As energy costs continue to rise, more homeowners are turning to solar panels as a viable and cost-effective alternative to traditional electricity. Even more homeowners today are explicitly searching for more sustainability features when house hunting. Solar panels can help you save on energy bills, reduce greenhouse emissions, and help you be more energy independent.
While solar panels can increase a property’s appeal, buying or selling a home with solar panels involves specific considerations that can significantly impact the transaction. Here’s what you need to consider:
Understanding the Solar Panel Ownership Structure
When it comes to solar panels, the ownership structure plays a critical role in determining the next steps in a real estate transaction. The three primary scenarios are:
1. Financed Solar Panels
In this case, the homeowner has taken out a loan to purchase the solar panels, and the panels are not fully paid off. A lien on the property may secure the loan. If you’re buying a home with financed solar panels, you’ll need to:
- Review the loan terms: Determine if the loan is transferable to you as the buyer or if the seller must pay off the loan before the sale.
- Check for liens: Ensure that any liens related to the loan are resolved to avoid complications during the transaction.
- Plan for additional costs: If the loan is transferable, be prepared for the possibility of monthly payments being added to your budget. This will be considered on your mortgage application as part of your debt to income.
2. Leased Solar Panels
Some homeowners choose to lease their solar panels, paying a monthly fee to a solar company. The lease agreement often includes maintenance and repair services. If the home has leased solar panels:
- Understand the lease terms: Review the contract to determine whether the lease can be transferred to you as the new homeowner. Your mortgage application will also consider any lease payments as part of your debt-to-income ratio.
- Negotiate with the seller: If the lease isn’t transferable, the seller may need to buy out the lease or find another resolution before closing.
- Evaluate cost savings: Ensure that energy savings will offset the monthly lease payments to make the arrangement financially beneficial for you.
3. Owned Solar Panels (Paid in Full)
When solar panels are fully paid for, they are considered part of the property and can add significant value. In this scenario, your primary considerations are:
- Verify ownership: Confirm that there are no outstanding debts or liens related to the solar panels.
- Assess the condition: Have the panels inspected to ensure they’re in good working order and provide the expected energy savings.
- Estimate long-term benefits: Owned solar panels typically result in direct energy savings, which can make the property more attractive and cost-effective in the long run.
Additional Considerations About Solar Panels on a Home
Who installed the panels?
While DIY is a popular trend for homeowners, you might want to be sure you know who did the work, and you’ll want to ensure that they were installed correctly and have the proper protections under warranties.
What is the state of the roof?
For any home purchase, the state of the roof is an important consideration. If the roof is holding solar panels, the roof’s condition becomes even more crucial. If the roof is not in good shape, having it fixed would mean uninstalling and reinstalling the panels, resulting in additional costs that must be considered. So, the condition of the panels and the roof must be checked.
What does maintenance look like?
Like anything in life, solar panels may need to be cleaned or serviced over time. It’s essential to know what the previous owners did and how the upkeep was done so you have a good idea of how to best maintain them going forward. Depending on where you live, how much rain you get, and so on, you may require more or less maintenance. If the panels are leased, you will have to worry even less because maintenance is the leasing company’s responsibility.
Impact on the Real Estate Transaction
Liens and Debt
If the solar panels are financed or leased, liens may be tied to the property. Before closing the sale, it’s crucial to:
- Work with your lender and title company to address any existing liens.
- Ensure all necessary agreements are finalized, such as transferring the lease or paying off the loan.
- Discuss potential delays: Resolving lien-related issues may take extra time, so plan accordingly.
Property Appraisal
An appraiser must note the presence of solar panels during the property appraisal process. This assessment will consider:
- Market value: How the solar panels impact the home’s overall value compared to similar properties without solar panels.
- Ownership structure: Whether the panels are owned, leased, or financed, as this can influence the appraised value.
- Energy efficiency: Solar panels can contribute to a higher valuation if they result in noticeable utility cost savings.
Home Insurance
Solar panels may also affect home insurance. As a buyer, you’ll need to:
- Check with your insurer to confirm coverage for the panels.
- Understand whether they’re covered under the general policy or require a separate rider.
- Factor in any additional insurance costs when budgeting.
Consulting with Experts
Buying or selling a home with solar panels involves unique challenges that require careful planning. It’s essential to:
- Talk to your real estate agent: Ensure they have experience handling transactions involving solar panels.
- Work with a loan advisor: A Homestead Loan Advisor can help you navigate the complexities of liens, leases, and financing.
- Review contracts carefully: Collaborate with an attorney or title company to ensure all agreements related to the solar panels are properly documented.
- Consult an energy specialist: If needed, seek advice from a professional who can evaluate the solar panels’ efficiency and lifespan.
Benefits of Solar Panels for Homebuyers
While navigating the logistics of solar panel ownership can be complex, the benefits are worth considering. Solar panels offer:
- Energy savings: Reduced utility bills can lead to substantial savings over time.
- Environmental impact: Solar energy is a clean, renewable resource that reduces your carbon footprint.
- Increased property value: Homes with solar panels often stand out in the market, especially to eco-conscious buyers.
- Tax incentives: Depending on your location, you may be eligible for tax credits or other financial incentives for owning a home with solar panels.
Final Thoughts
Solar panels can be a valuable addition to a home, offering energy savings and environmental benefits. However, understanding the implications of ownership, financing, and leasing is critical to a smooth transaction. By addressing these factors early and seeking expert guidance, you can confidently buy or sell a home equipped with solar panels. Whether you’re a buyer or seller, taking the time to research and consult with professionals ensures you maximize the value of your investment.