Don’t Get Burned By Solar

Solar energy is HOT, pun intended. It’s getting lots of attention these days.

Solar is also COOL! A bit of a status symbol & statement to the world that you are “going green”.

We’re big fans of solar, in theory.

We’re sure that 100 years from now the world will largely run on solar power. It’s the wave of the future.

However, it may not be the wave of the immediate future. We are having some issues when it comes to selling houses with leased solar power installations.

Here’s a summary:

Issue No. 1: You are not going to get more money for the house due to the solar installation when you sell it.

There is a big solar leasing company telling people that solar increases the value of their home by 15%. We’re pretty sure the researchers that came up with that figure were taking advantage of Colorado’s new liberalized marijuana laws at the time they were completing their evaluation.

A valid comparison involves looking at homes with solar compared to nearby homes without solar. Let’s look at one example:

The property at 16437 East Hialeah Drive is a 2,021 square foot 2-story home with unfinished basement. It had solar and it sold for $316,000 in September 2014. The house next door is also a 2-story home with 2,347 square feet and partly finished basement. Being a little bigger and with some basement finish, you’d expect it to sell for $10,000 to $15,000 more – and it did just that with a sale price of $329,000 in July 2014. The solar on the first house did not create any increased value for it.

We’ve done this for a number of paired home sales around metro Denver and pretty much find the same result — almost no value can be attributed to the solar installation.

Issue No. 2: You’ve got to get the buyer of your house to assume the lease when you sell it. No big deal, right?

Actually, it can be a big deal. First of all, the buyer has to qualify to assume the lease. The buyer must also want to assume the lease. This can be an issue due to the lease buyout provisions.

Every time the house changes hands, the seller risks paying a huge buyout cost if the buyer will not agree to take over the lease. The buyouts often run $10,000 to $25,000. We’ve seen one where the buyout was over $30k!

Many buyers balk at taking on this liability. Even thought the buyout cost decreases with time, the leases run for 20 years and buyout costs remain high during the first 10 years or more. Many buyers are concerned about what will happen when they go to sell the house. They wonder if their buyer will want the solar or will they get left holding the bag. This leads right into Issue No.
3.

Issue No. 3: We’re pretty sure that solar technology is going to change and evolve rapidly. We worry that the solar cells being used in today’s products will be out of date in a few years.

After all, how much can you get for your five year old computer compared to what you paid for? Probably nothing and you may even have to pay to dispose of it since you can’t just dump electronics in your trash can.

We can imagine that the same may be true of today’s solar panels. They may be close to worthless in five years and yet you’ll still have a huge lease buyout cost. This should make you and any subsequent buyer think twice about the advisability of solar.

Conclusion: We are sure there is much more to solar than just the three items listed here. We have not done extensive research. However, we wanted you to be aware of some issues that have come up.