In this article, you will learn about buying a house with solar panels.
The growth of solar panels since the turn of the century has been quite incredible. Look around the rooftops of your local neighborhood and you’ll quickly come across solar powered homes.
In the US there are already over 2 million homes with solar panels, and this number is forecast to grow exponentially in coming years. This means if you are planning to buy a house in the near future you are likely to come across properties with solar panels already installed.
Buying a house is already a complicated process and throwing solar panels into the mix adds a whole new layer of questions. Below we will go through everything together including what you are likely to come across, questions to ask, and things to look for before you purchase.
Should You Buy a House with Solar Panels?
On the whole there is no reason you shouldn’t buy a house with solar panels already installed. Of course, this assumes they are in good working order and there are no hidden surprises.
It is very common to purchase a home with solar panels and it can be a great benefit to your life. You will be able to generate your own electricity for free using sunlight, reduce your carbon footprint, and even sell electricity back to your electricity provider.
Not all solar arrays are equal, and you should check a few things out about the system before making your offer. Understanding how the equipment has been paid for and who owns it will drastically affect the value.
Owned vs Leased Solar Panels
Homeowners have two main options when installing solar panels. You can either buy the solar panels outright or you can acquire them through a lease.
Buying a House with Owned Solar Panels
Owned solar panels mean that the homeowner literally owns the equipment. It has been bought and paid for. This means there are no leases or monthly payments due. This is a big benefit in the buying and selling of a house as the solar array is included in the property just like the doors and windows!
This is a major asset to the property and will be reflected in the overall price. On average, homes with solar panels are valued 4% higher.
Even if the current owner has taken out a loan to pay for the solar panels this debt will not be passed on to the buyer. The value of the property will still be higher as you would purchase the equipment in the sale. The original homeowner is still liable for the initial loan.
Buying a House with Leased Solar Panels
Solar panel installations are expensive and can cost $10,000 – $20,000. Not everybody can afford this so solar companies also offer a lease contract. This allows people to still enjoy green electricity and reduced bills without having to purchase the equipment. The solar company retains ownership of the equipment and the homeowner pays a monthly fee to rent the solar panels. This monthly fee should be less than the amount you save on electricity bills.
Buying a home with leased solar panels is more complicated. This is because the new homeowner will be taking over the contract. You would be liable to pay the monthly fee once you become the owner. The buyer and seller must agree with the solar company to transfer the lease. This can be done but requires an extra layer of paperwork.
Houses with leased solar panels don’t usually have any extra value as the reduction in utility bills is reduced as you have a monthly lease fee, plus you won’t own the solar panels.
In addition, acquiring a solar panel lease can also affect your mortgage as you increase your debt-to-income ratio reducing the amount you can borrow.
If you find a home to buy with leased solar panels don’t despair, it is still common to make a purchase. You will need to do more due diligence and number crunching to ensure it makes sense for you.
Questions to Ask the Current Owner
When viewing a house with solar panels you need to ask a number of questions before making any decisions. Here’s what you should find out:
1. Do you own or lease the solar panels?
This will determine the value and offer you make. If there is a lease in place then you could use this as a negotiating point. Plus get details of the lease so you know how much you will be paying.
2. How old is the equipment?
Solar panels last for decades and should have a power output warranty of 25 years. Unfortunately, solar panels degrade over time and lose 1% of power output per year. So if the system is 10 years old it will be 10% less efficient. If the installation is much older, near the end of its warranty, it will seriously reduce the value!
3. Who installed the solar panels?
It’s crucial to know who the installer is and who made the panels. You will need to rely on these companies for ongoing maintenance and repairs. If the company has gone out of business then who can you call to have work carried out?
4. How large is the array?
The bigger the solar array the more electricity it will generate. Find out the total kilowatts of the system. How many solar panels and the wattage of each panel? Plus find out how much electricity it generates on average each month.
5. How much do you save on electricity bills?
You should also get details of how much the homeowner pays in electricity bills. It’s unlikely the whole house runs on solar power and there will still be a bill to pay. Utility statements should show how much extra electricity is drawn from the main grid.
6. Do you have all the paperwork?
Getting hold of all the original installation paperwork will enable you to confirm all the details. This will include details of the installer, system design, size, power, and permissions from utility providers and local authorities.
Advantages and Disadvantages of Buying a House with Solar Panels
If you’re considering purchasing a home with solar panels then you might make a list of pros and cons to help your decision. Here’s the benefits and disadvantages laid out for you:
Advantages
Just getting started with solar? Here’s the amazing benefits:
Reduced Energy Bills
The beauty of solar power is it is completely free! You can generate electricity from sunlight without paying a penny. You will need to pay for the initial investment but after this there are no ongoing costs. If the solar panels are included in a home you buy then you’ll get free electricity instantly. Producing your own electricity will mean you draw less from the main grid which lowers your utility bills.
Plus, if you generate excess electricity you will automatically sell the electricity to your energy company in exchange for credit. This is done using a process called Net Energy Metering (NEM).
Eco-friendly
It is no coincidence that the solar industry continues to boom. We’re moving into an electrical age which needs to rely on clean energy sources. Solar panels produce zero greenhouse gas or pollution. Plus they even offset the energy used in manufacturing in a little as six months. As long as there’s sunlight, you can generate clean electricity.
Long-life Span
Solar panels are incredibly durable and built to last decades. You can expect a warranty to last 25 years. The exterior is built from anti-rust aluminum and tempered glass which is completely weather resistant and waterproof. They will survive through wind, rain, and snow without a problem. In addition, the PV silicon solar cells degrade very slowly at less than 1% per year. This means you’ll still be generating electricity after the power output guarantee expires.
Disadvantages
It’s not all sunshine and roses. There are drawbacks to houses with solar:
Price
Houses with owned solar panels are more expensive. You will pay 4% more on average. This is because you will need to account for the equipment which can cost $15,000+ to install. Plus solar panels are often viewed as an investment which will make you most through reduced energy bills in the long run. While it is beneficial in the long run, you will be paying more for the property.
Plus, solar panels won’t hold their value forever. They degrade slowly over time so their value will decrease the older they become. The valuation of solar panels on a house will reduce significantly as they reach the end of the power output warranty.
Competitive
Houses with solar panels sell faster and attract more buyers. This makes it more competitive to secure your dream home. This means you’re likely to be involved in a bidding war and you need a good position to secure the property. If you have your heart set on a home with solar then move quickly or lose out.
Paperwork Complications
As you’ve probably realized there is more due diligence that needs to be done. You’ll want the solar array to be assessed and surveyed to ensure it is in good working order.
Paperwork will be increased if the solar panels are leased rather than owned. You’ll need to agree to take over the contract with the solar company. This is not always a problem but still needs to be completed in a timely manner.
Increased Maintenance
On the whole, solar panel systems require very little maintenance. You will still need to keep up with any repairs and remove any unwanted visitors like nesting birds. You might even consider investing in bird proofing to keep things clean and tidy.
In addition, they need to be cleaned every so often, usually every six months. It is important to remove any dirt and debris to maximize performance. Any solar cells blocked from receiving sunlight will reduce the overall output of the system
How Will Solar Panels Affect Getting a Mortgage?
If you’re buying with a mortgage then you need to understand the implications solar panels can have on your borrowing. You shouldn’t have any issues if the equipment is owned and paid for, only when there are outstanding leases and loans.
Solar Leases and Mortgages
When taking on a solar lease or power purchase agreement (PPA), you will be changing your monthly income and expenses which will be reflected in your debt-to-income ratio. With an increase in monthly expenses you might not be able to borrow as much as you thought. If your mortgage amount is reduced you might not be able to afford the property anymore.
You should discuss this with your bank as soon as possible. Make sure you get all the details of the lease and how the solar panels affect electricity bills to give your bank the full picture. Remember, the reduction in utility bills should offset the cost of the lease!
PACE Loans
A PACE loan is a debt on a property rather than a person. This means the repayments are attached to the house, not the actual owner. If you buy a house with a Property Assessed Clean Energy (PACE) you will be paying the loan repayments through property taxes. These loans usually last for 10 – 20 years and are financed by the government to encourage green upgrades to the property.
Properties with a PACE loan are usually ineligible for a mortgage. This is because the PACE loan takes precedence above the mortgage which increases risk for the lender.
Other Solar Loans
If a homeowner takes a personal loan to pay for the solar panels this should not affect you or your mortgage. The homeowner owns the equipment and will be selling them to you in the overall cost of the property. The original owner will still be liable for the loan, not you.
Buying a House with Solar Panels Summary
You should not be put off buying a house with solar panels.
Generally, you will find it is beneficial to have this eco-friendly and free source of electricity in your home. Before making an offer be sure to do your due diligence as this will affect the value and potentially your mortgage. The most important thing to find out is if the solar panels are owned or leased. Buying a house with owned solar panels is just like buying any other property. But purchasing a house with a lease or outstanding debt needs a closer look at the numbers.
