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Posted On: May 12, 2020

Solar Homes: Buying a Home with an Existing Solar System

Solar Homes

If you’re looking to sell your solar home or purchase a home with an existing solar system, you probably have a lot of questions. Once considered futuristic and expensive, solar systems have become affordable and much more common. As a result, today’s homebuyers are likely to encounter solar homes when searching for a new home.

What can buyers expect from a home that has a system already installed? Will the upkeep and taxes be different? What questions should they ask? What about the sellers? If you’re selling a home that has solar power, should you expect to profit more? Do solar homes sell faster?

In this home buying guide, I will address what to expect and what to ask when purchasing a home that has a pre-existing solar system installed. Here are some questions you might want to ask and things you’ll need to know:

Are the solar panels paid for? Does it matter?

Although the home may have an existing solar system installed, don’t assume the homeowner owns the panels. Homeowners can finance solar panels in a variety of ways. Sometimes the system is paid for with cash or a loan, but other times solar systems are leased or financed using PACE (Property Assessed Clean Energy) Loans.

If the homeowner doesn’t own the system, buyers will need to ask a lot more questions. If the seller financed the panels through a loan, any remaining balance still belongs to the seller, not the buyer. However, if the homeowner acquired their system via lease, here are some things potential buyers may want to consider:

  • What is the length of the agreement?
  • What fees are likely to be due at signing?
  • What happens if repairs need to be made to the roof?
  • What if the home is sold again? Can the agreement be transferred?
  • Who is responsible for the cost of system maintenance or repairs?
  • What if the system generates less power than expected?
  • How much will lease payments increase over time?

If the home’s existing solar system was funded through a power purchase agreement (PPA), you should also ask the same questions above. Buyers will need to agree to the PPA. Otherwise, sellers must buy out the system or have it removed. The cost of removing panels could be significant and, in some cases, cause friction in the sale of the home.

What is a PACE Loan and What Does It Mean for Buyers?

Some homeowners use PACE financing to pay for their home’s solar system. This financing program is available in California, Florida, and Missouri. Unlike a Lease Agreement or a PPA, homeowners who use PACE to pay for their systems own their panels. Payments are made through increased property taxes. Annual assessments are made to determine the payment amount.

Here’s what to know before buying a home with this kind of solar system:

  • Terms of the PACE agreement
  • Annual costs associated with the assessments
  • The number of years left on the agreement
  • Status of the PACE agreement at the time of purchase

In addition to asking lots of questions about how the solar system was paid for, potential buyers will want to ask to see the sales contract, interconnection agreement with the local utility company, any applicable warranties, and previous annual electric bills.

Sellers can accelerate the process by having copies of these documents ready for buyers to review in advance.

Solar Homes

Home Buyers Should Ask for a Tour of the Home’s Solar System.

Once it’s been determined how the system was paid for and who is ultimately responsible for footing any solar bills going forward, potential buyers will need to learn how the home’s existing system operates.

Modern solar systems have web-based monitoring systems that collect electrical output data. Asking for a walkthrough of the system is a great way to learn about how efficient the solar home will be and what kind of performance to expect from the system over the years.

Examining the monitoring system should alert potential home buyers to any individual panel failure that could lead to costly repairs in the future. It’s also a good time to check for cracked glass on any of the panels or any electrical damage (known as “hot spots” in the industry).

Don’t forget to check underneath the panels for any wire damage. It might be strange to believe, but squirrels often chew on loose cables and insulation, damaging the panels.

Potential buyers may also wish to look for a home inspector with experience assessing solar homes to rule out any damage that might not be easily detected by a novice. Eager home sellers can expedite the selling process and increase offers by having the solar system inspected themselves and providing the information to potential buyers.

Can buying a home with an existing solar system prevent me from getting a mortgage?

Solar homes don’t usually present a problem for potential buyers who are trying to secure financing, but buyers should let their mortgage lender know about the leased system in advance just in case. However, there are some really important details for buyers and sellers to address.

Panels that are leased require that the lease be transferred to the buyer when the home is sold. Buyers should ask for a copy of the original contract and review it carefully before agreeing to purchase the home. Sellers can help by having the contracts ready for buyers to review before agreeing to an offer.

Both homebuyers and sellers need to understand what is required to transfer the lease before the sale of the home. For instance, it’s important to remember that the potential buyers will need to qualify with the solar panel company to assume the lease. (Don’t worry, it’s not usually a problem.)

Buyers and sellers should answer the following questions together before closing:

  • How much will the lease cost every month? The cost of monthly payments should be calculated into the cost of the home. Buyers will need to decide whether the cost of the home with the lease is affordable for them. Sellers may also wish to consider this added cost when initially pricing their solar home.
  • Will the payments escalate? Monthly solar lease rates can increase annually. Potential buyers need to know if the payments will change during the length of the lease.
  • How much time is left on the lease? Usually, solar leases last for 20 years. Sellers sometimes decide to pay off the lease using money from the sale of the home. It’s a gesture that buyers appreciate, but shouldn’t count on.

Do solar homes have higher property taxes?

Since adding a solar system to your home increases the value, it may also increase your property tax bill depending on where your home is located. Some states have property tax exemptions for solar homes (like California). It’s a great way to save money over time!

Other states have a property tax exemption for solar systems that lasts for a restricted amount of time, like ten years. After the exemption expires, homeowners may see an increase in the property assessment and subsequent taxes.

Before buying or selling your solar home, be sure that you know the property tax laws in your state as they apply to solar systems.

What should you do before putting your solar home on the market?

It’s important to remember that solar systems add value to your home and this added value can lead to a higher sales price. Solar homeowners should begin the selling process by finding a licensed real estate agent who is experienced in selling homes with existing solar systems. An experienced agent will be able to help buyers see the value in purchasing a home like yours as opposed to a home without solar panels already installed.

Having your solar system assessed before the listing is another great way to document the value of your home with existing solar. Having an appraisal can also help potential buyers to see the true worth of your home.

Finally, as mentioned above, home sellers need to have any documents ready in advance for the potential buyers to review before making an offer. For example, sharing past electricity bills is an excellent way to show potential buyers how much money they can expect to save with an existing solar system.

Over one million homeowners in the US have added solar panels to their homes. As the number of solar homes in our nation grows, Americans are learning more about clean renewable energy and choosing solar more and more. If your home has existing solar panels, you may need to take extra steps to ensure potential buyers truly grasp the value of solar.

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