In Florida, Texas and Arizona, most of the non-mortgage approval problems we run into now come from one place: UCC liens for solar panels. They've become common enough that they deserve their own conversation.

What a solar UCC lien means in a short sale

When a homeowner finances solar panels, the lender usually records a UCC filing against the equipment on the property. In a short sale, the mortgage lender is already taking a loss and generally isn't interested in paying off a separate solar loan. That leaves three options: the solar company releases or reduces its lien, someone else pays it, or the buyer takes over the solar financing.

In practice, the third option is usually the only one on the table.

Why most buyers walk away

Short sale buyers are already being asked for patience. Asking them to bring extra cash to closing and also take over solar financing is where most of them say no. Our estimate is that it rules out about four out of five buyers who would otherwise have chosen a short sale. And as you know, buyers willing to choose a short sale are already a much smaller pool than the buying public at large.

When "selling" the panels to the buyer doesn't work

Where possible, we always help make the case to buyers directly, using flyers that break down the projected cost savings. The problem, in many cases, is the math. With some of these systems, the predatory financing arrangements make the monthly payments so high, and the energy output so low, that the buyer’s total monthly utility cost ends up higher than if the panels had never been installed.

That means the buyer is being asked to take on an extra monthly expense they never wanted, often for years after closing. It’s a hard sell, and honestly, a fair objection that nobody could reasonably overcome with some of the systems and financing arrangements in existence today.

HOA arrears make it even worse

Past-due HOA balances above $10,000 are often more common than balances below it in some markets, particularly in more HOA-friendly states like Colorado, Florida, and Nevada. In our experience, condo associations also tend to have less flexibility than single-family HOAs to waive excessive fees and attorneys’ costs, but that can vary a lot.

Put a large HOA balance together with out-of-pocket solar costs and ongoing solar payments, and the deal starts at a serious disadvantage. We still try, but it’s important to know what you’re walking into.

How to improve your odds

• Find the lien before you list. An early title search will show UCC filings, HOA liens and anything else that could derail the sale.
• Contact the solar company early. Get the payoff, the assumption requirements and whether they'll consider a release or reduction. Some will negotiate when the alternative is repossessing used panels.
• Run honest numbers for buyers. Show the real monthly payment against the real energy savings. Buyers trust a straight answer more than a sales pitch.
• Disclose it up front. Mentioning the solar lien and HOA balance in agent remarks saves everyone from a buyer who walks after weeks of waiting.
• Know when to pass. Some files can't close at any realistic price. We cover how we screen those in Which Short Sales Actually Close? (coming next week).

Frequently asked questions

Can you do a short sale on a house with solar panels?

Yes. Leased or fully paid panels are usually manageable. Financed panels with a UCC lien are the hard ones, because the lien has to be released, paid or assumed.

Will the mortgage lender pay off a solar lien in a short sale?

Rarely. Mortgage investors generally won't use sale proceeds to pay off unsecured or equipment-based debt like a solar loan.

Does the buyer have to take over the solar loan?

Often, yes, if the solar company won't release the lien. That requirement is the main reason solar short sales lose buyers.

If you have a short sale listing with solar or HOA issues, talk to our team before you list. We'll tell you honestly what we think it will take to close.