Do you feel frustrated trying to sell a house with solar panels. Do you feel like a fish out of water answering questions for your buyer when the house already has panels? Are they assuming the debt or is the seller taking the panels?
Lucky for you Ian Miller and Evan Stone of SCREC.org join me to discuss ideas on helping real estate agents sell houses with leased solar panels. They also discuss when solar panels are a fit and not a fit for your client as well as helping you understand the many facets that should go into the analysis such as tax credits, sunlight exposure, and ROI. In short, they will help you feel more educated on the issues so you can speak intelligently on the subject.
If you want to be more knowledgeable in discussing buying or selling a house with solar panels with your consumer, then you don't want to miss this episode. I also do another segment of Gary's Good News Only!
* Gary serves on the South Carolina Real Estate Commission as a Commissioner. The opinions expressed herein are his opinions and are not necessarily the opinions of the SC Real Estate Commission. This podcast is not to be considered legal advice. Please consult an attorney in your jurisdiction for applicable legal advice germane to your issue.
deshon dirt with Gary pequin South Carolina's only podcast dedicated to the real estate agents crap. And Greetings, everybody. Welcome back to yet another show edition dirt. I am your sometimes opinionated, but always correct host Gary pequin with yet another episode for each day, and this episode is going to be a little bit different than ones we've done in the past. As you all know, a couple weeks ago, I did an episode on solar panels and the difficulty I have with trying to get the title transferred when there is solar panels on the house. And Evan stone and Ian Miller of srtc.org, which is a solar organization reached out to me and asked me if they could come on the show. And he talked about some general misconceptions in the industry about solar panels. So I said, Hey, share, come on, on. And let's see what you got to say. So these guys are joining me today. And we're going to spend pretty much most of the show today with him. So our format is gonna be a little bit different. We're gonna have these guys on and we'll do a quick Gary's good news only. And then that will be the show today. So we're gonna jump right on in here with Ian Miller and Evan stone from sc rec.org. Sounds good. Thanks for having us. Thank you. Alright, so the first question is a real easy softball for you, consumers contacted you they want to buy solar panels, when are they a good fit? When are they not, there's a number of factors to consider when looking to see if your home's a good fit for solar. Obviously, the the main one is kind of how long do you plan on living in the house, there's a certain break point in terms of ROI. But also to it's a it's a big numbers game. So the same reason that people get solar panels are the same reason that people get mortgages, you know, we're taught since we're about knee high, it's a whole lot better to own your home than to rent it. And that's kind of the same thing with solar panels. The idea is, instead of letting that money flow out of your pocket, to a fortune 500 company, like Duke or semg, dominion, it's more about letting the money flow back in. So another another major proponent to it that we'll get to later in this is, is the tax credits. So it's really a numbers game. At the end of the day, saving the planet is great. But at the end of the day, really, people are concerned about how much money they're spending every single month. And for the right circumstances and the right customer with a good house in a good location, it can be a very advantageous program for them, it's just really important, they do their research first and know what companies that they're working with. Another big proponent of that is going to be obviously sunlight exposure, just because that's going to be the biggest production value in regards of your energies, production for your to run your home off of that being said, obviously, tree shading, those kinds of things play a factor in whether or not it's going to be feasible for someone to get the energy offset and receive the production values necessary for them to get 100% of the power from solar energy, rather than buying it from the grid from one of the major utilities here in the state. Another thing that's very, very, very important to consider and outside of the homeowners control or the agents control is the utility company. So different utilities have different net metering policies, Duke dominion, Santee Cooper, the major utilities that are publicly traded, they were set up with the with the certain program, it's called the state net metering program. And that was basically put in place by Nikki Haley. And it was put in place to help benefit homeowners. Now, some of the smaller cooperatives like mid Carolina, and you know, new bear electric, they have different rate structures. And depending on which way your house faces and how you use power, so what times you use power and stuff like that can have a big factor on whether or not you're going to see savings with solar not So the most important thing, I think, for ages to real, to kind of understand is that the Duke dominion, those major power companies, they have very, very fair one for one, net metering policies, and some of the CO Ops, if they are looking at doing solar and some of the smaller co ops and stuff like that, in most cases, they need to have a battery system to really beat those peak charges that everybody hears about with mid Carolina and stuff like that. So as a homeowner, I would want to meet with a reputable company, and have that company look at my shade versus my sunlight to see how much I can produce energy. And then I'm also going to have them look at my annual power usage, and then what power company I'm with, and then they're going to do analysis to see if I'm a good fit for solar. Yes, sir. So the most important thing and the best thing just to kind of have a quick understanding of it, is because we're in the Northern Hemisphere, sun, you know, rosin he sets in the west has done that since the beginning of time. But But where it actually leans a little bit more towards and especially in the wintertime it kind of drops down in the sky a little bit is the southern facing roof plane. So if you have a nice flat Southern waist and roof plane, that's where the power is going to be produced. You can put $20,000 with a solar panels on a southern facing roof plate and $20,000 on the northern facing roof plane. And that Southern roof plane is going to prove double the power over the course of a year on that Southern face and roof plane. So a lot of times People say, Oh, I want them on the back of my house. Well, if you want them on the back of your house, but the back of your house is north facing, it's probably not a good fit, it's almost impossible to make those numbers make sense. But if you have a nice Southern facing back of the house, and you know, they're going to be out the way, it's not going to take away from the curb appeal. That's, that's when it's a good fit for customers. And then tied into that is the solar tax credits. So we listened to your previous podcast, and that that how it was dropping down to 22%, it was actually extended to 26%. In the in the COVID build that Trump passed before he was out office, that she stood at a 26% in South Carolina has a 25% state tax credit, that is the highest state tax credit in the entire country. So let's say my solar panels gonna cost me about $40,000. I don't even know if that's the right price, but assuming around 40 grand, what would the state and federal tax credits do for me at that price, so that's pretty run of the mill. So on that you're gonna get, you know, roughly in the range of about 21,000, back on your taxes, what that means is, you know, 10, nine, nine agents, you guys understand it at the end of the year, you get that big tax bill that you have to cut, that's your taxable liability. If you're a W two employee, they withhold through your checks, and maybe you get a refund or so. But if you get a two or $3,000 refund, that typically means they've kept 1015 $20,000 in your taxes. So that's still your taxable liability. So the way the tax credits work are the federal portion, which is 26% of the system value. So on a $40,000 system, it's $10,000. And some change, you're going to get that refunded back to you. And if you didn't get solar with the solar tax credit, that money typically just goes to the IRS. But in if you get solar, it's basically an incentive from the US government for you to you know, move to renewables. And they give you that $10,000 back in, in most cases, people put that towards their solar panel. And so it's all about the net cost of your solar system now on that. So if I have a $40,000 system, are you saying that at the end of the day, I could get a tax credit from the federal and state government, when I file my income taxes, it could basically give me a credit back around $20,000. So my out of pocket expense would only be around 20? grand? Is that what you're saying? Yes, sir. So that's the that's the huge incentive. Now, the important thing for people to understand is their taxable liability, we have tons of, you know, homeowners who are w two, and they say I don't pay money in taxes, I get a refund. Well, we all know that everybody pays money in taxes at the end of the day. And so it's important for people to understand their liability, what we see a lot of times as you may have a big house, or a older house with these big roof planes that can fit a lot of panels on them. But maybe they only make 30 or $40,000 a year, well, someone who's making 30 or $40,000, a year might only pay five or $6,000 in taxes. So they don't need to go with a full $80,000 system, get $40,000 in tax credits, that's going to take them five or six years to collect. So the important thing is size in the system appropriate with your tax liability. Now, if you're in that range of 70 $80,000 a year as a household income, it usually works out pretty good to where you don't have to be too concerned, the only thing is the state state tax credit they have in place is capped out at 30 $500 a year. So what that means is if someone's planning on retiring in the next year or two, but they have $10,000 in the state tax credit, they're going to want to make sure they're working for two or three or four years to be able to collect that full tax credit. And that's circumstances where the the worst thing that can happen to homeowners, is if you have someone who's on Social Security, a disabled veteran or something like that, who purchases a big solar system, and they're not going to be able to capitalize on any of those tax credits. That's that's the that's the root of almost all the nightmare stories that you hear. Yes. So just understanding people's tax liability and their you know, your tax appetite. And being able to put that in proportion with the system size is really important as those tax credits can drastically affect the affordability of the system. So typically, you know, kind of going back into one of the questions from earlier is, you're going to pay your utility bill to the electric company regardless, right. So this is essentially the only alternative measure that you have to get power from outside of the grid in order to you know, put that cash flow back into your pocket with the tax credits. Those are really going to affect whether or not it's feasible for you and your family because those are typically structure on a monthly payment that you're used to managing and that's where the savings come in is say if you have a $200 Bill $200 a month bill now, you can typically have that structure to, you know, a new fixed payment of about 100 $110 a month and without those tax credits that's going to more than likely exceed the you know without the tax credits, that new monthly payment may exceed The $200 a month bill that they're already used to paying. So just trying to understand people's tax liability. I mean, we're not tax professionals, we always prefer that the homeowners consult whomever they have do their taxes before they move forward, as most of our tax advice is preliminary based off pretty standard general knowledge in everybody's fiscal situation is a little bit different. So just being able to peel back the layers of the onion, if you will, and understand people's full tax liabilities. So we know that we're setting them up with a system that's going to meet their needs. So what I'm getting from this is that solar panels are not necessarily a good fit for all at fit some, but not all people. Yeah, this is case by business. And that's the thing of it, it's not going to work for everybody, but the people that that it does work for, and they can take advantage of the tax credits, you know, save tremendously 10s of 1000s of dollars. And that's, that's one thing, it's really important to understand, I think what a lot of your agents are running into is the whole lease program. So I actually managed sunrun for the Columbia office for three years. So most of what your your agents are dealing with this is honestly probably coming from me, and part of my team. And I was I was one of the first guys from South Carolina to dive into solar whenever it came to the state. And I didn't really know any better, right? None of us did. we all we all listened to the big California company that came in. And and we drink the Kool Aid a little bit, we saw people saving money, we saw people were happy, and we thought it was a good fit. And what we learned is, is that a lease program is perfect for people who do not have any taxable liability. So people who want Social Security, people who are on disability, people who don't pay income taxes, you know, single moms with four kids, they don't have the taxable liability, take advantage of those tax credits. So the differences, Elise is a company buying the system, and the company is then entitled to those tax credits. Now, that's what a lot of people are in dealing with. And that works out well. And the way that that's figured is they typically see about a 30 to 40% drop in their power bill, with a 3% annual escalator, where that number comes from is the national average of utility rates have increased by 4%, over the last 20 years, now being in this market for seven to eight years. And if you ask anybody, they see their power bill go up every single year, whenever Dominion bought out semg, they actually figured in a guaranteed 4% rate increase every year for 20 years to cover that VC summer project. So if you had to pick one of the lesser of the evils is a 4% or 3%. Better, especially if the 3% is starting at about 20 to 40%. Lower. So that's when at least is a good fit is when people don't have the tax liability. Let's talk about that for a minute. So the knock on solar panels has been that if I leave my panels that a lot of people say well, my monthly lease payment is equal to or exceeds the energy savings. Because if I'm if I'm only paying on average $200 a month on a power bill, and I say 30% I'm saving 60 or 60 bucks. Yep. 6070, let's say 70 $70. My lease payments, typically more than $70. Oh, yeah, so the weight will take me to recover. This was the ROI. So that's the common misconception with it. So if you have a $200 power bill, they're gonna set you up with that 60 to $70 savings, meaning that that payment for the lease payment is $140. Now, whenever you have that in a Duke and a dominion, which have a one for one, net metering policy, it actually eliminates that $200 a month charge, utility companies only charge you a $10 connection fee. And then in lieu of that $200 you're paying 140. So that's where the savings is coming in, it's replacing a bill. It's like if you switch from Dominion to mid Carolina, that $140 a month is producing, let's say 12,000 kilowatt hours per year, well, you were using 12,000 kilowatt hours per year, but that was costing $200 a month, on average, from the utility company. Now you're paying for that 12,000 kilowatt hours per year $140 for the solar system that's producing that power. So that's that's how the savings work out as you're placing that bill. So Alright, so let me break this down as elementary as I can make sure by understand, make sure I understand. So if my power bill is $200 a month to do, and I'm saving 30% they were down down to or down to 140 is what what my ability. So you're saying I would not have a bill to do power anymore. I'd only pay $10 for the connection fee. Yeah. My lease payment to the solar company is gonna be 1/3. Yes, sir. So that's exactly how solar works is it's going to take that uses that you use on an annual basis, and it's going to put that exact same amount of power in in a good circumstance. You know, when a companies are doing it the correct way, and it's going to replace that usage. And in replacing that usage, you're not making a payment for equipment instead of paying per kilowatt hour like you are now what happens with a lot of people is they say, Oh, I got cheaper. Power. Now, let me turn it on 65 and leave the lights on all night. That's something that doesn't work, because you're driving your power usage up whenever we figure out solar systems is based off of an annual usage. So we look at the entire year, we figure out the average of how much you're using in that entire year. And then we size systems based off of your circumstances where your house is facing, where we're allowed to apply the panels by the HOA, and what kind of production we can get out of that, it's very important that you find a company that has a power production guarantee. So that's something that we do here at SCC is we make sure that we we give them not only you know words, because words are great, but you need to see it on the dotted line, we make sure that we have an agreement with the customer of how much power it's going to produce. And if they don't produce that power we refund them for any power that was lost. Solar is essentially the the easiest way to explain it as a mortgage for your power, right. Because if you think about your utility company, like your landlord, they flush the rate fluctuates month to month, and they go up on it every year. So this is a new fixed payment that you know you can budget for accordingly, you have ownership, it's a you know, the same way that when you if you rent a home for $1,000, when you get when you take a mortgage out on it, it's usually cheaper at a fixed rate. And you can plan in budget accordingly for that the same way that people you know, spend their spend $200 a month, every month, and they don't think about it in terms of long term contract or anything like that associated with their utility bill. But if you spend $200 a month and the rates never go up again, you're what you and I both know that will over the next 20 years, that's $48,000. Now you and I never nobody thinks about their power bill like that, because the bill shows up and you're going to pay it because you're not going to sit in the thought, right? But if solar cost you half of that $48,000 in that same period of time, and then you didn't have to buy any more power from the electric company after that. Well, that would just make sense, right? That's really the really thing that drives home I think that resonates with most homeowners, and especially your agents is it's the mortgage for your power bill, you know, we get 30 year mortgages, even with the expectation of leaving in five to 10 years, really, at the end of the day, if you're picking the right equipment, we use all North American made products here, everything that we have covers a 25 year warranty, we also have an extended 30 year warranty insurance program they can buy, that's a one time fee of $800. Now on something that's 40 to $50,000. That's not too bad to pay for that. And what that does is is it's really going to produce power for kind of the the life of the mortgage, it's going to produce power, typically in the same kind of range of time. And like he was saying a $200 a month bill over the course of 20 years, even if the power never went up on its rate would be $48,000. A system to replace that with a net system cost is typically about 22 to $24,000, depending on the placement of it. And that's where the feasibility really comes in. At the end of the day, the entire game was solar is about the flow of money, instead of money flowing out of your pocket into a fortune 500 Company, which is your power company, instead of money flowing out of your pocket to the IRS. It's the opportunity to allow you to take that tax money that would otherwise what's the IRS put that back into your house, instead of taking that money, it's flowing through the power company every single month and fluctuating and continuing to go up and put that back into your house the same way that a mortgage does comparative to rent. So we're running a little short on time here, I have another question to ask, before we finish. Keep saying that this is similar to a mortgage. This is an issue I keep seeing as a closing attorney, the seller is leasing the panel's and now he's decided to sell the house, they now have a mortgage payment and a lease to pay off if the buyer is not going to be willing to assume the lease. So the seller is essentially upside down in their house and they don't have enough money to move. So they're stuck. The biggest purpose for that is you know, with a lease, that homeowner doesn't own that system. Right. That's property of the solar company. So that's why it makes it much more difficult. As far as the transition, you know, changing homeownership between a seller and a buyer. That's why we specifically really drive home the benefits of the ownership program, because those warranties, and that transfer is is a much easier streamlined process because it's owned by that home owner rather than by the the solar company. And I think I think what has to be understood for agents trying to find a way to mitigate this is that kind of the same breakdown that we said that, hey, if you have a $20 power bill, for the next 20 years, you know that's $40,000 with these lease programs are typically warrantied and insured and taken care of completely for 20 years. And what you're able to do is take that 40 to $50 savings, and extrapolate that and really show that value to the homeowner the easiest process for someone who would be upside down in that is finding a buyer who would assume that least because in most circumstances If you only a year or two years out, it is still drastically cheaper than their power bill. And so if you're just saying, Hey, here's an additional $140. Bill, I know you guys weren't expecting this. But here's an additional $40 bill, I think in combination to help that transition be a little bit smoother, the homeowner should pull up their power bills, pre solar, and also currently with solar, because I think that if you see a homeowner who's coming from a house with a $200 power bill, and you say, yeah, we have this $104 payment for a lease, most homeowners are going Whoa, 140 bucks, I don't, I can't afford an extra $140. But if you pull up the power bill, and shown that it's only a 1020, or $30 power bill, then you add the two together, and it starts to make a lot more sense. And that's the number one thing that I think that we deal with in solar so much solar is not super simple. Solar is it has many different layers and components. And it's not a good fit for everyone. But the important thing is, is that solar is not going anywhere, solar is happening more and more commercial and residential as we speak every single day, especially with the new administration, there's a lot of incentive and government regulation that's coming down the pipeline. And it's just another one of those things that agents have to make themselves familiar with, to get a better understanding for it, not only for now, but for the future is going to continue to become more and more prevalent. Just as you see this year alone, the major utilities have already sent out letters and memos saying that they're playing the ratio rate, you know, they went up 10% in most of the major utility service territories last year, and they're already seeking another eight 8% rate increase in 2021. So you know, in the national average of 4%, here in South Carolina, you can expect those rate increases to be close to double. And other than solar, and some of the other renewable energy sources out there, you don't have an alternative to power your home. So really, our biggest thing is, is allow us to come through run the numbers, see if it makes sense and see if there's a more cost effective way to help us help you power. And I think I think you know, since the focus of this be in for your agents, agents just really should familiarize themselves as much as possible, we really lean on education, we're scrc.org, we actually have a bunch of explainer videos on there a bunch of tax forms that are very simple reads and kind of explain how everything breaks down. And what that is going to allow homeowners to do is when you have these homes that have either leases or purchase solar systems on them, it's going to make them a better fit to sell that house, right? This is how they can kind of step themselves out. And when they have these houses that other agents feel are nightmarish. But that agent that takes the takes the time and to educate themselves a little bit better understand these programs, is going to really put them out ahead of a lot of other agents, when it comes to the marketplace, especially as solar becomes more and more prevalent. Because you're going to want to find an agent, as a seller who can sell your house for top dollar by explaining the value of solar. And that's something that we really are happy to do, we have an entire training for real estate agents of how it makes sense, when solar makes sense, where the value is how to explain it to a potential buyer, and how to mitigate kind of some of those pitfalls that you have dealing with the least companies and stuff like that. There's there's plenty of systems out there that that people overpaid for there's plenty of circumstances, people were promised tax credits that they weren't eligible for. And those are going to be something we're going to have to navigate here. But as the market matures, as it grows older, as the buyers of solar become more educated, companies like ours are really stepping out and having a lot bigger foothold. And as this market matures a little bit, it's going to be kind of more of a commonplace. And it's important that agents know what was a good deal and what was not a good deal so that they don't either bring their buyers into it, or they don't pick up a house that has this huge liability that they're in turn trying to sell. It's really just that day, it's another another thing on the books, continued education, we have to continue, you know, to grow and shift as the world grows and shifts. And I think that it's a it's a great opportunity for those who are interested in it, to find out more and become kind of a specialty agent in that sense, and be able to allow themselves to stand and stand out in the market. Alright, so it seems to me, what we're saying is that you have to find a good company to work with because not everyone is a good fit. And perhaps you might not be able to produce enough power or you might not qualify for all the tax credits, or you if you're moving a lease probably not a good idea for you if we're going to move in the next 12 or 14 months. So you really need to work with somebody who's going to be honest with you and really share what their rate of return is going to be on these because like you said, Not everyone's a good fit. But I think main point I'm getting from this is that real estate agents and sellers truly need to understand how to sell it. And it seems to be that the most compelling component of it is that they won't have a power bill. Yes, they'll have a lease payment, but there won't be a power bill and that should all set that. So I think that's something that they need to learn how to how to sell essentially so Someone has a question, how would they get in touch with you guys? s crec.org. A stands for South Carolina Renewable Energy Commission. We lead with education. We have tons of real estate presentations that we can send over to people to better make them fit. We also are happy to extend some of our representatives in a circumstance that you are trying to show this to a new buyer and may not be so familiar with it. Our team here is very experienced, and we're just happy to help. There's a great opportunity to put money back in South Carolinians pocket. And we're happy to help. So SCR ec.org I'm happy to talk to any agent happy to help facilitate with any buyers to explain the value to really break down what they're looking at. There's not a lot of resources out there that aren't just trying to sell you. What we try to lead with is education. And we're just trying to make sure that people get the right information so they know what they're really getting into. Alright guys, thanks for being with us. Thank you so much. You guys have a good day this year. But now to Gary's good news only and housing wire this week reported was just more than a week away from our one year anniversary of the cares act, new forbearance request had dropped to their lowest level since March of 2020. In fact, they're down 5.05% of the service portfolios volume which is a new low that's great. realtor magazine, the pandemic is renewing interest in living on golf courses. 26% increase in golf course property search globally over the past year compared to 2019. And that's certainly good news. Since we have tons of golf courses here in Colombia, Wall Street Journal is reporting that US economic recovery is picking up steam as Americans are spending more on in person services. So that's good to see the economy is roaring back and red fan is also reporting that the sale to list price ratio shot up to 100.1% nationwide, marking the first time on record of the typical home has sold above its list price. Average median price now is 328,000, which is an all time high, which is also 17% higher year over year from last year. Now in COVID de HEC has reduced a lot of their rules for in person visitation of nursing facilities. I know that makes a lot of you happy who have family members and nursing facilities. Probably the biggest crime in this whole pandemic. Next a lot down is having people die alone in nursing. So very happy to see that that is over. Now some people are questioning whether these states should be lifting all of these restrictions. I will lifted their state restrictions six weeks ago and in that six week time period cases are down 43% hospitalizations are also down 54%. So that's good news to see cases and hospitalizations down in the states for lifting these restrictions. Yesterday, one of the largest global protests in history took place more than 40 countries had gatherings to demand freedom to be restored, their rights protected and destructive, like lock downs listed are lifted. We have not seen anything about that in the mainstream media. But these protests were as far wide as London, Paris and New York City. And finally to a poll that somewhat interesting. And when I say interesting, it's interesting because it demonstrates how much misinformation is out in the marketplace. The poll asked what is the chances somebody with COVID might be hospitalized? Well, the correct answer is one to 5%. You want to have a one to 5% of being hospitalized if you have COVID. So it's not as great as most people think this poll actually broke it down by political party, it doesn't really matter to me, because it does really show that but regardless what party you're in, most people have a huge misconception of whether you will be hospitalized because COVID. But let's break this down. If you're a Democrat, you believe there's a 20% or greater chance of being hospitalized, that would be 69% of you. Very publican, it's 51%. If you're an independent, it's not it's 60%. If you're a Democrat, you believe there's a 50% chance you're going to be hospitalized, which is 41% of you believe that if you're a republican 28% of you believe you have a 50% chance of being hospitalized if you're independent, it's 35% of you believe there's a 50% chance of being hospitalized. How overstated is this, the correct answer is one to 5%. But almost regardless of what party you're in is between 28 and 41% of you believe there's a 50% chance you're going to be hospitalized if you catch COVID complete misinformation in the marketplace. But that's scary is good news only for you. And that's the show for today. I'd like to thank Ian Miller and Evan stone from SCR ec.org for joining us today and I hope everybody gets some good information. That's really the purpose of our show is trying to get good information out to the real estate agents in South Carolina. So if you feel like we're doing a good job of that if you please like us, subscribe to us and share us I really need y'all to help subscribe and share us with other real estate agents in the industry who may not know about our podcasts. We are growing. We already had 6600 downloads and just a few months so we really appreciate y'all for tuning in. hope everybody has a wonderful weekend and we look forward to seeing you next week.