“Leased solar panels can complicate — or kill — a home sale,” a headline in the Los Angeles Times warned on March 22, 2015, and went on to cast a long shadow over third-party owned (TPO) residential photovoltaic (PV) solar energy systems. This is just one of several articles in major media outlets detailing the liabilities faced by TPO solar customers when they go to sell their homes.
If this is correct, we face a gigantic problem throughout California and across the nation as a growing wave of homes with TPO solar enter the real estate market over the next decade. The popularity of TPO solar has boomed since its introduction in 2009, because it eliminates upfront costs and opens the market to those who have traditionally been excluded due to a lack of access to capital. By 2013, TPO systems represented more than 70% of residential installations.
While it’s well documented that host-owned (i.e., purchased) solar systems add a price premium to home sales (see Lawrence Berkeley National Laboratory [LBNL] report or webinar), it remains unclear just how TPO solar, which now represents the majority of new installations, affect home values.
Understanding the realities
Given the lack of quantitative data on the effects of TPO solar on home resales and the media coverage of the topic, based largely on anecdotal evidence, CSE and LBNL teamed up to conduct a small-scale, preliminary qualitative analysis of the issue in order to help inform subsequent investigations when more data are available. To accomplish this, we contacted a sample of real estate agents, sellers and buyers involved in the sale of TPO solar homes in the San Diego region between 2010 and 2013.
Real estate perspective
Based on interviews with real estate agents, buyers fall in love with the home, its neighborhood and the schools, and accept items like remodeling a bathroom or fixing or adding specific features – and TPO solar is one of those things. It is not an important driver of the sale and, in their opinion, does not result in a sales premium (83% of respondents) or a longer time on the market (69%). TPO solar does require the seller and real estate agent to educate the buyer about how leases work, but in most cases (77%) the TPO contracts were directly transferred to the buyer, with the remainder of systems being bought out by the buyer (18%) or seller (5%).
What buyers think
Buyers of homes with TPO PV systems go through a process similar to homeowners who add solar to their existing home. They are interested in and curious about solar, but also cautious and uncertain about how the technology and TPO contracts work. Most of the buyers in the survey (94%) had never owned a home with solar, however, many listed solar as a desirable feature (56%). After purchase, a majority of buyers were either very satisfied (35%) or satisfied (64%) with the solar system, with most experiencing energy savings that were in line with expectations or somewhat better.
Sellers’ point of view
More than half (55%) of the sellers surveyed expected their TPO solar system to add value to their home at resale, however, only one respondent was confident that a premium was realized at the time of sale. A large majority (83%) perceived no change in value at the time of sale. Despite this, by the time of the survey, almost 30% had installed a TPO system on their current home.
- TPO systems appear to have minimal impact on home sales, either in terms of premiums or time on market.
- Buyers of TPO solar homes go through an educational process, much like other solar adopters.
- Sellers, their agents and leasing companies are key in the educational process and should be prepared to play that role.
- Buyers and sellers involved in TPO solar home transfers we sampled appear to be satisfied with the process.
More data is required to complete definitive, quantitative research that answers the question of how TPO solar impacts the home sales process. However, this look at a small sample of homes in the San Diego region indicates the negative picture portrayed in the media may be underdeveloped.
Read the three-page research summary, Survey of Buyers, Sellers and Realtors Involved In San Diego Third-Party Owned Solar Home Transactions – A Qualitative Assessment