David Collins11-minute read
PUBLISHED: March 31, 2023
Americans more and more are incorporating energy-efficient, eco-friendly products into their homes. Interestingly, the product they most want to add is a solar panel system, which is also the most complex and expensive. A recent survey by Rocket HomesSM found that solar panels are the most desired eco-friendly home upgrade in 2023.
But what should be considered if you are buying a house with solar panels already installed? In this case, the seller has already borne the expense of installing the system. They will want to recoup their investment when they sell the house. In many cases, however, the owner has financed the solar system through a third-party lender. They may even be leasing the system. Each of these arrangements will give you, the buyer, things to consider before buying the house.
A grid-tied solar panel system can supply power directly to the home but also store power on the electricity grid, the same system that supplies power to other homes. An off-grid solar system stores extra power on a battery that can be used when the panels are not supplying enough power, such as at night or on a cloudy day.
Grid-tied solar homes are connected to the power grid, and the local utility company manages their power. Grid-tied solar systems allow the home to receive grid power when the solar panels don’t receive sunlight.
Off-grid homes are not connected to any external power grid. They are completely dependent on their home solar system for electric power.
When considering the purchase of a home with an installed solar panel system, buyers should not assume that the seller owns the system outright. While they may have paid cash for it, or paid off a loan that financed it, the system may very well not be paid for. Here are some scenarios to prepare for.
A home for sale that includes a solar panel system should prompt serious consideration before an offer to buy is made. Certainly, a solar system can add value to a house – after all, it can (potentially) deliver significantly lower monthly electric bills. But if the system is not entirely paid off, buyers should fully understand the situation so they can have an accurate idea of what the house is really worth.
Sometimes a house for sale comes with a solar panel system that has been outright purchased with cash. Here are some things to consider:
Because home solar systems can easily cost $20,000 to install, many people take out a solar loan to pay for it. This may mean that the seller has not completely paid for the system when the house goes up for sale.
There is another type of solar system financing that is attached to the property, and the responsibility for paying does pass on to the new owner after a sale. Property Assessed Clean Energy Financing (PACE) is a type of financing administered by state and local government agencies specifically for energy efficiency upgrades and renewable energy improvements for commercial and residential properties.
There are many solar system companies that will lease their solar panels and equipment for a monthly payment. Points to consider including:
In a Solar Power Purchase Agreement (PPA) a solar company owns, installs and maintains a solar system on the homeowner’s property and charges the customer for electricity at an agreed-upon per-kilowatt-hour rate, usually one that is competitive with local utility rates. In many PPAs this rate escalates as the term moves forward.
Grid-tied residential customers who use solar power to generate their own electricity can use net metering if it’s available in their area.
Having a home solar system installed is a complicated and expensive process in which many key calculations and decisions need to be made. A person buying this house inherits the system without having any say in how it is set up. Before going ahead with the sale, here are a few things the buyer should make themselves aware of.
How much of the home’s electricity is actually generated by solar power is dependent on how powerful it is. The system may only cover a percentage of energy needed, with the rest coming from the local power company, which of course issues a bill that must be paid for.
The seller should also provide the name and contact information of the company that installed the system. Points to consider include:
Not all solar panels are created equally. The seller should provide documentation that provides the manufacturer name and the product model number, the date it was built and all relevant warranty information. Information on the panels’ wattage, construction and quality should be easy to research.
Most solar panels come with warranties covering both performance and longevity. A typical warranty will guarantee a certain amount of production from install date (say, 90% production at 10 years and 80% at 20 years, etc.). The age of the panels is relevant both in terms of advances in technology (which would favor a newer panel) and warranty coverage. Equipment warranties for solar panels typically guarantee 10 to 12 years without failing.
The type of inverter on the system is also relevant. The solar panel converts sunlight into DC power, but the inverter turns DC power into AC power, which is what everything in the home runs on. The inverter should be from a reputable manufacturer and should be matched to the size and type of solar panel array constructed on the home.
The seller should be able to provide warranties covering all the major components of the solar system. It’s easy to get deep into the weeds on warranties for solar equipment, but all of these considerations should be made:
Lower electric bills and a smaller environmental footprint are two good reasons that motivate people to buy a house with solar panels. If the seller owns the system outright and is able to show that it is in good working order with all major components under warranty, even better. If the seller is under financing to pay for the system, or if they are merely leasing it from a solar company, negotiating a fair price for the home can be more difficult.
The U.S. Department of Energy estimates that a house with solar panels shows an increased market value of $15,000. The seller should consider that when setting a sale price. However, the chances of realizing this extra value increases if the solar system is shown to be in good working order, with all warrantees applicable.
The payback period on a solar system is defined as the amount of time it takes for savings on electricity to add up to the investment in the system. This answer is different for every house and in every state. Varying factors include cost of the system, state and local tax incentives, how much sunlight reaches the panels, cost of electricity in that locale, and more. Most estimates place the payback period between 8 and 12 years.
The presence of an expensive, complex solar panel system on a house is of interest to any lender because it effects the value of the property. Just as a buyer of such a house should want to know everything about the system, it’s warrantee situation and how it has been financed, so will a mortgage company. If the system is under a lease contract, this can complicate the mortgage approval because it introduces a third-party solar leasing company into the situation.
Buying a home with solar panels can be an excellent investment. The reduction in electricity bills can save the homeowner more than a hundred dollars a month in some cases. But it asks the buyer to do thorough research into how the solar panel system was constructed and paid for. The seller will likely have baked the cost of their investment into the sale price. If the solar panels are owned by a third-party leasing company, the buyer must understand that contract and be comfortable with continuing the lease. There is also the option of asking the company to remove the panels and return the house to 100% electric grid power.
Ready to find a home that saves money on utility bills and reduces emissions? Connect with a Rocket HomesSM Verified Partner Agent who can help you find the right home.
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Home listings with solar spend 13.3% less time on the market and are 24.7% more likely to sell over ask.
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