What Realtors Need to Know About Solar solar bullet points
As a Realtor, you’ll find yourself increasingly dealing with questions involving solar energy. Whether it’s buyers, sellers, past clients, family or friends, people will look to you for answers to the many questions surrounding “going solar.” In this article we attempt to paint a picture of solar today – the ups and downs – and pay particular attention to what you need to know.

A recent survey showed that more than two-thirds of homeowners plan to make energy-related upgrades to their home in the next year. Many of these homeowners are “going solar.” This number will continue to increase as pressure from government at every level coupled with rising utility rates and an aging housing stock drive homeowners toward solar energy.

Making wise choices about going solar is not easy. Our goal is to help you understand the issues so you can guide your clients to make informed decisions. You’ll be able to ask the right questions and hopefully help them avoid some of the traps that others stumbled into.

We’ll cover five key areas:

• ROI – some homeowners look at solar as an investment – you’ll want to help them pay attention to the risks and rewards of their investment.
• The rest of the house – homeowners who don’t pay attention to what’s happening with energy throughout their home could find themselves fighting physics.
Lease vs buy – deciding whether to own a solar system or rent it has lasting repercussions.
• Net metering – if you own your solar system, you can make money selling power to your utility company – maybe.
• Resale – you may assume that adding a solar system to a home will increase it’s value and make it easier to sell – be careful.

Solar-Panel-PaybackWhat homeowners typically look for with solar is the “payback period” – how long it takes to recover their investment. Here are some of the variables involved in this interesting calculation:

• The cost of the system, installed.
• The cost of maintaining the system over time.
• The amount of electricity you consume.
• The cost of electricity you consume.
• The amount of electricity your system will generate.
• The cost of financing your system.
• The value of any rebates you receive.
• Net metering rules, fees, and benefits.

Besides payback, ROI includes changes to the value of the home and the ease of selling it.

The calculations presented to homeowners have to be much simpler – they can’t take into account all of these factors for several reasons.

• The solar industry and energy industry as a whole are moving – sometimes slowly, sometimes quickly – sometimes in predictable ways, sometimes not. Businesses, utility companies, municipalities, and regulators each play from a different set of beliefs and assumptions. Their power to influence decisions large and small waivers. We simply don’t know what will come next.
• User habits change – the weather changes – the home itself changes. The amount of electricity owners use fluctuates. A family may grow or shrink. They may dial back their thermostat. Extremes of heat or cold seem more frequent. Owners may upgrade windows or add insulation.
The cost of electricity is rising – we don’t know by how much or when.
• Financing tools are changing constantly. Interest rates vary. Rebates come and go.
• Net metering rules are being hotly contested. One day it looks like the solar industry is winning the battle – the next day belongs to the utilities. We don’t know what tomorrow’s rules will look like and no one can be sure they’ll be grandfathered into today’s rules.
All of this varies from lender to lender, from municipality to municipality, and from utility company to utility company.

When it comes to factoring ROI into the selling your home, you can’t be sure buyers will want solar, or that they’ll want your system, or the deal you made. You can’t know how your buyer’s lender will treat your solar package – or whether they’ll even allow your deal to pass through.

All of this can seem scary. But, it’s pretty typical for any investment. There are potential risks and potential rewards. The idea is to go into any investment with your eyes open.

You may also want to remind your customers that going solar is only one element of a more energy-efficient home – one that not only saves you money, but one that provides a safer, more comfortable environment. Besides, it’s clear we are moving towards a better energy future, and we can all feel good about participating in that!

Steps Before Solar
If homeowners want to save money and live in a more comfortable home, solar may not be the best first place to look for an upgrade. Most older homes are energy black holes – you pour energy in and it goes everywhere but where you need it. Essentially, you end up heating and cooling the outside rather than the inside of your home.

insulationHere are four places to look for major energy waste:

• Is your home’s shell tight? Is warmed or cooled air flowing through cracks and around doors and windows?
• Is your home’s ductwork tight? Is warmed or cooled air flowing out of leaky ducts before it has a chance to get to your living areas?
• Is your home well-insulated?
• Are your windows energy-efficient?

The fifth place to look – and it’s an important one – is your own habits. Are you wasting energy every day?

The key point is that, if homeowners waste a lot of energy, they need A LOT of solar to offset this waste. On the other hand, if they make their homes energy-efficient first, they can get by with a much smaller solar system. Any way you slice it, this will improve their ROI and reduce their payback time.

There are two things you can do now to gather the information you need to see if there’s anything your customers should do before going solar:

• Get a complete energy assessment. A trained professional can perform tests and gather information to create an energy model of a home. This model can show the effects of various upgrades to consider. You’ll be able to see which upgrades would be most helpful cost-effective.
• Get a monitor for the home that provides real-time data about energy usage. You’ll able to see where energy is going and use this information to modify habits.

Both of these steps will save money.

Net Meteringsolar
Net metering allows electric utility customers who connect approved, renewable generation systems such as solar panels to the electric grid to buy and sell electricity to the utility. When homeowners generate electricity from their solar array, it reduces the amount of energy they purchase from their utility company.

This balancing act has come under much attack recently. Net metering was implemented as one of several incentives to kick-start the solar industry. These days, utility companies don’t like the arrangement, arguing that the solar industry is doing quite nicely and no longer needs this incentive, and that customers without solar are bearing an unfair burden of fees for operating the grid. The utility industry is fighting hard to change the rules around net metering.

Net metering is critical to ROI and payback – so critical that in Nevada, where utilities defeated the solar industry and rolled back both the terms of net metering and the rates they had to pay homeowners for their excess electricity, the solar industry quickly dried up.

The ongoing battle over net metering greatly effects the solar market and homeowners with solar systems.

Lease vs Buylease vs buy
Perhaps the most important issue involving solar is leasing or purchasing the system. Here’s what to watch out for:

Some solar companies push a Power Purchase Agreement – aka lease. When they make their pitch, they tell homeowners what’s in it for them, but they don’t say what’s in it for the solar company. The main advantages of leasing are low out-of-pocket costs and no maintenance. These are really big advantages for some homeowners!

Otherwise, purchasing holds all the cards: 30% tax credit, control, and a 5-10-year ROI. Loans and rebates can further sweeten the pie.

If homeowners lease their system, their utility bills will definitely be lower than SDG&E. If they purchase, they’ll be even lower. And, if net metering continues, a utility company can end up owing the homeowner money on their monthly bill!

But here’s what you should really keep in mind: solar companies that push leases are not really in the business to make a profit on installing solar systems. That’s right. They’re in the business of aggregating power. They own the power their leased systems produce and they sell it back to homeowners. The more leases they do, the bigger players they become in the power industry. They want to be your next utility company.

Buying and Selling a Home with and Existing Solar System
Every existing solar system is unique. It may or may not add value to a home. It may or may not make the home easier to sell.

solar panel cleaning 3Evaluating Existing Solar Systems

• Who makes the panels? As the solar industry continues to consolidate, there will be fewer solar manufacturers in five years than there are right now. Make sure the manufacturer is still in business and has a good reputation.
What’s the warranty? Warranties differ wildly from company to company. Find out how much time remains on the warranty and exactly what’s covered. Many warranties do not cover service, labor, or shipping.
Is the system leased? If there’s a lease, what are the terms? Is there a fixed rate or a variable rate? (Fixed is ideal.) How easy it is to transfer the existing lease to a new owner.
• How old is the system? Solar technology changes every year. Older systems don’t generate as much energy as newer systems and most systems become less effective as they age.
• Is the system monitored? If so, how many kilowatt hours are produced annually? Ask to see the customer’s annual Net Energy Metering True-up statement, also called a NEM document. This special billing document details how much energy was produced by the home’s solar panels versus what was pulled from the electrical grid. With this statement you can begin to determine the energy value of the solar system.
• The idea of a solar system is to offset existing energy use. Factor in differences in family size and energy needs to keep expectations realistic.
• Has the system been maintained? Cleaning 2-4 times per year is ideal. Has the system been inspected? Inspections from qualified solar technicians cost about $125.
A bad solar system is a liability.

Determining the Value of an Existing Solar System

A solar system on a roof may or may not add value.

Appraisers struggle to value solar systems. They use comparable sales to determine value instead of ROI or payback. There aren’t a lot of comparable solar systems in your neighborhood and your appraiser probably has little or no training in understanding their value. There is no standard methodology for determining the value of an existing solar system.

Some appraisers are certified as “Green Appraisers.” They’re more knowledgeable about the value of an energy-efficient home. Since appraisers are usually not selected directly, you rely on luck to have a green appraiser working with you.

Like the rest of the solar market, this area is seeing rapid change. There has been some movement in the California state legislature to mandate appropriate training for all appraisers. A growing number of studies are showing that energy-efficiency and solar system do result in higher sales prices and shorter time-to-sell. The movement to include green features in MLS listings is gaining momentum.

Complicating the Sales Process
Buyers may not want to assume and existing solar lease. They may prefer to own their solar system. They may not like the terms of the lease. Terms of the lease may not favor a smooth assumption.

Lenders may not allow a solar lease to pass through to new financing. Some lenders may balk at the perceived value of a solar system when determining loan amounts.

Some lenders are more familiar – and some more comfortable – with the nuances of solar in financing a home purchase.

A buyer or a lender may force a seller to buy out the lease – at terms that are less than favorable. This can make the home more difficult to sell – even negating potential sales in the works.

For Realtors
Your customers look to you to be the experts in matters relating to their homes. We want to help you. That’s why we’re keeping both eyes on the energy-efficiency market. We’ll continue to provide helpful content to you through our enews letters, our website, and our social media sites. If you have any questions, please contact us – we love hearing from you!

PACE


pace bullet pointsProperty Assessed Clean Energy
(PACE) programs allow property owners to finance energy-efficient, water-efficient, and renewable-energy projects on existing and, in some cases, new homes through a special tax assessment on the property. The property owner pays the special tax at the same time and in the same manner as all other property taxes.

PACE looks like a powerful, valuable, exploding program that is here to stay. Realtors will want to understand the program and stay abreast of its evolution.

PACE makes it possible to finance improvements without a down payment. In theory, because the improvement is a fixed asset that stays with the property, sellers may be able to transfer any remaining balance to the buyer when they sell their home. That way, whoever is benefiting from the improvements pays down the loan.

Some lenders do not like PACE – we’ll talk about that. Realtors need to connect with an appropriate lender if they decide to pursue adding PACE to their array of customer options.

pace2Pace Basics
· Allows funding of energy efficiency, solar, and water conservation.
· Payments are made as part of property taxes.
· Easy to qualify.
· No Fico score.
· Minimum equity in property 10%.
· $5,000 minimum financing – up to 15% of property value.
· Must work with participating contractors.

Why use PACE financing?
· By offering up to 100% financing on qualifying improvements, PACE can eliminate the need to pay out of pocket for an energy-related project.
· Depending upon the type of improvements installed, repayment may be amortized for a period of up to 20 years, keeping monthly payments low enough that utility savings may exceed the payment, creating a net positive cash flow.
· Interest may be tax deductible.
· Because PACE ties the loan to the property and not an individual, the loan may transfer upon sale or refinancing of the property. In other words, owners may not need to be concerned about recouping the cost of their improvements if they decide to sell the property before the loan is repaid.
· A recent study indicates that the value of PACE homes increases more than enough to cover the cost of paying off the lien in the event of a sale. Owners of PACE loans have proven less likely to default than average owners.

Downside to PACE Loans
· PACE may present a hurdle in a real estate transaction. The lien that secures funding is superior to all previously existing private liens, including mortgages. In other words, like property taxes, the PACE special tax assessment will be paid before all other private liens recorded on the property if the property owner defaults on other debt secured by the property. This is changing as the program evolves.
· Some lenders, particularly those involved with federally-insured loans, have balked at PACE because they fear losing money on a foreclosure. They may refuse to finance or refinance a property with PACE. They may demand that the lien be paid off as part of any title transfer. Prepayment can be costly.
· There have been disclosure issues for Realtors. providers have improved the process by helping real estate agents understand how to disclose that there is an additional tax assessment on the property tax bill and how the energy and/or water savings help offset the assessment.
· Interest rate is higher than most consumers anticipate
· Long been promoted that a PACE Lien would transfer with property purchase. That has not been the case in many instances. FHFA initially discouraged PACE liens primarily due to the potential of first lien ahead of a mortgage lien.

History of PACE in California
In California, the first commercial and residential PACE programs were established in 2008. The residential programs soon encountered a significant hurdle. The Federal Housing Finance Agency (FHFA) was concerned that residential PACE assessments had a lien status superior to that of existing mortgages underwritten by Fannie Mae and Freddie Mac. This meant that, in the event of a default, any outstanding PACE assessments (though not the entire amount financed) would be paid off before other liens such as first deeds of trust.
In 2010, Fannie Mae and Freddie Mac stated that they would no longer purchase mortgage loans secured by properties with outstanding PACE loans. This effectively stopped residential PACE programs, with the exception of a few pilot programs.

Since 2010, a number of developments have facilitated a resurgence of residential PACE programs in California – including the passage of state legislation (SB 555), the implementation of legal instruments to address FHFA concerns and disclose the consequence a PACE lien can have on an existing mortgage, and the establishment of a PACE loss reserve program. Many cities and counties now have PACE programs for all three sectors (residential, commercial and municipal).

What can be financed with PACE?Energy bar
Eligible products vary by individual PACE providers and administrators. In general, most products that can be permanently affixed to a property and reduce on-site electric, gas or water consumption will be considered eligible. Some examples include attic insulation; heating, ventilation and air conditioning replacements; solar photovoltaic and thermal systems; and low-flow toilets.

Often, projects must be performed by a contractor participating in the PACE program to be eligible.

PACE Providers in San Diego County
PACE programs in San Diego county are managed by Renovate America and Ygrene. These organizations facilitate loans with realtors, lenders, clients, and certified contractors.

Renovate America, a San Diego company known for pioneering work and lobbying to improve PACE processes, recently passed the $1B mark in loans. The company, which is the leading provider of residential Property Assessed Clean Energy (PACE) financing in the U.S, and its government partners recently were awarded the U.S. Climate Leadership Certificate for Innovative Partnerships by the U.S. Environmental Protection Agency (EPA). The national award recognizes organizations working collaboratively on leading-edge climate initiatives which reduce greenhouse gas emissions.

HeroRenovate America, which provides loans through it HERO program, provides a team dedicated to supporting real estate professionals working with PACE loans. The nearly 55,000 households in California that have completed HERO projects have contributed to the creation of more than 11,000 local clean energy jobs, while reducing carbon emissions and saving water.

Renovate America worked with the State of California to set aside a $10 million loan-loss reserve fund to reduce lender’s exposure to defaults. In more than two years of existence, no claims have been made against this fund.

The HERO Program brings together Property Assessed Clean Energy (PACE) financing, consumer protections developed with government partners, more than 5,000 home improvement contractors, and a tech-enabled underwriting and product approval process. The HERO platform enables more than 1 million EPA- and DOE-rated efficient products to be selected if PACE financing is chosen, converting the moment when a homeowner

YYgrenegrene offers PACE financing in Chula Vista and throughout most metropolitan areas in San Diego County. Ygrene’s PACE loan is treated the same way as a Mello-Roos. Mello-Roos is a form of financing used by cities, counties, and special districts. These taxes are secured by a continuing lien and are levied annually against property within the district. These liens are subordinate to mortgages.

For Realtors
Keep your eye on PACE. It looks like attention paid to working out the kinks in the original loan program are paying off.

Engaging Your Customers

Your client base is your most valuable asset. Stay engaged. Join us for our upcoming webinar covering effective ways to reach out to your clients!

We’ll cover using email to reach out to your contacts; engaging your past clients in meaningful conversations using energy efficiency as part of your strategy; and solutions and strategies for mining your database.

  • Monthly Email templates using Constant Contact
  • Custom collateral for farming, events….

Since 2010, Inspection Perfection has focused on residential energy efficiency. We’ve completed hundreds of energy assessments in San Diego county. We monitor the Energy Efficiency marketplace regarding incentives, policy and news.

Why Energy Efficiency:

  • Cost Effective
  • Lowers your Energy Costs
  • Delivers Comfort
  • Financing
  • Rebates

Webinar – Tuesday March 15thMining your list Agenda

Click the appropriate link to register

Morning session: 9:00am—9:45am

Afternoon session: 1:00pm—1:45pm

Award reflects company’s consistently high level of customer serviceAngies List low res jpg

Inspection Perfection has earned the service industry’s coveted Angie’s List Super Service Award, reflecting an exemplary year of service provided to members of the local services marketplace and consumer review site in 2015.

“We strive to improve our customer experience with every client.  We are honored to receive this recognition for another consecutive year.” said Will Johnson, owner of Inspection Perfection.

“Only about 5 percent of the Home Inspection companies in San Diego County have performed so consistently well enough to earn our Super Service Award,” said Angie’s List Founder Angie Hicks. “It’s a really high standard.”

Angie’s List Super Service Award 2015 winners have met strict eligibility requirements, which include an “A” rating in overall grade, recent grade, and review period grade; the company must be in good standing with Angie’s List, pass a background check and abide by Angie’s List operational guidelines.

Service company ratings are updated daily on Angie’s List. Companies are graded on an A through F scale in areas ranging from price to professionalism to punctuality.

Angie’s List helps facilitate happy transactions between more than three million consumers nationwide and its collection of highly rated service providers in more than 720 categories of service, ranging from home improvement to health care. Built on a foundation of more than 10 million verified reviews of local service, Angie’s List connects consumers directly to its online marketplace of services from member-reviewed providers, and offers unique tools and support designed to improve the local service experience for both consumers and service professionals.