Is It Harder To Sell A House With Solar Panels What You Should Know
- On 12/02/2021
Solar panels are one of those home commitments that can really benefit a homeowner and the environment but require some serious long-term planning.
For one thing, the return on investment period for solar panels in many parts of the country is somewhere around 8 years, which may be longer than many families plan to stay in a given home.
When you commit to buying or leasing solar panels, recognize that youll be creating an obligation that will pass to your buyers. In certain markets, you may find that having those solar panels actually boosts your homes value, making your own investment even better, but you have to find the specific buyers who see them as a boon and not a burden.
Heres what to consider, whether youre shopping for panels now or trying to sell your home with the current panels on it.
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Do Solar Panels Increase Home Value
Buying solar panels generally helps increase the value of a home. Alongside potential savings on energy bills, additional value comes from the convenience of purchasing a home with solar panels already installed.
Leased solar panels are a different story. Fannie Mae does not include leased solar panels in a home’s valuation and the Federal Housing Administration doesn’t offer much guidance on how to determine their value.
When it comes to fully paid off solar panels, the National Renewable Energy Laboratory found that each additional $1 in energy bill savings from solar panels adds $20 to a homeâs total value. For example, in a sunny state like California, a small system has the potential to increase the average value of a medium-sized home by over $18,000.
Bonus: Buying With Solar
If you want to buy a house that requires assumption of a lease or loan, keep a few things in mind. In addition to qualifying with the solar company or bank that handles the solar payment, your lender will also need to approve that additional payment.
Depending on the loan, you may need to earn at least twice the payment amount, to maintain an acceptable debt-to-income ratio. For example, if the solar payment is $200 per month, the lender may require an additional $400 per month in income to approve that additional payment.
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Tip #: Know Your Timelines
As with any part of the real estate transaction, it is really important to know and understand your timelines. If you are working with a REALTOR®, they will be watching all of the timelines closely for you. Its kind of our thing!
With respect to the solar system, there are a few dates you need to watch out for:
Your REALTOR® will be able to walk you through the ramifications of what will happen in the event that any of these timelines are not adhered to, on a case by case basis. That being said, as the Seller, your biggest obligation is to deliver documentation related to the system and make the home available for inspections. If you have all of the documents ready to go before you even list the house, it will be a breeze!
Factors That Influence The Value Add Of Solar Panels
While these simple calculations can give you a ballpark, there are a number of factors that influence the value add of solar panels. Some of the most prominent include:
- Geographic location: Different communities experience different electrical costs . Additionally, geography can influence the amount of sun exposure you get, as well as the social benefits of installing solar power.
- Local solar installation prices: Another geographic factor is the cost of getting a new system in your area. If a buyer would save money by purchasing a home with a system already installed, it will make your home that much more valuable.
- System output: As you can see from the chart above, a larger system with more energy generation will provide more added value.
- System age: If you have an older solar system, youll need to account for depreciation. Older systems wont add that much value to your home when you sell it, as theres a higher chance the buyer will need to do repairs or replace parts sooner.
- System replacement value: Along the same lines as system age, how expensive or difficult parts of your system would be to replace affects the added value of the system overall.
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Selling Your Home With A Solar Ppa
A Power Purchase Agreement, also known as a PPA, is similar to a solar lease in that the solar installer owns the panels while the homeowner enjoys the benefits of solar electricity. Selling your home with a solar PPA works the same way as selling your home with a solar lease: You have to sell the house and transfer the solar PPA to the buyer. The seller, the buyer, the real estate agent, and the solar company should conduct negotiations about the solar panel PPA separate from the house itself.
Will Solar Panels Affect Your Mortgage Opportunities
Again, this really depends on the sellerâs situation and how they obtained the solar panels. If the seller purchased the solar panels with a loan, they are the ones who need to pay off that loan. They may want to account for these costs when they sell their home, as the buyer should receive full ownership of the solar panels at closing.
If the seller leased the solar panels, the buyer may need to take on that lease as well. The buyer needs to be aware of how this lease may impact their debt ratio. Your debt ratio affects your lending opportunities, rates, and terms.
Before you buy a home with leased solar panels, ask the homeowner the following questions:
- Who manufactured the solar panels?
- What warranties are available?
- How long are the parts and equipment covered by warranties?
- Who installed the system?
- Did they provide workmanship warranties?
- What is the size of the solar energy system and how much electricity can they offset?
- How much have past energy bills cost?
Itâs important to get the solar agreement the original owner of the home signed and provide it to your mortgage lender . The mortgage lender will want to confirm that the agreement includes a transferable warranty that wonât require you to be on the hook for expensive future repairs that will make it difficult to pay your mortgage.
Read Also: Where Can I Buy Solar Panels To Install Myself
Buying A House With Pace
PACE financing refers to a means of funding energy efficiency upgrades through residential, commercial and industrial property renewable energy installations.
PACE financing is attached to the property, not the person who took out the loan, since the homeowner makes payments through property taxes. Therefore, the solar equipment payments become your responsibility when you purchase a home that has PACE financing. If youre thinking about taking on PACE financing payments with the purchase of a new home, review the financing terms before you make a purchase.
Worried about affording your panels?
If you find that a solar panel system wont work for your finances, there are alternatives for you. For instance, you could buy into a community solar project. If you invest in a project controlled by the utility company, you could get your electricity at lower rates without having to deal with the financing problems.
Dont Assume That Solar Panels Automatically Add To Your Resale Value
Solar panels can make a home more attractive to a particular set of buyers and help get an offer sooner and perhaps at a higher percentage of the list price, says Dan Hamilton, a top-selling agent in Palm Desert, California. But typically the solar systems dont add a material amount of monetary value to the home.
The takeaway is when you sell a house with solar panels, make sure you price it right. The jurys still out whether solar energy adds to your homes value so dont assume you can offset the cost of the entire panels in your list price. Instead, focus on how they can boost your homes marketability and streamlining the process of transferring your system to buyers.
What my experience is, for a lot of our buyers, especially ones that are going to make this more than just a winter residence and a full-time residence here, is that having the solar can provide some predictability with energy costs, Hamilton said.
Thats in sunny California, where Hamilton says: Solar is a big deal. In locations with long winters and rainy seasons, homeowners have to be extra careful to do their homework on the long-term savings of solar and package it to buyers in a clear way.
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Solar Panels And The Environment
Solar panels produce clean energy that doesnt cause harmful greenhouse gas emissions. Because solar panels do not rely on fossil fuels, they help reduce air pollution. Water isnt necessary for solar energy systems to operate either. So the production of solar energy doesnt deplete the earths water supply, nor cause water pollution.
Cleaner air and water contribute positively to public health. In the long run, a cleaner environment can reduce the nations healthcare costs and create jobs in the renewable energy industry. These are strong selling points for many buyers today. Consider highlighting environmental, health, and economic benefits when showing your home.
Pros And Cons Of Solar Panels
When selling your house, there are some aspects which are likely to appeal to potential buyers:
- Improved EPC rating solar panels will generally have a positive impact on the EPC rating of your property. A good EPC can make your home more saleable.
- Low electricity bills buyers will appreciate the prospect of cheap or free electricity.
- Less environmental impact a lower carbon footprint can be a plus point for buyers
In addition, if you were receiving FIT payments these will usually be transferred to the new owner of the property.
However, buyers may have concerns about the impact of the panels on the roof structure. In particular, they may want to know what happens if the roof requires repairs. They may also find it difficult to obtain a mortgage on a house with solar panels, particularly if the panels are leased rather than fully owned .
Read Also: How To Set Up A Sole Proprietorship In Illinois
How To Buy Or Sell A Home With Solar Panels
As we all know, fossil fuels have been powering our world for eons.
All the way back to when exactly?
What is the 1800s, Alex?
Back when coal was first used to heat homes.
Since then, coal, oil, and gas have powered our society, but its also contributed to harmful greenhouse gases.
In turn, homeowners have been looking for a better way . . . for the environment and their pocketbooks.
Drumroll, please.
We bring you solar energy.
Its increased in demand within the last 10 years, with 46% of homeowners looking to go solar.
And homeowners know the gifts that solar brings.
A solar energy system increases the value of your home and helps you save on long-term energy costs.
As technology advances, more efficient and inexpensive solar options are emerging, making solar even more inexpensive and attractive.
Some, however, may hesitate to install a solar system due to concerns about the challenges in buying or selling a home with solar panels.
Heres what you need to know about buying or selling, worry-free!
Prepare For Liens If Solar Panels Arent Outright Owned
If youre not paying for your solar panels outright with cash, the manufacturer may have placed a lien on the property to ensure that you continue paying for them.
Solar loans, leases, or PPAs are usually submitted as a UCC filing. If a UCC has been filed, it must be cleared by the title company to ensure the mortgages first lien status. A UCC termination is required unless the title company confirms that the UCC is for fixtures only and can remain on the title. If not, a UCC termination or subordination is required.
Any lien that has been filed in connection with the panels must be subordinated to the mortgage at closing or it must be removed of record and can be re-filed after closing. While some manufacturers will temporarily remove the lien in the case of a sale, if you are still paying off the balance of the solar panels, there could be a lien on the home until the system is fully paid off.
Read Also: How To Make Your House Solar Powered
Sell Your Home Through A Home Auctioneer
As an alternative to using an estate agent, you could use a property auction to sell your house or flat with solar panels. These work the same way as auctions for personal items such as furniture people gather on a specific date and are shown items for sale, and then they decide whether to bid on them, starting with the opening bid price. The goal of any auction is to have many people trying to outbid each other on the same item, which pushes the final price higher. And a winning bid is a legally binding agreement to buy your home that you can sue to enforce.
However, there are no promises that this will happen at a property auction, and therefore you are waging a gamble when you try to sell your home this way. You might have a very popular house even with solar panels, and the final sale price could be much more than you thought was possible. Or you could just get the opening bid price, which is typically set a lower level than youd prefer in order to attract interest from as many potential buyers as possible. And its even possible that your home doesnt get any bids, in which case it doesnt sell.
Auctioneers have experience with selling various types of properties, but you should ask around several different auction houses to see if they have sold homes with solar panels. If not, they could also find it difficult to generate enough interest in your property in order to sell it.
Selling A House With Leased Solar Panels Follow This Game Plan
At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.
A solar lease gave you the opportunity to run on sun without having to pay the $11,000-$14,000 that it costs to install panels in one fell swoop. Youve saved energy, lowered your low utility bills, and felt the undeniable pleasure of sharing these perks when the topic of solar came up with anyone who would listen.
Now, youre ready to sell your house and suddenly your leased solar panels are looking more like a speed bump than a green light. You wonder, just how much will my solar lease impact my home sale?
Here well cover your options and how to communicate the benefits of solar power to prospective buyers. For added expertise, our guide features advice from top real estate agent Elmer Morales who has 18 years of experience selling homes with solar panels in Ontario, CA, the state leading the way in solar energy
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They Need Very Little Maintenance
Whatever the weather or time of year, your solar panels will produce electricity which you can use to power your life.
All youll need to do is make sure nearby trees dont start covering them, and get a list of maintenance checks from the installer.
Youll only have to carry out these tasks every so often, to check that the machinery is working, and to see whether you need to replace the inverter.
You can even clean them yourself and once per year should be enough.
Can I Buy A House With Solar And Remove The Panels
If youre considering buying a home but do not wish to keep the solar panels, you have a couple options. First, you may ask the home seller to remove the panels. Of course, the home seller may or may not choose to do this. Your other option is to speak with the solar company that installed the panels and see how much it would cost to move or relocate the panels.
One important thing to remember here is that purchasing a solar home allows you to start enjoying the benefits of solar, without you having to navigate the installation process. So, if you really wish to remove the solar panels from a home you are purchasing, be sure you understand the full benefits of solar first.
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Keep Records Of Your Utility Bills
One of the most popular reasons people choose solar power for their homes is the energy savings. Prospective buyers may or may not have an awareness of how much they could save on their utilities.
Include your past utility bills in your solar system information binder.
This is proof for your buyer of their potential savings and could be another motivating factor in converting a showing to a solid purchase offer. Include details about how much youve already saved. Show your projected savings too!
Find out the average cost for electricity in your area. Calculate what youre paying per watt. Show the comparison on a spreadsheet and include it in your binder.
Does your system produce the majority of the electricity you need? Does it produce ALL of your electricity?
If you show your buyer proof that you pay nothing or very little for electricity thats a great incentive.
