Does this solar system look overpriced?

[hankm]

I'm looking at purchasing a home with a solar system on it. The seller purchased them on a loan, which I would take over They installed them about 8 months ago so I would assume almost the entire loan. They have stated that they would pay the tax credit into the loan. However, I'm concerned that they overpaid for their system. Can anyone give me feedback on this?

Location: Denver, CO

Total Cost: $40,194

Size: 9.135 kW DC

Estimated Production: 10412 kWh AC

Average Sun Hours: 1139

Make: Hanwha Solar

Model: Q.PEAK BLK-G5 315

QTY: 29

Inverter Make: SolarEdge Technologies

Model: SE7600H-US000NNC2

QTY: 1

Any insight, information or opinions on this would be very helpful. Im skeptical with 16 of the panels on a north facing roof and comparing costs with national averages for systems.

Thanks!

[solarix]

Those panels cost about $0.55 per watt wholesale. You do the math.

[foo1bar]

I'm looking at purchasing a home with a solar system on it. The seller purchased them on a loan, which I would take over They installed them about 8 months ago so I would assume almost the entire loan.

Is it a loan or a lease?

Or a purchase power agreement?

Are you getting a mortgage on the property?

Assuming it actually is a loan (doubtful that it is - but maybe) - Is there any benefit to having this be a separate loan rather than just part of your mortgage?

What they paid and what is left on the loan is irrelevant IMO.

What is relevant is how much you're paying for the property and whether it is worth it.

There are many stories of people who have had a "Power Purchase Agreement" - where they pay a solar company (installer or someone they work with) a set amount each month. And they have a contract for 10 years or something. And if they sell they have to get any buyer of their property to take over their contract, OR buy out the contract. And in those situations IMO the property is worth *less* with the solar system on it. Only if they buy out the contract is the solar a benefit, and then probably only a small benefit compared to what the sellers have paid for the system over the years.

I would ask them to include the details of the solar loan. (how much is left on the loan, what the payments are, what the terms are, etc. etc. )
And have them provide access to the details from the Solaredge system. (You want to see how much power it has produced over each month of the past 8 months)
And you'll need to learn about how net metering works in Denver.

[foo1bar]

Those panels cost about $0.55 per watt wholesale. You do the math.

But to be fair, panels are not the majority of the cost of a lot of systems.
There's costs for inverter, racking, wiring, possibly a main breaker panel upgrade, other miscellaneous stuff, and often the biggest item - labor.

I think your point is that the sellers paid too much - which is true IMO. $4.4/Watt is quite high. $2.75/Watt to $3/Watt would be a reasonable price.

But like I said in previous post - What they paid and what is left on the loan is irrelevant IMO.
What is relevant is how much you're paying for the property and whether it is worth it.

[Ampster]

That figure of average sun hours (1139) is the same as the ratio of annual production 10,412 kWhs divided by the DC capacity 9.135kW of the system (1139 to 1). That could be explained by the fact that the majority of the panels are North facing. To me that means the system is not as valuable as an optimally installed system of the same capacity. I also agree with @foo1bar that the important issue is the actual value of the home, regardless of the less than optimally installed system.
If it were me I would read the "loan" documents carefully, get a preliminary title report to see if you could even finance around that loan. I would also weigh the cost of that financing against a mortgage and I would significantly discount the value of the system to something less than $1.50 per Watt.

[hankm]

Thanks for the responses. I don't think i provided enough context, but it sounds like generally speaking they at least paid a lot for the system. Our offer on the house was somewhat independent of the panels because they were listed as 'lease to own' and could be pulled off if the buyer choses. The reality is that they have a loan on the panels (which isn't in itself an issue). The problem is the balance on the loan is only about $600 less than the total price because they've only had the panels for a few months. My guess is some sales guy told them the loan would transfer to a new owner on the house because they mentioned nothing about the loan during negotiations and have acted like it would just randomly transfer when we close. I'm just trying to educate myself on what a realistic number would be if we end up negotiating extra payment for the solar panels. And from what I gather it should be much much less than what they're loan is currently for.

[PugPower]

If it were me, I would negotiate the seller have the loan on the solar paid off through escrow so it is free and clear once you take possession. You can roll the loan into the total home value for negotiation purposes. By all means that system is not worth 40K, but that's the sellers problem. Make the seller a a fair offer for the property including the solar and make escrow contingent on seller paying off the loan. Easy, simple, and best option for you.

IMO, the solar is worth approx. $27.5K max. I don't really understand why 13 panels are facing North. Not enough roof space on the South? I did not take that into account when giving my estimate. Generally you shouldn't pay much more than $3 per a kW but you should take into account that the system is new and is already installed saving you the time and trouble of doing it yourself. Was any other work don like main panel upgrade or EV charger? If so you should account for that as well when determining value.

[J.P.M.]

Unless the seller got screwed into a PPA, lease or some other B.S. deal, you are buying a property, not a property and a PV system.
As for that 1139 "sun hours", that's a B.S. use of a B.S. term.

I would agree that it seems to be the estimated annual production divided by the STC size of the system.
Unless there's more to the story, only nitwits and unscrupulous vendors put panels facing away from the equator. Sound to me like there's a more than small probability the seller was clueless and got screwed. I'd then wonder how else the seller got screwed. Makes me wonder if the rest of the system is a POS.

Consider doing this: Before anything else, consider retaining legal counsel that's competent and knowledgeable with respect to the ins/outs of real estate and residential PV.
Then:
1.) Do not, under any circumstances assume the "loan" - if it is indeed a loan - without a LOT of checking.
2.) Deduct the system loan balance from the asking price of the home and base any offer you make for that home on that lower number - that is, work down from there.
2.) Verify that the modeled (that is, probable, long term average) system output is somewhere in the vicinity of 10,400 kWh/yr. - and while you're at it, find out why they're telling you modeled output and not actual output. Is this thing even working ? PVWatts is a decent tool for modeling long term output. See the PVWatts help/info screens for particulars.
4.) If modeled output can be verified (independently, by YOU, or someone you trust and not a vendor), and the system is operating, figure out how much that the electricity the system produces is worth per year. Inflate that $figure by 3 %/yr. for as long as you plan on potentially owning the property and sum the annual savings.
5.) Knock that total savings estimate in half, or however little you want, and add that result to what you'd pay for the house without a poorly sited PV system on it as found in step 2 above.

Good luck.

[njdealguy]

I'd just offer a flat 20k built into the purchase price based on a reasonable purchase price of 2.85 a watt minus the 30% tax credit, and if seller doesnt agree better to pass on buying that house. Just because the seller got a screwed over price doesnt mean your responsible for compensating his mess.

Sounds the same as taking over someone's car lease payments where it was originally a crappy s***ty deal!

[J.P.M.]

I'd just offer a flat 20k built into the purchase price based on a reasonable purchase price of 2.85 a watt minus the 30% tax credit, and if seller doesnt agree better to pass on buying that house. Just because the seller got a screwed over price doesnt mean your responsible for compensating his mess.

Sounds the same as taking over someone's car lease payments where it was originally a crappy s***ty deal!

Why $20K ? A nice round # that's ~ half the claimed loan balance ?

Look, it's an overpriced and what reads/sounds like a poor design bought by someone who didn't know what they were buying. A well designed system in CO ought to be capable of something like, maybe 1,600 kWh/yr per STC kW. Such performance might be worth about 2/3 the going rate for a new system. But, if the system performance models out at something like ~ 1,100 to 1,200 kWh/yr. per STC kW, and given the idea - based on what looks like lousy siting or just a crummy application that the vendor or buyer didn't know or care about, or both - I'd question the overall robustness and suitability of the design. Such considerations would lower my offer still further - if I made an offer at all.

If I did anything besides walk away from the deal, I'd do as I suggested and deduct the loan balance from the asking price and use the result as a maximum of what I'd consider, but not before a lot more information about the loan, or even if it is a loan and not a lease, a PPA or something other than a loan.

It's always easier to raise an offer than lower an offer. An offer can always go up, but rarely goes down.

Besides, there's always another house.

[njdealguy]

Why $20K ? A nice round # that's ~ half the claimed loan balance ?

Look, it's an overpriced and what reads/sounds like a poor design bought by someone who didn't know what they were buying. A well designed system in CO ought to be capable of something like, maybe 1,600 kWh/yr per STC kW. Such performance might be worth about 2/3 the going rate for a new system. But, if the system performance models out at something like ~ 1,100 to 1,200 kWh/yr. per STC kW, and given the idea - based on what looks like lousy siting or just a crummy application that the vendor or buyer didn't know or care about, or both - I'd question the overall robustness and suitability of the design. Such considerations would lower my offer still further - if I made an offer at all.

If I did anything besides walk away from the deal, I'd do as I suggested and deduct the loan balance from the asking price and use the result as a maximum of what I'd consider, but not before a lot more information about the loan, or even if it is a loan and not a lease, a PPA or something other than a loan.

It's always easier to raise an offer than lower an offer. An offer can always go up, but rarely goes down.

Besides, there's always another house.

Actually I miscalculated, based on my fair installation price of 2.85 a watt (I was quoted few months ago approximately this price for same brand panels from 4 different installers in NJ, similar size system) which after subtracting 30% fed tax credit is about exactly $2/watt, that puts us at 9135 × 2 = $18,270. On that would subtract and tax incentive the state of Colorado gives that I'm not aware of but guessing may be a further 3k to 5k to subtract.

These calculations are assuming if the home with the system is worth purchasing which probably isnt given the low estimated production and lack of south facing panels it seems. I personally would take a hard pass.

[hankm]

This info is very helpful. I'll be collecting some energy date from them either walking away or making an offer that makes sense for us. Does anyone have opinions on the panels or inverter? Are they pretty standard, budget or premium level?

Thanks for all the responses!

[Ampster]

........
Does anyone have opinions on the panels or inverter? Are they pretty standard, budget or premium level?

My system uses those panels and a SolarEdge inverter. I am very happy with it. I have another SolarEdge inverter at another location. That inverter replaced a 10 year old Xantrex inverter that failed. The designation of the letter H on the inverter means it is the more recent version that is transformerless and more efficient.

[PugPower]

SolarEdge is basically the standard or Cadillac of inverters.

[sdold]

Thanks azdave