs a particular module that they buy from an another division of the company. The other division marks up the panel some amount. The installer buys the marked up panel and includes that marked up cost on the install. The leasing firm now gets a higher rebate from the government. The other division makes extra profit that then goes into the corporate profit. In theory the government is the only one who loses until someone who leased the system wants to get out of the lease. The leasing company has the project on the books at a high cost and that means the buyout is going to be higher than a system that was installed without the financial games.

Systems with microinverters may have higher equipment costs but could be quicker to install with cheap labor while string inverters could have lower equipment cost but take a bit more work to design and install. Special conditions like tile roofs, ground or pole mounts or undersized electrical panels will also raise the cost per watt.

[J.P.M.]

Purely for arguments sake, but ballpark before credits and rebates using middle of the road components, what would a 6 KW system with 28 panels cost?

Price varies w/ area. In SO. CA at this time, a decent turnkey system from a reputable installer, with no extra roof or electrical work can probably be had for something like $3.25 - $3.50/S.T.C. Watt. Other areas may be more or less. Of course, you can always pay more, but that's a very possible range around her, maybe even down into the $3.00/watt range depending on roof conditions (tile vs. comp. shingles, slope, how irregular the roof area is, etc.), and how sharp a negotiator the cust. is.

So, for a 6+ kW system: Before fed. tax credit: ~~ $19,500 - $21,000.

After fed. tax credit: ~~ $13,650 - $14,700.

If you're wondering about an offer price on the current system, I'd consider using the $3.00/Watt for a new system, and offer about a buck/Watt for a used system.

Also, keep in mind that things have changed a bit since the days of 210 - 230 Watt panels. a 6 kW system today will probably have something like 18 - 22 panels or so, but the S.T.C. size of the panels will not affect performance of the entire array which will be 6 kW nominal size +/- a bit due to there being no fractional panels.