Buying or Selling a House with Solar Panels: A Comprehensive Guide

Whether you are buying or selling a house with solar panels in place, you have absolutely nothing to fear. You will come out ahead in the long run on either side of the deal.

The normal lifespan of newly installed and good quality solar panels is an estimated 25 to 30 years. That is only five years less than the length of a standard solar lease or Power Purchase Agreement (PPA) [1]. Whether purchased or leased, solar photovoltaic energy systems are built to last. It is certainly conceivable that you’ll decide to sell your home before your rooftop solar panels outlive their usefulness.

Real estate transactions involving solar panels can be an added complication for buyer and seller alike. But in most cases solar panels are an attractive extra option. Any issues that might arise during the transfer of ownership are well worth resolving from the perspective of both parties.

Buying a house with solar panels installed

If you’re interested in a house that comes with solar panels on the roof, here’s something you should know: a high-efficiency solar panel array can drastically reduce your electricity bills, meeting anywhere from 80 to 90 percent of your power needs with little or no offsets for repairs or maintenance.

Whatever your current electricity bills might be, they would be far less than they are right now if you chose to purchase a solar-powered home. If the seller owns the solar panels free and clear his or her savings would transfer directly to you. And that is a financial windfall you can’t afford to ignore.

Nevertheless, before you purchase a home with solar energy installed there are some important questions you should ask [2]:

• How much of the home’s energy needs are the panels actually meeting? Homes that go solar remain tied to the grid, allowing the homeowner to fill in the gap during times when the panels aren’t producing adequate supplies of power. You should request copies of the seller’s utility bills for the past year, so you can estimate how much utility-generated electricity you’ll still have to pay for.
• How old is the solar energy system? According to a study completed by the National Renewable Energy Laboratory (NREL), most solar photovoltaic panels decline in efficiency by about 0.5 percent each year [3]. Knowing this and having the seller’s utility bills in hand, you should be able to calculate how much your energy savings will decline over the remaining lifespan of the panels.
• What kind of inverter system does the solar array use, a central inverter or microinverters? Inverters convert DC solar power into usable AC power. Central inverters carry 10 to 15-year warranties and cost between $1,000 and $2,000 to replace when they wear out (which they will, likely sometime during that 10 to 15-year time frame) [4]. Microinverters, which are installed individually in each panel, are more expensive but more technologically advanced. They can last up to 25 years and will improve the efficiency of your solar array by about eight percent in comparison to a central inverter [5].
• Is net metering available? Net metering is the practice by which solar homeowners can sell any extra power their solar panels harvest back to the utility company for credit [6]. Net metering can bring a nice financial bonus that makes solar panels even more of a bargain.

You can expect to pay more for a home with functioning solar panels, regardless of the characteristics and overall condition of the solar array. But when you have the answers to the above questions, you can crunch the numbers and make an offer that makes sense for both parties.

Buying a house with leased solar panels

When homes are sold, solar leases and PPAs (an alternative form of solar lease) can be transferred to the new owner, assuming that person is interested. Should the buyer prefer not to continue with solar, it would be up to the seller to have the panels removed at his or her cost.

But in most cases solar energy is a good deal. If you have a chance to buy a home with a solar lease or PPA in place you probably shouldn’t look a gift horse in the mouth. You’ll have a monthly fee to pay if you take on a solar lease, or a set fee per kilowatt-hour of electricity consumed if the panels were rented under a PPA. But those costs will be lower than your previous utility bills, even with annual increases factored in—which is why there is such a thing as solar leasing in the first place.

You will have to meet at least one of these three criteria to receive approval for a solar lease transfer [7]:

• You have a high credit score. In most cases, if you’ve qualified for a mortgage loan to purchase a home you should qualify to assume a solar lease.

• You paid cash for the home. The leasing company will be happy to approve the transfer if you didn’t need a loan to afford the house.

• You’re willing to pay a credit exemption fee. You can pay an extra fee of a few hundred dollars to take over the lease if you don’t meet criteria one or two.

Solar leasing companies do need to be notified ahead of time if a seller would like to transfer the lease to a buyer. They may require a lead time of 2 to 4 weeks to approve the transfer. Another option is to purchase the solar panels from the leasing company (options to buy are included in solar leases), which would eliminate the monthly fees and give you ownership of the panels free and clear.

Selling a house with solar panels installed

A study by the Lawrence Berkeley National Laboratory found that solar panels added significantly to a home’s value. On average, homes with rooftop solar fetched an extra $4 per watt of solar generating capacity. This translates to a $15,000 premium for homes with a modest 3.6-kilowatt system [8].

Naturally, this return varies based on the age, size and efficiency of the solar array, and consequently that $15,000 figure may not be realistic in every case. But there is no doubt that having solar is an added enticement for potential buyers. The Lawrence Berkeley study confirmed the bullishness of the solar home market across geographical locations and in different home price ranges.

If you decide to sell your home before your solar loan is fully paid off, you will have to use some of the proceeds to close out that loan, if it was secured (that means your home equity was used as collateral) [9]. If the loan was unsecured, you can continue to pay it off at the previously agreed upon terms.

Selling a house with leased solar panels

Selling a home with leased solar panels is only a problem if your buyer doesn’t want them. If this happens you’ll probably have to buy out the remainder of the lease and have the leasing company remove the solar array. This will of course cut into your profit margin on the sale.

But once you’ve explained the benefits of solar energy to potential buyers and shown them copies of your miniscule electricity bills, they’ll likely be gung-ho on the lease transfer concept. With solar leases the company that owns the panels is responsible for all repair, maintenance and inverter replacement costs. That can actually make older leased panels more attractive to buyers than older panels that must be purchased outright.

The leasing company must approve the transfer. But that is a formality in most instances as long as you follow the procedures outlined in your leasing contract.

A second Lawrence Berkeley National Laboratory study carried out in Southern California found no premium for homes sold with leased solar panels. But they discovered that homes put on the market with solar leases attached were still vigorous sellers.

If you’re moving within the same utility district, the solar leasing contractor may agree to move the panels to your new home and transfer the lease to that location. You will not have to convince the buyer to take over your monthly payments in this case. You will only have to pay all moving and reinstallation expenses, which could run up to $1,000 or more.

Whether buying or selling, solar energy is an advantage

Solar energy is growing in popularity and reputation. That undoubtedly explains why solar homes are selling rapidly and for impressive prices. Even solar leases offer bountiful savings on energy costs, enough that more than three-fourths of those who buy homes with existing solar leases or PPAs choose to facilitate a lease transfer.

If you plan to buy or sell a home with solar panels in place, you have absolutely nothing to fear. On either side of the deal you’ll come out ahead in the long run, since the efficiency of solar panels makes them equally valuable for both parties.

Many things in life are not truly win-win. But solar energy is an exception to the rule.