Negotiating Purchase of Home With Solar PPA

[Jeremy Martin]

Hello folks,

I’m looking for some tips, not really on how to negotiate a number in this situation, but on how to handle the money if I reach an agreement with the seller.

I’m in escrow on a home that has 15 years left in a Solar PPA with Vivint Solar. I relied on vague information from the agents regarding the solar and didn’t do my due diligence in reading the solar contract until just before the end of our inspection period. So if we walk out of this deal, it’s my fault for losing the inspection/appraisal costs.

I do not want to assume the Seller’s solar lease (not sure why ANYONE would). In this case, the solar contract states the home owner must buy out of the lease, which I’ve calculated will cost about $30k plus tax.

To convince him to buy out, I’m considering offering to increase my purchase for the home by fair market value for a similar system, minus 30% for the Solar tax credit I will not get (Vivint got that), and minus depreciation (assumed at 5% per year for 5 years by now).

So if gave him about about $16k to “buy” the system with the house and own it... I understand that I cannot claim the solar tax credit, since the solar company already claimed that.

However, can I claim that this money went to home improvements in general, (by buying the solar system from for the house) so I can claim that on my taxes in any way? Or would the seller get to claim that when he buys it out?

Aside from being able to own the solar system, is there any other benefit I can recover from investing that money into the home purchase price? If so, would I have to keep that money separate from the “purchase price” of the home, and just give the guy a separate check?

[Jeremy Martin]

@Chris Mason

I thought about that, but I was worried that Vivint would charge me more to buy out than they would charge him. I’ll have to find out for sure.

In a sale situation the Vivint contract says he must pay the “Transfer Payment” to buy out of the lease if the prospective buyer (me) refuses or does not qualify to assume the lease.

There is also a “Default Payment” clause, which applies if you just stop paying the lease for any reason. I’m assuming this would apply if you just “wanted out”, which I would after we complete the sale. This price is almost 50% more than the Transfer Payment option, which only seems to be offered during a sale of the house.

EDIT: for anyone that may wonder why I don’t want to assume the lease, it seems like a really crappy deal to me; you’re locked in for 20 years (15 left in my case), and you must pay for all energy produced by the solar, whether you use it or not. You pay a lower rate than PG&E, but your rate increase by 2.9% every year. The rate in my case is currently $.168 per kWh. For any surplus energy, you must rely on PG&E to credit you through Net Metering. If you still have a surplus at the end of a year, PG&E will only pay you the “wholesale” rate of $.03 per kWh. I got the owner’s last 12 solar bills and the panels make so much energy I KNOW I would have a large surplus, which I would take a loss on at the end of the year unless I just deliberately used more energy.