Selling a Home With Solar Panels
Last Updated February 16, 2024
By Michael Jones
Michael literally wrote the book on solar (it’s called The Homeowners’ Guide to Going Solar) and has been a solar consultant for over four years.
A common question I often hear from homeowners mulling over the solar switch is how it might affect their ability to sell their home in the future.
Even if you’re not planning on selling your home anytime soon, the worry about solar panels complicating a future sale or lowering property value can nag at a homeowner. It’s a common concern, though it often turns out to be baseless.
Nowadays, nearly everyone knows someone who’s gone solar, making it less of an oddity; in fact, many respected authorities even suggest that solar panels could boost your home’s value and simplify the selling process.
So let’s break down how selling a home with solar panels might affect its value, sort through how that might differ between leased vs owned systems, and learn how to market a solar-powered home to would-be buyers.
Will Solar Increase the Value of Your Home?
Ask that question of your local solar rep and they’ll probably cite a 2019 article from Zillow.com which claims that installing rooftop solar on a home can increase its value by as much as 4.1%.
On Cape Cod, where even a modest 3-bedroom home can cost well north of $500.000, that’s adds up to a pretty impressive return on investment.
So you can imagine your solar rep pitching you like this: “Even if you’re thinking selling your home, go solar before you do and you could not only recoup the entire cost of installation but also have a little extra cash left over when you complete the sale”.
But we all know that selling real estate is seldom that easy.
In all honesty, the Zillow article falls short as a piece of journalism. It only spotlights five real estate markets and three out of those (Los Angeles, San Francisco and Riverside) are in sunny California – the undisputed hub for rooftop solar in the US. And it’s also worth noting that San Francisco and NYC, two of the markets spotlighted, are widely regarded as the priciest places to buy property in America.
Hardly a representative sample for homeowners on Cape Cod.
Determining whether it’s easier or tougher to sell a house with solar panels isn’t that straightforward – there are lots of other elements at play.
Do You Own or Lease Your Solar System?
There are three main paths to going solar. First, you can lease your system via something called a Power Purchase Agreement (PPA). Alternatively, you could buy the either by paying cash or by taking out a solar loan.
You Own the System Outright
If you own and have fully paid for your system, it’s typically the most attractive option for folks looking to buy a home. Therefore, it should theoretically boost your property’s value the most when it comes time to sell.
In fact, one study cited in the Appraisal Journal suggested that for each dollar a solar system saves on a home’s yearly energy bills, could boost that home’s value by $20. So a home whose rooftop solar system has eliminated a $200/mo electricity bill should theoretically sell for $48,000 more than one which has no solar ($200/mo. x 12 months x $20).
But there are other factors to consider, such as:
- How old the system is
- How well it’s been maintained
- What percentage of the home’s electrical needs does the system cover?
Even if it’s fully paid off, a 20-year-old system installed by an older couple using 300kWh monthly won’t cut it for the family of four who might be planning to buy that same house and wondering where they’ll charge their electric car.
You Own the System But Still Have an Outstanding Solar Loan
With a solar loan, you might’ve been able to take advantage of certain solar tax credits without having to come up with a large sum of money upfront. but now that you’re trying to sell the home, the outstanding balance on that solar loan is going to complicate things.
First of all, you’re probably going to have a lien against the property. So, if you’ve got a home equity loan to put in solar panels, using your house as collateral, you’re going to have to pay off the loan before you can sell.
If you’ve financed your solar setup with a loan that didn’t need your house as collateral, selling is possible, but someone’s going to have to pay off that debt. Whether that is the buyer or the seller is subject to negotiation – something your realtor will probably take care of.
You Financed the Solar System With Either a Lease or a PPA
There’s a big myth out there that leasing or financing your solar systems through a PPA doesn’t boost your property value the same way buying the system would. That’s not necessarily true, but both the homeowner and realtor need to know how to effectively market them.
Sure, the house will still get an electricity bill with these systems, but that bill is likely to be way less than what the neighbors are paying to the utility company. When it’s time to sell your house, you or your realtor need to figure out just how much less, so you can highlight this as a strong selling point.
If you locked in a lease or PPA rate five years ago that trimmed your power bill by 25%, it wouldn’t be too surprising if you were now paying 40%-50% less than the current utility rates. But you might not even realize that since you no longer get a bill from the utility company, and you may not have even looked at your PPA agreement since the day you signed it.
It’s worth doing some homework to find out just how your rate compares with what your non-solar neighbors are paying.
Reach out to your utility company or have a chat with your neighbors to understand their electricity rates, then pat yourself on the back for being savvy enough to secure those low rates years ago.
Transferring a Solar Lease or PPA
After you’ve steered your buyer past any doubts they may have about leases or PPAs, there’s still the need to transfer that agreement over. Some solar companies like Sunrun make this process a breeze.
Tesla, the other hand, makes things tricky by demanding that only the original homeowner can handle the transfer process, ruling out any help from their realtor or lawyer.
Others, like Sunova, use intimidating wording in their contracts that state you can’t transfer without a clear written okay from them. Even though they promise not to unreasonably withhold that permission, it can be unsettling to see such terms when you’re about to list your home for sale.
To put it simply, lease and PPA agreements are specifically designed to be handed off from one homeowner to the next. This makes sense when you consider that most folks in the U.S. pack up and move every seven years or so and these agreements usually last 20-25 years.
The People Who Help to Sell Your Home with Solar Panels
You might think that the only ones who need to give a thumbs up for selling your house with solar panels are you and the potential buyer. But, there are a few other people who have to get up to speed on the pros and cons of solar power, and learn how to handle the sale of a home with solar.
Your Real Estate Agent
The hard truth is that not all real estate agents on Cape Cod are as knowledgeable as they should be about the benefits of solar. Home buyers are going to have a lot of questions about your solar system, so you’ll want an agent who’s not just seasoned in selling homes but also able to provide answers to those questions.
Check out agents who have the ‘GREEN’ badge from the National Association of Realtors. This shows they know about solar and energy efficiency, and can really sell all the great benefits your system offers.
Even if you and your realtor knock it out of the park showing off your solar setup, the appraiser still holds the power in determining how much solar adds to your house’s value. That’s because lenders typically look at the appraised value when figuring out how much they’re willing to lend to buyers.
Solar panels, especially leased ones, often don’t get much love from home appraisers. Why? Because Fannie Mae, Freddie Mac the Federal Housing Administration and the Veterans Administration all instruct appraisers not to place any value on leased solar panels when calculating a house’s worth.
Even if you own the solar panels, don’t expect a huge jump in your home’s appraised value. You might see an increased valuation equal to about 25% of what you paid for the system, but that’s only if similar solar homes recently sold in your area with similar added value.
So, does this mean that solar doesn’t boost your home’s value? Not quite. We’ve got two things at play here: appraised value and market value. Buyers might still be willing to pay more for a house with solar panels compared to one without them, even if they have to pay the difference out of pocket
The Lending Institution
Usually, loan providers are okay with solar panels as long as they can make sure all warranties and lease or PPA agreements can be passed on to the borrower. They’ll also want to make sure that any lien on your property gets lifted before close. Then, they put their own lien in place before letting the solar company do so again so that it’s they who has the first lien on the home in the event of a default.
The Mortgage Brothers did a podcast episode that does a good job of explaining how lenders view solar panels.
Your Solar Consultant
It’s probably been a while, but don’t hesitate to reach out to the solar consultant who first sold you your system. If they’re still around, they’ll likely be eager to drop by and refresh your memory about some of the benefits of going solar.
After all, embracing solar energy is more than just slapping panels on your roof and cutting down the electric bill. It’s about getting a head start on the future of power.
Invite your solar consultant in for a cup of coffee with you and your realtor. They’re the best one to explain how solar power, EV charging, and battery storage can boost your home’s selling points.
They might even be up for a direct chat with potential buyers, because part of their job is educating folks about the benefits of solar energy. They could even get a sale out of it if the new homeowner decides to expand on your current system after buying your house.
Final Thoughts on Selling a Home With Solar Panels
Selling a home with solar panels can be tricky or straightforward, depending on your local real estate market. If you’re trying to sell in a market where buyers have the upper hand, squeezing extra value out of your solar panels might be tough. But if sellers are calling the shots, those same solar panels could crank up your home’s selling price tag significantly.
I, for one, genuinely believe that all things electric – like solar panels, EV chargers and heat pumps – will soon become essential features for any home. And it’ll happen sooner than we think.
Honestly, I can’t picture my kids even entertaining the idea of purchasing a home without an electric car charging point in about a decade. It’d be like buying a place today that’s completely cut off from the internet!
Before too long, we won’t be asking how much solar panels boost a home’s worth; instead, we’ll be wondering how much value a house loses if it doesn’t have solar panels.
If you would like to discuss how adding solar panels to your Cape Cod home is likely to affect its value, you can contact us to set up a time to chat.
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