Buying A House With Solar Panels: What You Need To Know

When you're buying a home, you may have specific items on your checklist: the right number of bedrooms, the right size of the yard and finding a home that checks all the other boxes. 

What about buying a house with solar panels? If you want to buy a home with solar panels or aren't sure whether you should buy a home with solar panels at all, how do you make the final decision?

In this piece, we'll walk through the benefits of buying a house with solar panels as well as go through your financing options. We'll also go over the ins and outs of buying a home with leased solar panels as well as buying a home with fully owned solar panels.

Let's start with the benefits of solar panels.

Benefits Of Buying A House With Solar Panels

What are the benefits of buying a house with solar panels?

First, a little background on your options. Many homeowners buy solar panels outright or purchase with the help of a loan. Others choose to lease their systems to save on the cost of installation.

The main difference between these types of solar acquisitions is ownership. When you purchase solar panels, you have full ownership over the system, but when you lease solar panels or sign a power purchase agreement (PPA), a third party owns the solar equipment.

• Increase to property value: Homes with solar systems sold for 4.1% more on average than comparable homes without solar power in 2019, according to Zillow research. This means home sellers could achieve an additional $9,274 on a home sale. In certain areas of the country, homes may sell for even more.
• Lower electricity bill: Solar panels usually cost $200-$250 apiece, depending on the brand and multiple panels, but you’ll likely pay less over time on your electricity bills. In fact, Consumer Affairs notes that switching to solar could slash energy bills up to 75%. This means that you can save thousands of dollars over the course of time.
• Tax breaks and other advantages: Solar can give you more than low electricity bills – it can give you tax breaks, and credits using solar power if you qualify for such incentives.
• Greater grid independence: "Off the grid" means that you don't have to rely on utilities to give you power. However, you can choose how much connectivity you want to have to the grid. You can connect partially if you don't want to get completely off of utilities.

It's important to realize that while solar panels can save you money on energy bills and energy companies often offer homeowners large subsidies, they can still cost a lot to install.

Both options are great choices for someone interested in a solar panel system, so make sure to choose the right option for your own personal situation. For example, you might consider purchasing solar panel equipment if you want to increase the market value of your home or take advantage of the system’s financial benefits, rather than only having them for their environmental benefits.

You might also be eligible for energy-efficient tax deductions. On the other hand, leasing a solar panel system might be your best option if you are only interested in the system’s environmental benefits for renewable energy. You might also not want full maintenance responsibility of the equipment, may be ineligible for investment tax credits or don’t want to wait until the following year to receive the financial benefits of tax credits.

Understanding The Different Solar Panel Financing Scenarios You Could Encounter

As a buyer, you could encounter several different solar panel financing scenarios.

For example, you might entertain the idea of buying a house with fully owned solar panels, buying a house with leased solar panels, solar panels financed through a solar loan or Property Assessed Clean Energy (PACE) -financed solar panels.

Let's walk through how each of these financing types might impact your purchase.

Buying A House With Fully Owned Solar Panels

If you’re specifically looking for a home with solar panels, buying a home with a fully owned system is the best scenario. That’s because the previous owner purchased the panels upfront, so the seller entirely owns them upon buying the home.

By buying a house with solar panels, you don’t have to pay the high upfront costs of the panels or the installation, and you don’t have to pay a monthly fee to a third party, which is the case when leasing solar panels. When you own the panels outright on the home, you save on utility bills without other monthly costs.

That said, the solar panels will likely require the buyer to pay more for the home because, as mentioned above, solar panels typically add value to home purchases. But, similarly, you should be able to retain this value when you sell the home at some point.

Buying A House With Leased Solar Panels

Buying a home with leased solar panels might offer a better option for your needs. However, assuming a solar lease can be tricky – it means the homeowner sends monthly payments to the company that installed the solar equipment.

If the house you’re interested in purchasing is leasing a solar panel system, it’s important to learn more information about the lease terms. Understand everything you can about the lease contract and deal. Feel free to ask about what monthly fees come with the system and find out whether payments will escalate or not.

If you’re satisfied with the lease terms and your personal financial situation can handle a solar system lease, the solar company can easily transfer your name to the lease after you pass the credit check. However, if you’re not comfortable with the current lease, you might be able to negotiate with the previous owner to see if they will compensate you or pay off the remainder of the lease.

One more thing: Check for solar panel liens. The manufacturer may have placed a lien or Uniform Commercial Code filing on the property to make sure you keep paying for the panels, depending on how you financed them. A lien is a claim against the property, which can create problems for both the buyer and seller. Many solar panel manufacturers will be able to remove the lien and uninstall the system entirely in the case of a sale.

Your solar panel lease contract also can’t have any provisions that interfere with the mortgage, including clauses that hinder the sale of the property.

Solar Panels In A PPA

A solar power purchase agreement (PPA) eliminates the upfront costs of putting solar panels on a home. A PPA is a financial agreement between you, the home buyer and the developer, in which the PPA finances and installs a solar energy system on a property. You pay one monthly rate on the electricity produced by the solar panels.

Buying A House With Solar Panels Financed Through A Solar Loan

If a homeowner installs solar equipment with a solar loan, the loan will always be the homeowner's liability, which differs from a lease. This is the case, even if the property is sold. If you’re looking to buy a home with solar panels financed through a solar loan, you don’t need to worry about making additional monthly payments. Instead, the asking price for the home might factor in the cost of the solar equipment and pay off the solar loan.

Buying A House With PACE-Financed Solar Panels

PACE financing refers to a means of funding energy efficiency upgrades through residential, commercial and industrial property renewable energy installations.

PACE financing is attached to the property, not the person who took out the loan, since the homeowner makes payments through property taxes. Therefore, the solar equipment payments become your responsibility when you purchase a home that has PACE financing. If you’re thinking about taking on PACE financing payments with the purchase of a new home, review the financing terms before you make a purchase.

Worried about affording your panels?

If you find that a solar panel system won’t work for your finances, there are alternatives for you. For instance, you could buy into a community solar project. If you invest in a project controlled by the utility company, you could get your electricity at lower rates without having to deal with the financing problems.

Questions To Ask Before Buying A House With Solar Panels

Let's walk through some key questions you should ask or consider before you buy a home with solar panels.

Who Installed The Solar Panels?

What business installed the panels on your new home purchase? It's important to validate that a reputable business installed the panels. Make sure that the company is still in business and check for any existing warranties or maintenance plans with the installer or manufacturer that will transfer to you upon closing.

How Much Output Can You Expect From The Existing Solar Array?

You might have to do some math to determine how much solar power your roof could produce. Multiply your household's hourly energy requirement (you may need to get some figures based on information from your real estate agent) by the peak sunlight hours in that area and divide by panel wattage. This will give you an indication of whether the existing solar array should offer enough "coverage" for what the home will require.

The Residential Energy Consumption Survey, according to the U.S. Energy Information Administration, put together general figures of average energy consumption and number of panels recommended per month based on home size.

If you can find out the total energy consumption from the last 12 months on the home, divide that number by 12 to determine how much the solar panels should generate each month, though remember that another family may not have the same energy use habits as yours.

You can also try using the PVWatts^® Calculator, a project of the National Renewable Energy Laboratory. You can put in your location and the specs of the solar panel system you’re considering to find out how much you could save based on local retail energy prices.

What Incentives Or Net Metering Opportunities Are There?

Potential buyers should ask for more information about net metering.

What is net metering?

Net metering allows residential and commercial customers to sell the electricity you don't use back into the grid, and many states have passed net metering laws.

Utilities may offer net metering programs voluntarily or due to legislative decisions. You can't move from New York to California and expect to experience the same net metering rules. Legislation differs from state to state and implementation policies change based on the state and even the county in which you live.

For example, your state may offer solar renewable energy certificates (SRECs), which require your utility company to buy your SRECs to comply with state-level renewable energy requirements. Each SREC can give you extra income, depending on your state's requirements.

It’s important to note that while similar, net metering and SRECs differ in how you receive the excess energy you produce

Performance-based incentives (PBIs) also pay you a per kilowatt-hour credit for the electricity that your system produces. PBI programs differ from SRECs because they provide an incentive for the electricity itself produced.

Do You Want To Buy A House With Solar Panels?

So, bottom line: On top of everything else you want to look for in a home, adding solar panels into the mix creates some unique questions. You need to think about the average energy savings, as well as how having these panels affects the price. Do these factors all mesh with your budget?

One thing you don't have to worry too much about: maintenance. You can cross that off your list, because, luckily, solar equipment is known for its durability and has warranties on the panels themselves. Leasing solar equipment requires even less maintenance on your part because the company that owns the system is responsible for maintaining it.

Rocket Solar does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.