Buying a house with leased Solar

[socialleper]

1043kwh at $259 is $0.25/kWh. That's about the same you are paying without solar, but once you add back in the grid tie fees you will be paying more.

A new 7.2kwh system should cost around $15,000 after tax credit. Even if financed by a 10% loan you would pay it off in 7 years at $250/mo and actually own the equipment.

What I can get it for now isn't the point. This house comes with it and we are trying to decide whether to assume the lease. We really want the house but don't want to hurt ourselves.
Would a system that would be $35k today have been $50k three years ago.

[J.P.M.]

In Florida the POCO's are supporting a new bill that they state is needed to protect the electrical consumers by keeping out companies that can lease solar systems.

While I do not like the idea that the POCO's are in total control of solar here, I kind of like the idea that fast talking solar leasing companies can't take advantage of someone that is fooled into paying way too much for a pv system.

FWIW, seems to me (perception only) FL does a better job (note, not perfect) of consumer protection. Maybe due to the higher % of senior citizens ?

[J.P.M.]

What I can get it for now isn't the point. This house comes with it and we are trying to decide whether to assume the lease. We really want the house but don't want to hurt ourselves.
Would a system that would be $35k today have been $50k three years ago.

Depends. Maybe not quite, but close. Read the lease and read it from the perspective of the lessor to see how it's biased and loaded in that direction, particularly the current lease's obligations - not yours. Walk in with your eyes open, and without rose colored glasses.

[SunEagle]

FWIW, seems to me (perception only) FL does a better job (note, not perfect) of consumer protection. Maybe due to the higher % of senior citizens ?

While it is a nice thought that large companies might be looking out for the senior citizens due to the higher % that live here, unfortunately there always seems to be some news of people being ripped off by fraudulent people.

I also think the POCO's main drive is to maintain a power generation monopoly. But the side affect may be fewer rip off companies that prey on the uneducated.

[foo1bar]

What I can get it for now isn't the point. This house comes with it and we are trying to decide whether to assume the lease. We really want the house but don't want to hurt ourselves.
Would a system that would be $35k today have been $50k three years ago.

What you can get it for now *IS* the point.
It is the pointy tip to use in negotiating with the seller.

"Assume this lease? It'll cost me $60k over the next 15 years. I could buy a new system for $23500 today - I have an estimate of $3.25/W for a 7.2kW system. Even if I used a 2nd mortgage to buy it, the payments would still be only $31k. You must be out of your flipping mind to think I'm going to assume this lease without a big price concession so that I'm not overpaying for that ugly mess on the roof."

Of course if you're in love with the house (you probably are) - you probably won't negotiate as agressively and you'll leave money on the table so that you're more assured of getting the house.

[sunnyguy]

What I can get it for now isn't the point.

Of course it is the point. Why would you pay more than current market value for something? So let some other sucker throw away all that money on a bad lease and find another property.

[J.P.M.]

Of course if you're in love with the house (you probably are) - you probably won't negotiate as agressively and you'll leave money on the table so that you're more assured of getting the house.

+1. Emotion always causes more problems than logic.

[randomuser]

I agree with what was said earlier. Don't assume the lease. Either have the current owner buy out the lease and you negotiate the price for the house with the panels or have the owner remove the panels and you negotiate the price of the house.

[Alexalbert]

Yes, buying a lease is problematic. The solar was installed for someone elses needs, it may be overkill for you, or not enough . And who pays for the repairs, and will they be prompt ? After 20 years, the street value would be "scrap" so you might get another 10 years of life, Whoops, got a roof leak, and the roofer has to move the lease panels, to fix it. Can he move the panels ? Do you have to call the lease company, have them move the panels, and then ding up the roof putting them back ?? Leases are toxic in my opinion,

Anything attached to the roof? If it is, they will need to make repairs, how long that will go? If they don't have a good reputation, get rid of them. good luck...

[wwu123]

Of course it is the point. Why would you pay more than current market value for something? So let some other sucker throw away all that money on a bad lease and find another property.

Geez, everyone's arguing this as if the OP's one and only goal is to take over payments on someone's bad lease deal. Certainly if the OP can get the current owner to buy out the lease, or have the leasing company remove it, I agree with that. But those might not be options. Certainly taking over the lease is way worse than buying outright or financing one's own - but OP is facing neither of those options.

Here's what I see:
-the OP's main goal is purchasing (possibly upgrading to) a new home, which many here point out happens typically every 7 years for the average American. And this seems to be in SoCal, where we're probably talking about a $500K home in a market that's been tight for a few years now
-the OP stated they can't afford to buy solar outright, but may or may be interested in leasing solar, having observed that many neighbors are doing so.

The lease is poorly negotiated, and will cost about $67K in payments over 17 years (in nominal terms, non-discounted). It seems to escalate about 2.7% each year, that was an assumption about energy costs that may or may not hold true. The solar production will likely cover at a minimum about $30K in utility bills over 17 years (in nominal terms, non-discounted), just assuming Tier 1 rates for SCE - perhaps more depending on actual rise in SCE rates. So at worst, the bad deal costs an extra $37K - maybe that's an OK risk if it's a good deal on the $500K home, and just take the risk

The major energy cost is in the summer bills (A/C) - the solar (not the lease itself) will offset significantly more than $30K if the OP can offset peak tiered rates in summer. The real question then is, can the OP buy into NEMS 1.0 by taking over the existing system? If not NEMS 1.0, NEMS 2.0 is still probably better than flat rates for the climate.

So if the OP can take advantage of NEMS 1.0 or even 2.0, I think that offsets much more of the $37K overhang, to the point where the main decision can now revert back to whether they really want this house or not. What can the SCE'ers on this forum comment on what the rate structures are eligible for this taking-over-lease situation?

[J.P.M.]

Geez, everyone's arguing this as if the OP's one and only goal is to take over payments on someone's bad lease deal.

I'm certainly not and I've stated so since the beginning.

If it was me, if it was me, I play hard ball and tell the homeowner to remove it or buy it off and we'll negotiate.

[foo1bar]

The lease is poorly negotiated, and will cost about $67K in payments over 17 years (in nominal terms, non-discounted). It seems to escalate about 2.7% each year, that was an assumption about energy costs that may or may not hold true. The solar production will likely cover at a minimum about $30K in utility bills over 17 years (in nominal terms, non-discounted), just assuming Tier 1 rates for SCE - perhaps more depending on actual rise in SCE rates. So at worst, the bad deal costs an extra $37K -

I disagree with that calculation.

The correct (IMO) calculation would be $67k vs. lowest cost for equivalent amount of energy.
And that would be $67k vs. ~$16.5k (post-tax-credit cost for a 7.2kW system)

I think $3.25/W for a 7.2kW DC system is a good but reasonable price - subtract 30% for the tax credit and that'd be $16380

If you want to account for the time-value of money (which is a good idea), take that $16500 and use a loan for it at ~4% and you're at ~$23k over the life of the loan.

So IMO it's an extra ~$44k that taking over the lease would cost. (I had mis-estimated in my previous post because I hadn't factored in the tax credit.)

If it were me, I'd explain to the RE agent that I'm not happy with taking over the lease because it's going to cost me thousands of dollars each year because the previous owner doesn't have a good deal.

Quite likely there is a buyout amount for the lease - that the seller could buy the equipment today for some amount (probably less than $67K)
If I were the buyer I'd possibly consider that buyout amount vs. the $16500 - and be willing to take a smaller price concession if that difference was less than $44k
(Or possibly even pay more for the house if the seller pays for the buyout out of his side of the settlement.)

[wwu123]

Sure, I get that the $16.5K is a great calculation for comparison and determination of whether the $67K is proper and fair - and thus reveals it is not.

The $16.5K is just not the price point for any option or decision the OP is trying to choose from, i.e. the OP is not looking to purchase a new 7.2kW system in any scenario I can see.

But I like your suggestion of looking for alternative options like a buyout amount that might be well less than $67K, as that sets a "current price" for the existing system for negotiating between buyer and seller, such as a seller credit towards the close, or rolling it into the sales price and thus enabling it to be financed as part of the mortgage (since the OP again suggests they don't have cash to purchase a system outright).

[Ian S]

Hmm, a monthly lease with escalator. A favorite bete-noire hereabouts! Anyway, I'd try to get the seller to do a buyout. It will be stated in the lease document what the buyout amount is. You should get a copy of the lease for starters. I think we can safely assume that this is an all SunPower system. If it's properly installed, it's top of the line as far as solar goes. Ideally the seller would take the hit in its entirety but a negotiation might be needed where you and they wind up sharing in the cost of the buyout. That way you might wind up getting a top quality system for a reasonable price. I might also throw into the negotiation the HVAC system which at ~ 30 years old may soon be due for replacing. I'd avoid simply taking over the monthly lease as these are designed to pay off big time for the lessor not the lessee.

[inetdog]

Can you please explain that the PITA factor is?

PITA stands for Pain In The Ass. In other words the large number of things about leases that make life difficult for you down the road.