First…in the fine print in your financing contract, any buyer can only assume your payments if the lender approves. When contacted, the lender says they almost always approve a new buyer, but it states very clearly in the contract that the buyer must be approved by the lender. What happens if the lender does not give approval? Hint: you pay it off, not the new buyer.
Secondly…and more importantly…what homeowners are not thinking of at the time of the installation is this…No buyer wants to assume your debt for an item they feel they have already paid for in the sales price of the home.
Think about it. The buyer has just purchased your home that is listed with a new central air conditioning system, and then they are told in reality, they have to take over your debt to pay off the new AC system? No buyers we have seen will agree to that. The buyer is not assuming the debt you have on your existing home loan(s), so why should they assume your debt on your air conditioning system, or solar system? It doesn’t matter what the AC salesman said…the AC salesman is not the one buying your home! That is like selling your car, but asking the buyer to pay you for the car, and then also pay off your car loan too!
Thirdly, and equally as bad…Once the buyer has said they will not assume your debt, and you are faced with the real world consequence that you are responsible for the payment of said debt, did you see the part in the contract that allows the lender to not only charge you a prepayment penalty if you pay the loan off early, but charge you a processing fee as well?
Oh, you missed that part?
On a recent escrow we just closed, not only did the seller have to pay off his debt for a new solar system, but they were charged a 5% prepayment penalty (5% if paid off in year one, 4% if year two, 3% year three, etc.), but the lender also charged them a $500 processing fee. In this case, the total payoff cost to the seller was over %50,000!!
Not to be outdone, we have another escrow that involves a new air conditioning system, and while the total amount of the payoff is less, the process is the same…prepayment penalty and a processing fee of $500.
The bottom line here is that you need to be careful about the debt you take on as a homeowner when doing any upgrades to your home. Financing these upgrades can be a very good thing, as long as you don’t get caught in a vice down the road. Just as a real estate professional should not be advising you about air conditioning or solar systems, neither should these professionals give you advice about real estate.
Remember…the buyer of your home will almost always want to purchase your home free of any debt you may have aquired while you owned the home. If you keep that in mind, you will be OK.
Good luck, and don’t get caught with a loan payoff simply because some salesman said said a new buyer would assume it. Just because the buyer can, doesn’t mean the buyer will.
