This biggest mistake Realtors are making when selling a home with a solar lease or PPA is encouraging the buyer to buy-out the solar equipment and roll the cost into the mortgage. 

Solar Power Purchase Agreements (PPAs) are becoming increasingly common in residential real estate as solar energy gains traction. For realtors, understanding how to navigate these agreements can be a significant advantage, enabling you to provide better advice to clients who are buying or selling homes with solar installations. 

Here’s your ultimate guide to understanding the differences between a solar LEASE and solar PPA is and how it impacts the real estate transaction process- for the better.

A solar lease and a solar Power Purchase Agreement (PPA) are two financial agreements that homeowners and businesses can use to obtain solar power systems with government grants so they can secure a lower fixed rate on electricity. Both models allow users to benefit from solar energy without having to pay for the solar panel and battery systems. However, they differ in structure and payment methodologies.

Solar Lease:

A solar lease is similar to leasing a car. You pay a fixed monthly fee to "rent" the solar energy system from a solar provider. This fee is usually lower than your current electricity bill, offering savings on your energy costs. The leasing company owns, installs, and maintains the solar panels on your property. The monthly lease payment is typically determined at the start of the lease and may include an escalator clause that increases the payment by a fixed percentage each year. Leases typically do not offer a buyout option until after 25 years which could be seen as a drawback for people looking to own the system and remove their energy payment all together.

Solar Power Purchase Agreement (PPA):

A solar PPA is a power purchase agreement where a homeowner can pay less for electricity every month from a solar company instead of their local utility company. A homeowner agrees to purchase the power generated by the system at a set per-kWh price from the solar provider which is a attractive offer considering utility companies do not offer homeowners low fixed rates on electricity. With a PPA this rate is typically lower than the local utility’s electricity rate, offering savings on your electricity bill. The PPA provider is responsible for the installation, maintenance, and operation of the system but does give the homeowner the option to purchase the equipment in the future if they choose at a depreciated rate.

Benefits of Solar PPAs and Leases for Homeowners:

• Cost Savings: Homeowners can save on their electricity bills from day one without any investment as the equipment is paid for with government grants.

• Hassle-Free Maintenance: All maintenance and repairs are handled by the solar provider, removing the burden of upkeep from the homeowner.

• Green Energy: By using solar power, homeowners reduce their carbon footprint and contribute to a greener environment.

Considerations for Realtors When Selling Homes with Solar PPAs or Leases:

Avoid encouraging the buyer to pay off or buy-out the solar lease or PPA. This advice essentially encourages homebuyers to finance 25 years' worth of energy into their mortgage with added costs of real estate commissions and interest rates on the equipment. Homebuyers are looking for two things to feel confident in making an offer which are:

1. Finding The Perfect Home

2. Feeling Confident They Can Afford The Monthly Payment

Encouraging a homebuyer to buy-out the solar lease and roll that cost into their mortgage loan increases their monthly payment due to the interest rate and commissions on the high priced system. Instead, a realtor should highlight the benefits solar provides which is securing a lower monthly payment on energy which actually makes the home more affordable a month or room to invest money into the things they want, like a new kitchen or home upgrade. Homes with solar in California are projected to save homebuyers anywhere from $100k-$400k on energy costs over the life of their mortgage. This is a huge selling point realtors should lean into.

Instead Take This Approach:

• Transfer of Agreement: When selling a home with a Solar PPA or LEASE, the agreement must be transferred to the new homeowner, which can require approval from the solar provider, this process should not be difficult and agents at My Solar Solutions have been known to assist Realtors and their potential buyers through this short 5 minute call.
  

• Educating Buyers: Many buyers may not be familiar with Solar PPAs or leases. Realtors should be prepared to explain how PPAs work, including the benefits and obligations under the agreement. Learn More At The Next Win-The-Buyer Seminar
  

• Evaluating the Contract: It’s crucial to understand the terms of the PPA contract, such as the duration, rate escalations, and buyout options, as these can affect the home’s marketability and the buyer’s long-term satisfaction.
  

How to Handle Solar PPA Transfers:

• Review the PPA Terms: Before listing a home, review the terms of the PPA to understand the process for transferring the agreement.

• Communicate with the Solar Provider: If you're unsure where to begin and the selling agent doesn't have the solar agreement, you can reach out to a My Solar Solutions Agent. They will help you locate the initial solar provider and finance agreement, so you know what kind of system is installed on the seller's roof and the terms of the service.

Early communication with the solar provider can facilitate a smoother transfer process. 

• Highlight Benefits To Potential Buyers: Clearly disclose the existence of the LEASE or PPA in the home’s listing and provide detailed information during showings. 

Marketing Homes with Solar PPAs:

• Highlight Cost Savings: Emphasize the energy cost savings and fixed electricity rates in your marketing materials.

• Showcase Environmental Benefits: Appeal to eco-conscious buyers by highlighting the environmental advantages of solar energy.

• Leverage Certifications: If the home or solar system has any green certifications, include these in the listing to attract additional interest.

Attend The Next Win The Buyer Seminar If you’re a realtor looking to deepen your understanding of Solar PPAs or need expert advice on navigating solar transactions, contact My Solar Solutions today. Our team of experts is ready to assist you with detailed insights and guidance to empower your real estate practice.

By mastering the ins and outs of Solar Power Purchase Agreements and Leases, realtors can confidently support their clients in buying or selling solar-powered homes, ensuring all parties are informed and satisfied with the transaction.