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Rooftop Solar Panels: “The Rest of the Story”

Written by Bruce Jordan

It seems like no matter where you go, you are bound to see a rooftop sporting an impressive array of solar panels collecting those rays coming from the sun and converting them into electrical current. The story, of course, is electrical energy is fed back into the grid and the homeowner can look forward to years and years of reduced energy bills as a result of having gone green and installed the panels on the roof of the home. In some parts of the country, like Colorado, where the sun has a reputation for shining for much of the year, the use of solar panels has become prolific and very much common place.


In spite of the newfound popularity, homeowners, sellers, prospective buyers and their real estate agents would be well advised to exercise some caution when it comes to solar panel installations. They can, and often do, affect title and financing transactions, producing unanticipated outcomes for the parties involved.


In many cases, the company providing the solar panel installations is not receiving payment in full from the homeowner for the panels when installed on the rooftop. Instead, a lease arrangement is created which provides for many years of payments to cover the cost of the panel installation, sometimes as much as twenty years into the future. The outstanding payment obligation associated with the lease is then secured by a recorded financing statement or installment contract against the owner in the office of the County Clerk and Recorder. When that occurs, an encumberance comes into being, affecting the ability of the homeowner to convey title to his or her property.


Let’s assume a homeowner, who has entered into a solar lease arrangement, decides to sell the property a couple of years later, when there are eighteen years left on the lease term. With this continuing obligation, the secured lien creates a priority against any future activity, such that a new buyer might not be able to obtain a new first mortgage because the new lender will not be able to obtain a first mortgage position. The seller and buyer could then have several hurdles to navigate:


  • One option would be to have either the seller or the buyer pay off the entire remaining balance due on that eighteen year leasehold — a prospect that neither had probably considered when they started the transaction.
  • A second possibility might include an effort to have the holder of the lease agree to the assumption of the lease by the new buyer, and a subordination of the leasehold to the new deed of trust. Many leaseholders have minimum credit score requirements that will preclude the possibility of certain buyers being able to assume the outstanding lease.
  • Assuming the holder of the lease will approve the assumption by the new buyer, some lenders have been known to require the consideration of the assumed lease payment in the debt-to-income calculation used to qualify the buyer for the mortgage financing. In such cases, the additional debt service may well push the buyer/borrower over the maximum debt ratios, resulting in denial of the loan.


The message of this bulletin is not that solar panels are a bad thing, or that houses with solar panels are to be avoided. Rather, it is important to recognize there are consequences that can flow from these sorts of arrangements which might not be readily apparent when people focus on the expected, advertised benefits of this green energy alternative. A good strategy would be to exercise caution and due diligence whether a homeowner is considering an initial installation or when a buyer and their real estate agent is contemplating an offer on a property with solar panels. It is a good time to make sure that all the necessary documentation is obtained and reviewed by competent professionals. Only after that review has been accomplished and a full understanding of the consequences has been obtained, should the parties consider proceeding.

International Home Buyers Continue to Invest in Profitable U.S. Market

WASHINGTON (July 8, 2014) – Favorable exchange rates, affordable home prices and rising affluence abroad continue to drive international buyers to the U.S. to purchase properties and make real estate investments.
According to the National Association of Realtors®2014 Profile of International Home Buying Activity for the period April 2013 through March 2014, total international sales have been estimated at $92.2 billion, an increase from the previous period’s level of $68.2 billion.

“We live in an international marketplace; so while all real estate is local, that does not mean that all property buyers are,” said NAR President Steve Brown, co-owner of Irongate, Inc. Realtors® in Dayton, Ohio. “Foreign buyers are being enticed to U.S. real estate because of what they recognize as attractive prices, economic stability, and an incredible opportunity for investment in their future.”

International buyers and recent immigrants purchased homes throughout the country, but four states accounted for 55 percent of the total reported purchases – Florida, California, Arizona, and Texas. Florida remains the destination of choice, claiming a 23 percent share of all foreign purchases. California comes in second with 14 percent, Texas with 12 percent and Arizona with 6 percent. According to®, the top five cities searched online by international buyers in 2014 were Los Angeles, Miami, Las Vegas, Orlando and New York City.

Foreign buyers take many factors into consideration when deciding where to purchase abroad, such as proximity to their home country, the presence of relatives and friends, job and educational opportunities, and climate and location. European buyers are generally attracted to states with warmer climates such as Florida and Arizona while the West Coast tends to attract Asian purchasers. Indian buyers tend to gravitate towards states that are home to large information technology companies, such as California, New York and North Carolina. Within markets in an individual state, it is not unusual to find concentrations of people grouped by nationality, possibly indicating that word-of-mouth and shared experiences influence purchases.

Twenty-eight percent of Realtors® reported working with international clients this year. International sales tend to be handled by specialists and only 4 percent of those who reported having an international client saw 11 or more international transactions in a year. Of those who reported having an international client, approximately 54 percent reported that international transactions accounted for 1 to 10 percent of their total transactions, a decrease from 2013 but still in line with past years’ levels.

International buyers are more likely to make all-cash purchases when compared to domestic buyers. In 2014, nearly 60 percent of reported international transactions were all cash, compared to only one-third of domestic purchases. Mortgage financing tends to be a major problem for international clients due to a lack of a U.S. based credit history, lack of a Social Security number, difficulties in documenting mortgage requirements and financial profiles that differ from those normally received by financial institutions from domestic residents.

Most homes purchased by foreign buyers, about 42 percent, are used as a primary residence. Non-resident foreigners are limited to 6-month stays in the U.S., so these buyers largely use the property for vacation or rental purposes or as an investment. Approximately 65 percent of purchases involved a single-family home. Nearly half of international clients preferred properties in a suburban area, about a quarter preferred a central city or urban area, and about 13 percent choose to purchase in a resort area.

International buyers come from all over the world, but Canada, China (The People’s Republic of China, Hong Kong and Taiwan), Mexico, India and the U.K. accounted for approximately 54 percent of all reported international transactions. Canada maintained the largest share of purchases, dropping from 23 percent in 2013 to 19 percent in 2014; however, China held the lead in dollar volume, purchasing an estimated $22 billion with an average sale cost of $590,826. China was also the fastest growing source of transactions, now accounting for 16 percent of all purchases, up 4 percent from last year. Mexico ranked third with 9 percent of sales and India and the U.K. both accounted for 5 percent.

“Foreign buyers who choose to work with a Realtor® have a substantial advantage,” said Brown. “Realtors® who have completed the Certified International Property Specialist designation have received specialized training and are prepared to help clients with the unique difficulties of being an international buyer. CIPS designees understand the challenges buyers face when purchasing property in the U.S., and have the experience and expertise to help them navigate the complex, time-consuming and overwhelming world of international real estate.”

Pending Home Sales Edge Up in April

Pending home sales improved for the second straight month in April, according to the National Association of Realtors®. Gains in the Midwest and Northeast offset declines in the West and South.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, increased 0.4 percent to 97.8 in April from 97.4 in March, but is 9.2 percent below April 2013 when it was 107.7.

Lawrence Yun, NAR chief economist, expects a gradual uptrend in home sales. “Higher inventory levels are giving buyers more choices, and a slight decline in mortgage interest rates this spring is raising prospective home buyers’ confidence,” he said. “An uptrend in closed sales is expected, although some months will encounter a modest setback.”

Yun projects the 30-year fixed-rate mortgage to trend up and average 5.5 percent next year. “The extent to which higher mortgage interest rates will impact housing affordability and sales depends on income growth, ongoing improvement in the labor market and any change to mortgage underwriting conditions.”

The PHSI in the Northeast increased 0.6 percent to 79.3 in April, but is 12.0 percent below a year ago. In the Midwest the index rose 5.0 percent to 99.2 in April, but is 6.9 percent below April 2013. Pending home sales in the South slipped 0.6 percent to an index of 111.9 in April, and are 6.4 percent below a year ago. The index in the West declined 2.9 percent in April to 88.4, and is 15.0 percent below April 2013.

With sub-par activity in the first quarter, annual existing-home sales are expected to be modestly below the nearly 5.1 million in 2013, but should be close to 5.3 million in 2015. The national median existing-home price is projected to grow between 5 and 6 percent this year, and in the range of 4 to 5 percent in 2015.