Questions to Ask about Solar Panels When Buying a House Powered by Solar Energy
Have you noticed? As solar panels continue to grow in popularity, it is becoming increasingly common for homebuyers to encounter properties that already have solar systems installed. Especially in some States where solar energy makes a lot of sense.
With solar installation costs having dropped by over 50% in the past decade, the solar industry has seen explosive growth, contributing to a record 54% of the nation’s new electricity-generating capacity in just the first quarter of 2023. This rapid expansion added 6.1 gigawatts-direct current (GWdc) in those three months alone, which is enough to power 26 million homes across the U.S.
As a result, a growing number of homes on the market come equipped with solar panels, which can be an appealing feature for buyers looking to reduce energy costs or lower their environmental footprint.
In fact, recent surveys show that 4 in 10 homeowners are seriously considering adding solar panels to their homes. However, buying a home with solar already installed isn’t as simple as it might seem.
Prospective buyers need to carefully examine the age, ownership status, and efficiency of the solar system, as well as the terms of any financing agreements or warranties in place. Asking the right questions upfront can help you fully understand the benefits and potential challenges before making a final decision on a solar-equipped home.
What to consider when buying a house with solar panels?
Who owns the solar panels on the property is the most important information you need to know because this information changes the whole dynamics for you. If the solar panels are leased, you will need to review the lease agreement closely. Solar lease payments usually range between $50 to $250 per month for many years. Make sure to account for this when calculating your total costs. Is it still worth it for you?
Most modern solar panels come with a warranty of 25 years and are expected to retain 80 to 90% of their efficiency after that period. If the system was installed 10 years ago, it may have already lost around 10 to 20% of its original efficiency. The degradation rate depends on the climate, maintenance of the equipment and of course the quality of the solar panels.
You can also estimate the efficiency of the solar system by taking into account that solar panels degrade at an average rate of 0.5% per year. This means that a 10-year-old system would generate around 95% of the energy it did when it was first installed. So, naturally, this is the second important information you need to get when deciding on buying a house with solar panels.
How to check the warranty and maintenance history of solar panels?
Solar panels usually come with performance warranties lasting 25 years. We have written a detailed article on this topic: What Should I Look For in a Solar Panel Warranty? Have a look.
Inverters, which are a critical piece of equipment for converting DC power from solar panels to AC power used by modern appliances, often have shorter warranties. Be careful because inverters last usually a maximum of 15 years. Replacing an inverter for a new one can cost between $1,000 to $2,000. You should know how old it is and if the warranty transfers to you as the new homeowner.
If solar panels are mounted on the roof, there may also be a warranty that covers any potential leaks caused by the installation. This warranty is valid often 10 to 15 years and is usually provided by the installation company.
One important thing to remember: Ask if all the warranties on the panels and inverter are transferable to the new owner. Some warranties transfer automatically, while others may require a fee or written approval from the solar company.
Solar panels are wonderful pieces of equipment, with no moving part, there is not really much to be maintained about them. But it is still good to ask if any annual cleaning, inspections, or repairs have been conducted throughout the system’s life.
Why? Solar panels should be cleaned at least once a year to remove dust, dirt, and debris, especially in areas prone to pollution or heavy pollen. You should also ask if any components of the system have been replaced or repaired, particularly the inverter is of your interest (do not forget).
Additionally, many solar systems come with a monitoring app that allows them to track the system’s energy production in real time. Ask if the monitoring is still on, and whether any past issues (such as underperformance) have been flagged and addressed by the solar installer.
What to ask about solar panel efficiency and capacity?
The average photovoltaic solar system in the United States has around 5 to 6 kilowatts capacity. A 5 kilowatt system produces around 20 to 25 kilowatt hours (kWh) a day, and on average around 5,000 to 8,000 kilowatt hours in one year. How much is produced is affected by the number of sunny days, panel orientation and efficiency of solar panels.
In any case, since we are talking about having enough energy to power your house at a decent price, you should know how much power the solar system can cover.
Ask the seller for energy bills or solar production reports to assess how much power the system generates and how much you can expect to save—often between $600 and $2,000 per year depending on the region. It would be practical to get to see the bills for the past two years at least. Shorter period might provide misleading information.
Compare the system’s actual energy production (which can be obtained from the monitoring system) to its original capacity. The current energy production should align closely with the system’s total capacity and be adjusted for age and panel degradation rate.
For example, a 5-year-old system should still be producing more than 95% of its original capacity. A well-functioning system should show consistent energy output aligned with seasonal changes. Sharp drops in production could indicate underperformance or shading issues.
Why is requesting utility and production history for at least one year important?
When considering the efficiency of a solar system, you should examine the system’s production history over the last 12 months and more. The seller should be able to provide this data through their monitoring software or utility bills.
On average, a solar system generates between 1,300 and 1,600 kilowatt-hours (kWh) per kilowatt (kW) of installed capacity annually.
For example, a 6 kW system should produce between 7,800 and 9,600 kWh every year. If the actual energy production falls short, this suggests that some piece of equipment will need to be exchanged or repaired. Comparing the system’s actual output to its original specifications allows you to identify any potential issues.
It is also wise to review utility bills from the past year to determine how much of the home’s electricity has been offset by solar power. If the home is connected to the grid and participates in net metering, request information on how much energy has been sent back to the grid and how many credits have been earned.
In states with favorable net metering policies, you can earn up to $0.10 to $0.30 per kWh for excess energy from solar energy.
Is there battery storage? What about grid connection & net metering?
Does the home have a solar battery system? If so, what is its capacity, and how long does it store energy? Is the battery covered by a warranty, and what is its expected lifespan?
About 20% of homes with solar panels now also have battery storage systems, such as the Tesla Powerwall or LG Chem. These systems typically add between $10,000 to $15,000 to the overall cost of the solar setup.
The capacity of these batteries is measured in kilowatt-hours (kWh), which indicates how much energy the battery can store. A typical Tesla Powerwall has a storage capacity of 13.5 kWh, while the LG Chem RESU offers capacities ranging from 9.3 kWh to 13 kWh depending on the model.
For a typical household, a 13.5 kWh battery could store enough electricity to power essential appliances (like lighting, refrigerators, and outlets) for several hours to a day, depending on consumption. These batteries can be stacked to increase capacity. For example, multiple Powerwalls can be connected to store more energy if needed.
Both Tesla Powerwall and LG Chem batteries are designed to last around 10 to 15 years, with warranties typically covering around 10 years. During this period, they are generally expected to retain 80% of their original capacity.
Over time, like solar panels, these batteries lose some efficiency to the point when they need to be exchanged. Re-installing multiple units of new batteries could significantly increase the costs you will have to pay.
Is net metering an option?
Another question you need to ask is whether the solar system is connected to the grid, and is there a net metering agreement in place? How does the current net metering arrangement work, and how much credit does the system generate for excess energy?
If the house is connected to the grid and benefits from net metering, you could earn credits for the excess energy you send back. In states with favorable net metering laws, you could offset a substantial portion of your electric bill, sometimes even up to 100%.
If the system is connected to the grid and participating in net metering, ask for details on how much energy was sent back to the grid and how many credits were earned. In states with favorable net metering policies, homeowners can offset a significant portion of their bills, earning up to $0.10 to $0.30 per kWh depending on the local utility.
How to briefly evaluate the condition of solar panels on a property?
Do not worry, you do not need to be an expert to be able to assess the quality of solar panels you are about to buy.
Here is a little overview of signs you should look for when assessing a solar system on a house you are considering to buy.
Visible damage: Inspect solar panels as you would inspect any fruit or vegetables you are deciding to buy. Sounds a bit funny? Well, it is not so far from the truth. Even with solar panels you are looking for cracks, discoloration, or hot spots. These defects affect performance and mean that the equipment is not at its best production.
Even small cracks in the glass allow moisture to enter and lead to internal damage over time. Discoloration, on the other hand, can indicate panel degradation due to prolonged sun exposure – this means that solar panels are perhaps older than you are being told.
Framing and mounting check: Check the frames and mounting hardware to be intact and not rusting or corroded. Damaged mounts or loose hardware could cause the panels to shift, impacting their alignment and efficiency. Mounting systems should also be free from rust or corrosion, as this can weaken the panels’ stability.
Shading and obstructions: Trees, buildings, or debris on the panels block sunlight. Even partial shading can decrease the system’s efficiency by up to 30%, especially if the system lacks microinverters or optimizers, which mitigate shading issues on individual panels.
Should you hire a solar expert for an inspection before buying?
Solar panels should last even 30 years, while roofs generally last 25 years. If the roof is older than 10 years, replacing it while also dealing with the solar system can be costly. Solar panels will need to be removed and reinstalled, which is an expense that ranges from $1,500 to $6,000.
Additionally, solar panels add $15,000 to $20,000 in value to a home and will slightly increase your home insurance premiums by up to 5%. Expect an additional cost of around $75 to $150 per year for insuring the solar system. It is not so cheap to deal with an older solar system right after you have purchased a house.
If the solar system is more than ten years old, hiring a solar expert for an inspection is a good idea.
A professional can assess the condition of the panels, wiring, and inverter. If the maintenance history is unclear or nonexistent, an expert checkup becomes even more important. If there is a significant discrepancy between the system’s expected and actual energy output, a professional inspection will help identify issues such as malfunctioning components or shading problems.
The benefits of a professional solar panel inspection
You will get a detailed assessment of the panels, mounting system, and electrical components. An expert will look for signs of damage, such as cracks, loose connections, or wear. Even if everything appears to be functioning, internal issues might go unnoticed without specialized equipment.
Professionals use tools like irradiance meters and thermal cameras to measure energy output and spot underperforming or malfunctioning panels. Additionally, a solar inspection includes an electrical safety check, making sure that the wiring, inverters, circuit breakers, and grid connections are functioning safely. Faulty wiring can cause fire hazards or result in energy production losses.
A solar expert can catch other subtle issues that a typical homeowner might overlook. Solar panel degradation can be difficult to spot in some cases. They can also detect microcracks or hot spots, which are invisible to the naked eye but can reduce energy output by 20% over time.
Advanced tools like solar pathfinders allow professionals to analyze shading patterns more precisely. While you may not notice how trees or buildings affect the system, an expert can calculate the exact impact of shading on energy production. Lastly, they’ll also check the inverter, as a failing or aging inverter could cost you between $1,000 and $2,000 to replace if overlooked.
Buying a house with solar panels not paid off: What you need to know
If you are considering buying a house with solar panels that haven’t been fully paid off, it’s important to understand your options and the potential financial implications. Approximately 41% of solar installations in the U.S. are either leased or financed through loans or power purchase agreements (PPAs). This means there is a chance the home you are interested in could have a solar system with remaining payments.
Here are the scenarios you could encounter and what you need to consider:
1. Loan-financed solar systems
If the current homeowner financed the solar panels with a loan, they may still have an outstanding balance. Solar loans can range from $10,000 to $30,000, depending on the system size and financing terms.
Monthly payments typically range between $100 to $300 over a loan term of 10 to 20 years, with interest rates ranging from 2% to 5%. If you decide to buy the house, the seller may expect you to assume the remaining payments.
Your options:
Ask the seller to pay off the loan: One option is to negotiate with the seller to pay off the remaining balance before closing the sale. This would leave you with the solar panels free and clear, and you won’t have to worry about making additional payments.
Assume the loan: Alternatively, you can assume the remaining loan payments, but make sure you understand the terms and any interest involved. Ask for all documentation related to the loan to see how much is still owed and whether there are any prepayment penalties.
2. Leased solar systems
In some cases, the homeowner may have entered into a solar lease. Solar leases typically last for 20 to 25 years, with monthly payments ranging from $50 to $250. The leasing company owns the panels, and the homeowner pays a fixed rate for the energy produced.
Leases often come with escalator clauses, which increase the monthly payment by 1% to 3% annually. If you buy a home with a leased system, you will most likely have to assume the lease and its payment obligations.
Your options:
Ask the seller to buy out the lease: You can negotiate with the seller to buy out the remaining lease, which can cost between $10,000 to $20,000 depending on how much time is left on the agreement. This would allow you to own the panels outright after the sale.
Transfer the lease: If you are comfortable with assuming the lease, you will need to work with the solar company to transfer the agreement into your name. Be sure to review the contract carefully, especially the terms regarding future payment increases and system maintenance responsibilities.
3. Power Purchase Agreements (PPAs)
A power purchase agreement (PPA) is similar to a lease, but instead of paying for the panels, the homeowner agrees to buy the electricity generated by the solar system at a set rate per kilowatt-hour (kWh). These rates can be lower than traditional utility rates, but like leases, PPAs often come with escalation clauses that increase the rate by 1% to 3% annually.
The homeowner does not own the panels; the solar company retains ownership and maintains the system.
Your options:
Ask the seller to terminate the PPA: You can negotiate for the seller to buy out or terminate the PPA agreement before closing. Some PPAs allow for early termination, though it could come with penalties.
Transfer the PPA: If you are willing to assume the PPA, you will need to have the contract transferred into your name. Be sure to understand the terms, including the current kWh rate, how often it escalates, and whether there are any buyout options in the future.
Important considerations:
Whether assuming a loan, lease, or PPA, the financing company may require a credit check to see if you qualify. Solar companies typically require a credit score of 650 or higher for lease or PPA transfers, so make sure you are eligible before proceeding.
Most solar lease or PPA agreements involve a transfer process, and many companies charge a transfer fee. These fees typically range from $150 to $250. Some companies waive this fee, but it’s best to confirm with the seller and the solar provider.
The process of transferring a solar lease or PPA can take several weeks, so it’s wise to start the transfer process early in the home-buying process to avoid delays. You will need to sign new contracts or amendments to assume the loan or lease, so thorough documentation is a part of the transfer process.
But it may be all worth it. Did you know that a home with paid-off solar panels can add significant value, often increasing the property’s value by around $15,000 to $20,000? However, homes with solar leases or PPAs can be more difficult to sell, as some buyers are hesitant to assume the additional financial obligations. According to Zillow, homes with fully owned solar panels can sell for up to 4% more, but those with leased systems don’t always see the same increase in value.
Can you remove solar panels when buying a house?
Yes, you can remove solar panels when buying a house, but there are several things to consider before making that decision:
1. Ownership status of the solar panels
Owned Panels: If the current homeowner owns the solar panels outright, you can remove them without too much hassle, although this will involve costs. Once the panels are removed, you will need to decide what to do with them (resell, store, or discard).
Leased or financed panels: If the solar panels are under a lease or power purchase agreement (PPA), removing them becomes more complicated. Leases typically last 20-25 years, and you would need to buy out the lease or negotiate termination with the solar company, which can cost anywhere from $10,000 to $20,000 depending on the remaining contract.
2. Cost of removal
Removing solar panels typically costs between $1,500 and $6,000, depending on the size of the system and the complexity of the installation. If the panels are mounted on the roof, the cost may be higher, especially if the roof needs repairs after removal.
3. Impact on utility bills
If the home has been relying on solar power to offset energy costs, removing the panels means you will no longer benefit from the savings. Depending on the system size, homeowners can save between $600 and $2,000 annually on electricity bills, so removing the panels could increase your energy expenses.
4. Local regulations and permits
Depending on where you live, removing solar panels may require permits from your local municipality. Additionally, if your home is in a community with a homeowners association (HOA), there may be specific rules regarding panel removal.
5. What to do with the solar panels after removal
If you choose to remove the solar panels, you can either sell them (if they are in good working condition), donate them to organizations that install solar for low-income families, or properly recycle them.
