Home solar is growing in popularity, and if you’re in the market for a new home, you might come across options with solar panels already installed.
As a buyer you want to know all the relevant and accurate facts about the system you are considering – including when it was installed, by which company, its power production, what percent of the home’s power does it provide, warranty, and maintenance history.
Buying a home with solar panels already installed allows you to receive the benefits of solar energy without having to deal with the installation process. However, before buying a home with solar panels, it’s important to know whether the panels were purchased outright or leased.
If the seller bought the panels upfront, you’ll own the panels completely once you purchase the home. This is ideal because you won’t have to pay anything for the solar panels. Even if the panels were acquired with a solar loan, the seller will be responsible for paying off the loan.
Buying a home with leased solar panels is more complicated. Solar leases can last between 10-20 years, and it can be expensive to buy out the system or roll the lease into the house purchase. Additionally, solar leases can have increasing payments, posing an ongoing liability. If the solar lease raises your debt-to-income ratio, you may face another hurdle to qualifying for a mortgage. If the home has a leased system, ask to review the contract before moving forward with the transaction.
The ideal situation when you’re looking at homes with solar is for the panels to be owned completely by the current homeowner. A system that is purchased is owned entirely by the seller, which means they don’t come with any contingencies aside from potentially paying a more due to the increased home value that comes with solar.
A leased system means that the current homeowner is making a monthly payment to the panel installation company - review the original lease terms to understand the deal. Common concerns to have answered by the lease contract and original owner include: what are the monthly fees, are the payments increasing, and what are the lease terms.
Take into consideration your finances before exploring a leased system. Leases have the possibility to raise your debt-to-income ratio making home mortgage qualification more difficult with an acquired solar lease.
If the lease terms make sense and you would like to assume the lease responsibility, the solar company issuing the lease can transfer it once you meet credit qualifications. If the lease terms are unsatisfactory, but you'd like to take on a home with leased panels, you can negotiate with the homeowner to see if they will compensate you or pay off the lease.
If a homeowner installs solar with a secured or unsecured solar loan, the loan will always remain their responsibility, even if the home is sold. This means you don’t need to worry about additional payments or contracts.
Keep in mind the homeowner might consider these costs into the price of the home. The asking price may reflect the loans held by the previous owner – a fair price to pay for the long-term benefits and savings of going solar.
PACE (Property Assessed Clean Energy) financing is attached to a property, not to the person who opened the loan - payments are made through property taxes. When you purchase a home with PACE financed solar panels, the payments become your responsibility. If the home you choose has PACE financing, you should review financing terms before you purchase.
As a new homeowner, PACE payments may seem undesirable, but the energy savings from day one outweigh the additional assessed value added to your property taxes. In the case you are responsible for the remainder of a PACE loan, it's common you'll still see a net financial benefit.
When purchasing a home with solar panels make sure you learn about the warranty. Two kinds of solar system warranties are normally offered. The first one is the manufacturer’s warranty which covers the panel and inverter. The warranty on the panels is typically 25 years and 5-10 years for the inverters.
The company installing the system should also offer a warranty on the installation which ensures there is no immediate or long-term damage to your property for a specified period – usually 10 years. Keep in mind that neither of these warranties cover fire, theft, and/or other indirect damage, so make sure you get the system added on to your homeowner policy.
Depending on the state and utility company, some solar panel owners are eligible for net metering, a policy that allows you to sell excess electricity produced by your solar panel system back to the grid to service others. This can help you determine how much you can save on your monthly electricity bill.
The amount of electricity a solar panel produces depends on three important factors: panel size, efficiency of the solar cells inside, and the amount of sunlight the panel is exposed to.
Age is related to size and efficiency. Modern panels make more electricity than older systems. Panel manufacturers have found ways to improve cell efficiency over time.
Solar efficiency relates to the amount of available energy from the sun that gets converted into electricity. If you combine the efficiency of the cells with the size of the panel, you get a number called the “power rating.” It is crucial to know this power rating when analyzing cost savings.
The rapid growth of rooftop solar (also known as photovoltaic, or PV, solar) homes are making them more valuable on the market. Homes with “green” features like solar panels stand to sell for a higher price and at a faster rate. While owned systems are ideal, moving with a leased system isn't always terrifying.
As a seller, you should have all solar-related documentation on hand to discuss with realtors and potential buyers. Accurate records and information will make everyone more comfortable and educated in the decision-making process.
Many benefits, like home value and less days on market, apply most regularly to homes with purchased solar panels - not leased systems. Leased solar systems cannot be included in a home’s valuation for mortgages. If you sell your home before your lease is up, the prospective buyer will have to agree to take over the solar lease, or you will have to pay off the lease before you sell. Some buyers may be deterred by the idea of committing to a lease with several years left on it.
Before putting your home on the market, review the details of your purchase or lease. If you bought your array with a secured loan, you’ll have to pay off the balance before you can sell, while an unsecured loan won’t hold up the sale. In either case, you’ll still have to pay off the remainder of the loan - even if you no longer own or live in the home.
Owning a solar-equipped home can contribute to increasing values by 3-4%. In states with a more mature solar market, such as California, real estate agents, lenders, and appraisers are more likely to understand the value of solar, and there are plenty of comparable home sales that can guide accurate pricing decisions.
Prospective home buyers have two big concerns: Is there documentation that the installation was done properly (information any solar dealer will provide); and is there proof that the system is saving money on energy costs.
Real estate prices are often tied to the neighborhood and comparable homes, which can sometimes limit the value that renovations and additions add to the property. Much like an expensive addition, like a swimming pool, to an average home in a middle-class neighborhood, adding solar panels in certain areas may be unusual that they do not increase value as expected. Few buyers looking in the same middle-class neighborhood will be willing to pay more for an addition that is out of place, and you may run into the same issue with solar panel systems. Note, appraisers cannot increase the value of something that is not permanent to the structure.
EcoSmart RE is capable of analyzing your data and consolidating all documentation to garner the highest market value for your home. We focus on educational management to help make the transaction process easy for all parties.
One nice aspect of third-party owned systems is that they are usually transferable. If you decide to move, you can pass along the solar agreement to the incoming residents.
If you acquired your solar system through a Power Purchase Agreement (or lease) or through a loan, check to see if there is a UCC-1 Filing placed on the system. If there is a filing on the system, you will need to work with your realtor, the title company, the solar provider, and the buyer to determine how you will negotiate the UCC-1 Filing as part of the deal. The solar provider may be willing to provide a "subordination agreement" if a buyer is willing to take over the contract.
Having all your accurate data and documentation is one of the most important prerequisites to selling your solar home. Collect all of your system's documentation together, along with 4-6 months of your most recent electricity bills. Reach out to your solar provider if you are missing any pertinent information. At a minimum, you should have enough information to fill out the solar portion of the Residential Green and Energy Efficient Addendum.
Know your warranty information. Speak with the company that installed your solar system and carefully review your contract's warranty. It is important to know if your warranty will cover a second homeowner and for how long.
Solar panel technology continues to advance, producing more efficient systems that are naturally more desirable than older systems. Even if your system is still fully functional, if it is older, buyers may not consider it as desirable as a newer system.
The less desirable it is, the less value you can expect it to add to your home.
There is a possibility a buyer will request the solar panels to be removed. Speak with the company that installed your panels to see how much it would cost to remove or relocate your panels. Be sure to review and know your contract terms to see if there are any obligations or commitments tied to the panels you have.
Chances are that potential buyers aren't looking at your house just because of the solar panels. People unfamiliar with solar panels won't know about the added value, so it's important to explain this value. Don't look at your solar system as the reason to demand a higher asking price because it falls into the broad category of being an expensive add on. Focus on proving value with documentation that puts the potential buyer at ease.
The appraisal can help with that, but a knowledgeable realtor can also help convey this. Be prepared to share past electricity bills to demonstrate any savings you enjoy as a result of your solar energy system.
We help educate and convey all the benefits of your system as a valuable addition to your already stunning home.
Many states, including California, encourage homeowners to build ADUs. It's easy to see immediate value with a rental unit on your property. Despite at ease regulations that make it possible to build expansions to your home, there are still many complexities to consider.
We'll help you identify if expansion makes sense for your home, and what legal and development factors to think about.
ADUs serve as additional space that can be utilized in many different ways to expand a home. Because ADUs are rental units, they produce additional household income. “Empty nesters” can stay in their neighborhoods by moving into a smaller ADU and renting their larger existing home to pay the mortgage. An ADU can also be built to house a relative or caregiver.
Architects, builders, and planners are ready to help build your ADU. With many teams on standby, how do you utilize them most effectively? How do you know what you can and cannot build, and how is this properly conveyed to your contractors? Our 15+ years of expertise in home improvement puts us at the forefront of overseeing and managing every aspect of the development process.
Single family homes with extra space in the backyard, a backyard garage, or a room that can be converted into a unit with a private entrance meet the space requirement. If the home is also located within 1/2 mile from public transit and/or has room for an additional parking space, you may be able to build an ADU.
To build an ADU, your current house must be located in a residential zone, and most likely in a single- family residential zone. ADUs are permitted in all single-family zones. Any lot in these zones, regardless of its size, can add an ADU if it will fit. Your lot must have an existing house, only one ADU per lot is permitted, and the ADU cannot be sold separately from the house. An ADU must meet additional site requirements as well as building construction requirements as described in this booklet.
When you imagine what the expansion will look like, there are 4 primary types of ADUs you can consider depending on what your home can accommodate. With each option are requirements.
Detached unit on my lot
Attached unit to my home
Backyard garage conversion
Attached unit to backyard garage
Depending on the type of unit that makes sense for your home/lot, the below must be met before you can starting building your ADU.
Detached unit on my lot
Requirements
Max 1,200 sq.ft
5 ft min. from side and rear property lines
10 ft min. between main house and ADU
Attached unit to my home
Requirements
No more than 50% of existing house and max of 1,200 sq.ft
Side and rear setbacks as required by zoning
Backyard garage conversion
Requirements
Max 1,200 sq.ft
No change to existing setbacks
Attached unit to backyard garage
Requirements
Max 1,200 sq.ft
5 ft min. from side and rear property lines (for ADU only, not garage itself)
10 ft min. between main house and ADU
*Parking considerations are attached for each type of ADU
How much space will I need for parking? Many lots already accommodate two parking spaces in a garage or carport. When you add an ADU, you may need to fit one extra parking space on your lot. If an additional space is required, the space may be covered or uncovered.
You may not need additional parking if:
1. ADU is located within one-half mile of public transit.
2. ADU is located within an architecturally and historically significant district.
3. ADU is part of the existing primary residence or an existing accessory structure.
4. On-street parking permits are required, but not offered to occupant of the ADU.
5. There is a car-share vehicle located within one block of the ADU.
*Parking requirements may change. Check with the Dept. of City Planning for current requirements.
There is a possibility a buyer will request the solar panels to be removed. Speak with the company that installed your panels to see how much it would cost to remove or relocate your panels. Be sure to review and know your contract terms to see if there are any obligations or commitments tied to the panels you have.
Chances are that potential buyers aren't looking at your house just because of the solar panels. People unfamiliar with solar panels won't know about the added value, so it's important to explain this value. Don't look at your solar system as the reason to demand a higher asking price because it falls into the broad category of being an expensive add on. Focus on proving value with documentation that puts the potential buyer at ease.
The appraisal can help with that, but a knowledgeable real estate agent can also help convey this. Be prepared to share past electricity bills to demonstrate any savings you enjoy as a result of your solar energy system.
We help educate and convey all the benefits of your system as a valuable addition to your already stunning home.
Full-service value packaging that makes sense.
Pre-listing inspections designed to realize improvements that increase home value.
Analysis of loan/lease contract, including Solar System Production.
Loan/lease payoff negotiations and cost effective finance solutions for lowering your payment.
Collecting and organizing all essential documents with tax credit guidance from solar educated CPAs.
Whether you're looking to buy/sell a home with or without solar PV, we’ll guide you with the right data and expertise to better understand the market. We assess your real estate needs for top-value while protecting you from any pitfalls you might encounter during the transaction process.
We're committed to helping increase efficiency in the housing market. We evaluate and manage Accessory Dwelling Unit development for home expansion and rent.
