Solar panels: They might brighten the prospects of a home search or dim them. It all depends on the specifics.
Though solar energy has grown in popularity in recent years, homes with solar panels are, nationally, still somewhat rare. Only around 4% of homes in the US had solar panel systems as of 2020, according to data from the Energy Information Administration. They are much more common in certain areas, such as the Southwest, where solar panels dot millions of rooftops in cities like Las Vegas, Phoenix, San Diego and Los Angeles.
But still, by and large, homes on the market aren’t likely to have solar panels. “We don’t have a lot of them,” said Sarah Knight, a real estate broker in Spokane, Washington. “They’re not super common — maybe one house out of 30 would have them.”
That holds true even in the Southwest, an area rich with residential solar systems. “You wouldn’t expect to see most houses have solar panels,” said Skip Adams, a qualifying broker in Albuquerque, New Mexico.
Adams said while Albuquerque sees more than 300 days of sunshine per year, making it a fairly ideal place to install a solar system, many people are turned off because of the costs. Adams said he’s had deals fall through due to solar panels — sellers hoped they would add value, but in many cases, they’re not completely paid for and buyers are asked to assume the costs of paying them off.
Buying or selling a home with solar panels may be more difficult than many people realize. However, if you find yourself interested in buying or selling a home with a solar system, there are some things you should know.
What if the house you want to buy has solar panels?
A home with an existing solar system may become a point of contention for buyers, Adams said. Solar systems are expensive, and sellers may not have fully paid off the system. So, a buyer could be on the hook for paying the remaining balance on the system, assuming it was financed or paid for with a loan or similar agreement.
That’s because the owners may have installed a system thinking that they would live in the home until it was paid off in full — unless they paid for it in cash or don’t have a financing agreement.
“Some people think that if they’re buying their forever home, the cost of a system might pencil out in the end,” he said. “But what we’ve seen is more damage than positives for sellers — a lot of times, homeowners will sign up for buying solar panels, not realizing or planning ahead, and then they go to sell their house and they have [an effective] lien on it.”
In other words, sellers are not only trying to find a buyer for their home, but find a buyer who is willing to assume the payments on a solar system. “Buyers don’t like it,” he said, and “it’s caused a handful of deals to crater.”
This can be mitigated, of course, if sellers have already paid in full for their solar system. That is, they don’t owe any money or have otherwise satisfied their financing agreement with a solar company. In that case, the system may actually add value. Some research has shown that solar panels can add a 4% premium to a home’s price.
At the end of the day, a solar system will likely make a home more expensive for a buyer either because they need to pay off the system or pay the premium associated with a paid-in-full system.
“It does cost,” said Knight, “and not everybody has that type of money.”
How to buy a house with solar panels
For those who do want to purchase a home with a solar system, the process may get muddled depending on one key factor: Whether the seller owns the solar panels outright or if they have a lease or power purchase agreement with a third-party.
If the seller owns the panels
The best case scenario for buyers is that the seller owns their solar panel system outright. That is, it’s paid for in full, and there are no outstanding financing agreements or loans to deal with. If there is a solar loan or financing agreement that the buyer will need to assume, the buyer should ask a lot of questions about the details — make sure you know exactly what you’re signing up for — and get a sense of what the payments look like.
There are a lot of details and situation-specific issues that could arise. You need to understand exactly what is going on — who owns the panels, how much is owed on the panels, whether there are any leases or other loans floating around, etc. Buyers can always ask that sellers pay off any outstanding loans as a condition of sale, Adams said.
If the seller has a lease or power purchase agreement
If a home has leased solar panels or has a power purchase agreement, things could be more complicated. In this case, a third party would own the panels, and a prospective buyer would need to look at the lease agreement to see if it’s something they’d want to assume. If not, the panels might need to be removed before the transaction could close.
Again, in cases such as this, the panels create a headache and could complicate a deal. While a lease or power purchase agreement may have options for buyouts or something similar, there could be resulting damage from the panels to a home’s roof — another issue that could need to be resolved before closing.
In all, there’s a lot to consider, and buyers will want to do as much research as they can.
How to find a house to buy with solar panels
For buyers who aren’t scared away by all of the potential hiccups, finding a house with an existing solar system isn’t terribly difficult. Knight said agents and brokers have a way of finding listings for potential buyers through multiple listing services (MLS), but given that most homes don’t have solar panels, options may be few and far between.
So, for buyers, the specific geographic search area will probably play the biggest role in finding a home with solar panels.
Perhaps the best thing buyers can do is look for a home that has a solar system that is paid for in full and doesn’t have any financial strings attached, be it a lease, power purchase agreement or outstanding solar loan. That way, you’re purchasing a home that can generate electricity and lower your energy costs without assuming any monthly payments or leases.
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