Negotiating Purchase of Home With Solar PPA

Buying & Selling Real Estate
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Negotiating Purchase of Home With Solar PPA

Jeremy Martin
Selma, CA · Member since 2017 · 26 posts · 2 votes

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?

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    7y

    FYI: The appraisal has already been ordered with $X00,000 as your purchase price. 19 out of 20 times, the appraisal will come back right at that contract price. If you bump price to $X16,000, don't expect to be able to finance any of that extra $16k.

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  • Jeremy Martin
    OP
    Selma, CA · Member since 2017 · 26 posts · 2 votes
    7y

    Thanks, yes I understand that. That’s one thing that makes this hard to swallow.

    The appraiser set the value right asking price, which was $265,000. Our offer accepted was $264k, so no room there to justify the increase out the home’s value. From my perspective, I’m straight up “buying” a solar system I didn’t choose myself, for cash (I do have the cash). I feel I can justify it to myself if we can settle on a fair price, since we really want this house. It would be really big setback to have to start looking for a new house and lose my inspection costs.


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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    7y
    Originally posted by @Jeremy Martin:

    Thanks, yes I understand that. That’s one thing that makes this hard to swallow.

    The appraiser set the value right asking price, which was $265,000. Our offer accepted was $264k, so no room there to justify the increase out the home’s value. From my perspective, I’m straight up “buying” a solar system I didn’t choose myself, for cash (I do have the cash). I feel I can justify it to myself if we can settle on a fair price, since we really want this house. It would be really big setback to have to start looking for a new house and lose my inspection costs.


     

    I'd actually go the other route, to be honest. Seller is to deliver the property with clear title OR seller is to reduce price by what it will cost you to clear title. This is no different than if they had a HELOC or mechanic's lien, in my humble opinion. That is THEIR problem and a result of THEIR choices, not yours. 

    Heck, let's really think about this. If they had elected to finance the solar by taking out a HELOC, would you even be having this conversation? No, you wouldn't. OK, then what's the magical fairy dust that means you're willing to negotiate it b/c they elected to use a horrible overpriced PPA? What if they'd purchased a car they couldn't afford, would you agree to take over the lease on an underwater obsolete beat up Ford Mustang in the driveway? No? OK then, same thing here.

    #SorrySolarSalesmanGottaBeReal

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  • Jeremy Martin
    OP
    Selma, CA · Member since 2017 · 26 posts · 2 votes
    7y

    @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.

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  • Shannon Wright
    Escrow Officer · Temecula, Ca. · Member since 2016 · 418 posts · 152 votes
    7y

    Why not just have solar removed and end the service? You don't have to keep the panels. There has to be an opt-out option, they cannot FORCE you to keep panels.

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  • Keval Shah
    Investor · New York NY & Toronto, ON · Member since 2018 · 5 posts · 0 votes
    6y

    Did you end up getting the solar removed or was the PPA bought out by the seller?

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  • Andrew Smith
    Investor · Valencia, CA · Member since 2017 · 171 posts · 130 votes
    6y

    Vivint is no more as it was subject of an asset purchase. I'd say your leverage increased as a result.

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  • Greg Cisneros
    Member since 2020 · 1 post · 0 votes
    6y

    What sucks about the PPA is you pay the remaining balance of the contract and thats it. You don't own the equipment. So you still have to purchase the equipment. They will remove the panels after the contract is closed but then you have to repair your roof. Usually with PPA you lose your tax credits and they offer no net metering. 

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