Buying a House with Existing SolarCity Installation - Roof Replacement question

[tsukiakari]

We've gone under contract for a house in Colorado that has an existing 10.5 kW SolarCity installation from 2015. The problem is that the roof is in such shape currently that it needs to be replaced. Normally roofs get replaced before a house is sold in this area (if they've not been recently replaced) because most home experience some level of hail every 1-2 years, plus the snow and wind, etc.

The problem in this situation is that an Energy advisor here has said that it's likely to be a 1 to 1-1/2 month delay in the process due to Tesla negotiating cost with insurance company then removing the panels, permitting the re-installation, replacing them after the roof, and then city and power company inspection and certification.

We've got our interest rate locked such that if we miss the closing deadline on that in about 40 days, we incur hefty daily penalties from the lender.

We're trying to work with the seller (who has not been terribly agreeable so far) to come up with a solution. We're not sure if we can get the roof insured ourselves or not (which would allow us to put it off and we could negotiate with the seller on the deductible we'd eventually pay--a related question is can we get insurance from a company without them inspecting the roof).

Another idea we had: get process started, close once roof is replaced, then Tesla and the city and power company can work out things on their own time after. I'm not sure Tesla would allow that and their Energy Advisors are hit or miss at times.

Our realtor (who also has some minor Tesla connections) is trying to figure this out for us, but now that I've laid out my situation, I'm wondering if anyone has had something like this before or if anyone has any creative ideas about how we could make this work out.

Thanks!

 

[glide]

I would do one of two things in this situation.
First would be to run as far as possible away from the deal. Having the purchase contingent upon something a 3rd party insurance or utility company needs to square away will not work in your favor. Walking away may also bring the owner to the table.

Second would be to deal with it after closing and just assume you’re going to be footing the bill.

 

[Ampster]

I believe the PPA agreement allows the seller to move to panels to another home. Maybe you can leverage them to do that then you can install new solar, get the tax credit and not be encumbered with the PPA. My daughter purchased a home last year with a Solar City PPA and it is an uneconomical arrangement.

 

[tsukiakari]

@glide - it's my understanding that a significant portion of home purchases here are contingent upon getting the roof replaced (if it has not already been done so) because just about everyone experiences a notable amount of hail every year or two. That usually only takes a few days without the complication of solar. It's my understanding that the process can be done in a week in some places, but they're telling us a month or two here, which, like I said, puts our timeline in jeopardy. The attractive thing about this is that the solar installation is financed and will be paid off in full by seller for the sale. We would just walk away but honestly, for the price, this one is worth fighting for at least a little bit.

@Ampster - as far as I know, the seller's situation is impractical for moving the panels. They've promised (and we've got a stipulation in the contract) that they'll be paying off the financing in full ($30k+) for the sale.

 

[Ampster]

as far as I know, the seller's situation is impractical for moving the panels. They've promised (and we've got a stipulation in the contract) that they'll be paying off the financing in full ($30k+) for the sale

If that is what I think it means that is good news. It doesn't solve the logistics though. From a financial risk standpoint we have escrows which could be instructed to hold funds until roof replacement is done. Don't know how that would satisfy the lender but maybe a possibility.

 

[nwdiver]

I believe the PPA agreement allows the seller to move to panels to another home.

Really? I've never seen a PPA that allows that. >60% of the cost of a PV system is labor. Between the labor required to remove and re-install you're essentially destroying >100% of the value of the system. I don't understand how people get this idea that a PV system installed on a home is any different than new windows or new floors. You wouldn't tear out your new window or rip up the floors to take with you... why on earth would you remove the PV system? It stays with the house.

 

[glide]

@glide - it's my understanding that a significant portion of home purchases here are contingent upon getting the roof replaced (if it has not already been done so) because just about everyone experiences a notable amount of hail every year or two. That usually only takes a few days without the complication of solar. It's my understanding that the process can be done in a week in some places, but they're telling us a month or two here, which, like I said, puts our timeline in jeopardy. The attractive thing about this is that the solar installation is financed and will be paid off in full by seller for the sale. We would just walk away but honestly, for the price, this one is worth fighting for at least a little bit.

So is there a contingency in the contract? What does it say? What are the penalties if the seller does not abide?

A financed solar installation sounds like more of a liability than a benefit. What contingencies exist if the seller does not pay off the loan or if he decides to take the panels he now owns with him? How are you transferring ownership of the panels if there is currently a lien on them.

There is so much in doubt about this purchase and I understand not wanting to share all details on a public forum. I just hop you have answers to all of the above and these things are included in your contract.

 

[patrick40363]

Really? I've never seen a PPA that allows that. >60% of the cost of a PV system is labor. Between the labor required to remove and re-install you're essentially destroying >100% of the value of the system. I don't understand how people get this idea that a PV system installed on a home is any different than new windows or new floors. You wouldn't tear out your new window or rip up the floors to take with you... why on earth would you remove the PV system? It stays with the house.

The owners installed a solar system on a home that needed a new roof. Not very bright. Buyer can remove and re-install but that is costly too.Wonder why the solar company didn't discuss roof age prior to install.

 

[nwdiver]

The owners installed a solar system on a home that needed a new roof. Not very bright. Buyer can remove and re-install but that is costly too.Wonder why the solar company didn't discuss roof age prior to install.

Sounds like the roof was fine when it was installed... it's just standard practice to replace the roof at sale due to the frequent hail in the area.

Removing and replacing at one location is going to be A LOT cheaper and easier than removing, moving and reinstalling somewhere else.

Normally roofs get replaced before a house is sold in this area (if they've not been recently replaced) because most home experience some level of hail every 1-2 years, plus the snow and wind, etc.

 

[tsukiakari]

To elaborate further, there's nothing in the contract about specifically getting the roof replaced; the requirement is that we are able to get homeowners insurance, or the deal will fall through. If the roof isn't in reasonably fair shape, we won't be able to get the house insured.

The seller has claimed that the roof is ~5 years old. Our general home inspector claims that it likely needs replacing. We're waiting for a roofer to actually come and inspect. I'm no expert, but only the back side looks to have damage or wear. The front side generally looks fresh. This would make sense since the back side faces west (toward where most of the storms come from, basically), and if the solar was only installed just over 2 years ago, it's likely that the roof isn't that aged because they probably wouldn't have installed it on a bad roof.

Possibilities:

1. The roofer says the roof has some reasonable life left and doesn't necessarily need to be replaced immediately. We move on with the sale as normal, assuming there aren't any appraisal or insuring issues.
2. The roofer says the roof has reasonable life left and we can get a partial repair, in which case the seller would have to make a claim for wind or hail damage.
3. The roofer says the whole roof needs replacing due to recent hail/wind, in which case the timeline would become the problem if there's an insurance claim involved. Our drop dead date for our interest rate lock is about 40 days away after which we owe significant fees to the lender. Since it's unlikely that the seller will forego an insurance claim (if available) to meet the timeline, perhaps we could have the seller set aside money to pay these fees instead if we have to go this route.
4. The roofer says the whole roof needs replacing due to general wear or age, in which case the seller would have to agree to put the money in escrow or whatever for the repair, we close as normal with that condition, and get the repair after.

Basically, anything but #3 would be preferable--something that doesn't munge up our timeline. Having to have the part of the roof with the solar on it replaced is the part that puts our timeline in jeopardy since according to Tesla Energy Advisors, the solar part isn't quick. I'm wondering if we had to go that route, if once the roof is replaced we could close anyway, and Tesla Energy's contractors could get to putting the solar back on in their own time, assuming we need a whole roof replacement on an insurance claim. As I mentioned, it's not likely that the seller will be willing to forego an insurance claim to help the timeline.

 

[Ampster]

Really? I've never seen a PPA that allows that

The house my daughter bought in Corte Madera has a Solar City PPA. I read that lease and it was an option for the original lessee (seller). He didn't want to do that so they are stuck with the PPA until 2021 when there is an option to buy out the system at appraised value. Depending on that value it may be cheaper to do that than continue to pay $0.13/kWhr for every kWh it generates.
The worse part was their first year they also had a true up charge of $500. It turns out they didn't know about TOU rates and apparently the seller had been on a tiered rate which their order for service defaulted to.

 

[Az_Rael]

Well, it sounds like you need the roofers inspection before you can really weigh your options. I assume with option #2 the seller could complete the repairs in time to close?

If option #3 happens, well, you will have to weigh how much you want that house vs. how much those lender fees are. I have never had a rate lock that involved fees for missing closing, so I am not familiar with how high the fees are.

I would NOT proceed with the sale and let Tesla Energy deal with it later, that all needs to be agreed to in a contract with Tesla up front. Be aware that the Energy Advisors may give you wrong information, and their timelines are also terrible. Communication is also terrible. Get everything in writing, and not just by emails.

 

[Ampster]

They've promised (and we've got a stipulation in the contract) that they'll be paying off the financing in full ($30k+) for the sale.

At least you will be out from under the PPA lease obligations.

 

[Xenoilphobe]

Have the seller put +/- $30K in an escrow account and resolve the roof after the sale. if this doesn't work walk....

 

[glide]

To elaborate further, there's nothing in the contract about specifically getting the roof replaced

I would walk away immediately. YMMV.

 

[tsukiakari]

In case anyone is interested in the outcome:

We had our roofer inspect and they recommended a full replacement for wear--there's no obvious hail or wind damage.
The seller had their roofer inspect and they said they would do spot replacements of shingles here and there. When they found out we were going to terminate, they offered to get it "certified". When we told them that it was still an insurance risk without full replacement and that we needed them to escrow the money to get it replaced, they refused to get a full roof replacement, so we've terminated this contract.

FYI - in the Denver area, the current quoted lag time is about 1 month of delay to get solar panels removed and then another month after roof replaced to get them reinstalled.

Thanks for your answers.

 

[Az_Rael]

Thanks for the update! Sorry you had to bow out of the sale, but it is probably best in the long run.

 

[nwdiver]

Thanks for the update! Sorry you had to bow out of the sale, but it is probably best in the long run.

Yep... one more person that's going to tell their friend not to get solar. And those friends will tell their friends... meh... we don't need renewable energy... it's not like there was recently a 1600 pg report saying how desperately we need renewable energy or anything.......

 

[Az_Rael]

Yep... one more person that's going to tell their friend not to get solar. And those friends will tell their friends... meh... we don't need renewable energy... it's not like there was recently a 1600 pg report saying how desperately we need renewable energy or anything.......

I dont see anywhere in the OPs posts that they are against solar. The issue here was really the sellers not being willing to pay for the roof replacement. The solar was the complicating factor, and really only because Tesla Energy is such a PITA to work with.

You should direct your ire at Tesla Energy, since they are the ones that end up making solar look bad when these situations come up.

 

[nwdiver]

I dont see anywhere in the OPs posts that they are against solar. The issue here was really the sellers not being willing to pay for the roof replacement. The solar was the complicating factor, and really only because Tesla Energy is such a PITA to work with.

You should direct your ire at Tesla Energy, since they are the ones that end up making solar look bad when these situations come up.

It's a lost sale due to solar because the buyer is unwilling to assume a little inconvenience and risk. The unfortunate reality is that we ALL need to assume a little more inconvenience and risk today to avoid A LOT more tomorrow.