March 28th, 2015 2:14 PM by Christopher Terry
Everyone likes the idea of "Going Green"-- and no, we are not talking about the kind of green they are going in California, Washington and Colorado. We are talking about the kind of green that conserves energy and can save you some real cash. Who doesn't like the idea of saving money and conserving energy?
Solar panels are all the rage right now. How can you resist the sales pitch? Lock in energy costs now and really save in 10, 15, 20 years when energy costs go up, provided the panels are still working and not broken. The problem is solar panels are expensive, very expensive. But no worries! There's a solution for that. You can lease them! And in 20 years you'll own them out right. The panels generate savings on your electric bill and you can use those savings to pay the lease. Sounds like a great deal. Right?
Well, not so fast. There are a couple of things to consider:
How Long Are You Going to Stay in Your Home?
The average length of homeownership is 10 -13 years, so chances are you will be selling before the lease is up. So, then what happens? The lease payments don't just go away. The new buyer will have to be willing to take over the lease payments or you will have to buy out the remaining lease to be able to sell. Not all buyers are going to want your solar panels. Or think about it this way-- 20 years ago satellite dishes were all the rage, but look around at homes today and the large dishes are gone replaced by small, nearly unnoticeable dishes. The same could go for solar panels in the future. Another thing to consider is that a future buyer may not qualify, or may not want to qualify for the solar panels. Energy use is not factored in when qualifying for a mortgage loan but the cost of the lease payment is. It would be added to the debt obligations of the buyer possibility disqualify them for getting the mortgage loan. Even worse, this added debt might not be discovered until far into the sales process.
You Might Refinance
Let's say that you are not going to sell in the next 20 years. Is it possible that you might want to refinance? Maybe take an equity loan? Well, remember that lease payment we were talking about? It is now on your credit report and is factored in to your ability to qualify for a mortgage or home equity loan.
Lease Verses Loans for Energy Improvements
If you decide not to lease you can look into financing solar panels or other energy saving improvements. The Property Assessed Clean Energy Program (PACE) has a program, currently available in 31 states, that allows for the costs of all the energy improvements, including solar panels, to be added to the homeowners tax bill. It's like a loan for the improvements, but the problem is that it is now part of your tax bill. You tax bill supersedes all mortgage loans in case of default. In other words, in case of a foreclosure, the clean energy program bill would be paid before the lender. You can imagine that Fannie Mae, Freddie Mac and HUD are not happy about this. In fact, they have said that they will not finance homes with this type of program. So if in the future you decide that you want to sell or refinance, the only channels for loans have said they will not do them. So, what does that mean? It means you will have to be prepared to pay off the loan yourself.
We are all for going green, just beware that doing so may mean spending a lot more green than expected. Christopher Terry is a licensed real estate broker in Ma and RI, has completed the Accredited Buyer Representative Certification, is a graduate of the Certified Distressed Property Institute, holds the prestigious CDPE designation, is a 4-Time winner of the Master Sales Society's 5/50 Award and is the founder of EZ Home Search Real Estate Inc.