Buying a house with solar panels: what you need to know

Despite solar panels being more common than ever, many home buyers are still determining if buying a house with solar panels is a good idea.

The truth is – it depends! Solar panels can increase the value of a property and can lead to low or no electricity bills, but it all comes down to who owns the panels and how they're financed.

Whether you're actively looking for a home with panels or you find your dream home that just happens to have solar attached, we'll walk you through the questions to ask so you can decide if buying a house with solar panels is the right investment for you.

Are the panels owned, financed, or leased?

One of the most important questions to ask when buying a house with solar panels is, "how are these solar panels financed?" The answer will be one of three options: purchased with cash, paid for with a loan, or leased through a third party.

There are valid reasons for choosing each option when installing solar panels. But, if you're buying a home that already has rooftop solar, systems that were paid for outright and owned by the current homeowner are the easiest to deal with and the most cost-effective.

Here is what to know in each scenario.

Buying a house with a cash-purchased solar system

Pros	Cons
No paperwork; the solar panels come with the house	You will not get rebates or tax credits, the original purchaser gets them
Immediately save money on electricity bills	Transferring warranties and certain performance-based incentives

If the house you are interested in buying has solar panels that the current homeowner paid for with cash in full, you're all set. One caveat – there may need to be a transfer of ownership of some warranties, but this is typically an easy process.

Some companies only provide a warranty to the original purchaser, so be sure you know which category the panels on your new roof fall into.

In this scenario, you might pay more for the house due to the increased appeal of solar panels. Think of it like this: solar panels are an added feature, similar to a backyard pool or a recently remodeled kitchen. These unique features, like solar, typically increase the value of a home.

Another reason solar panels increase home value is that solar panels either provide free electricity or at least a significantly reduced electricity bill and shield homeowners from rising utility costs.

The age of the solar panels might factor into this benefit. Older solar panels are not necessarily a deal breaker, but think twice if they are over 15 years old.

The solar was purchased with a loan

Pros	Cons
A lower payment than a monthly electric bill	Transferring the paperwork will be a lot of work
You will own the panels after the loan term is up	A lien could be placed on your home that would allow the solar company to take your house if you miss a payment
	Certain loans take precedence over mortgage payments, so lenders might not give you a mortgage if solar panels are loaned

This is the next best option. Even though the solar panels are paid for with a loan over time, the homeowner still owns them. Dealing with the loan itself during the sale is up to the seller. There are two main ways to address this, the seller can price the home at a higher rate to use that cash to pay off the loan, or the loan can be transferred to new ownership.

Additionally, the buyer can negotiate to pay more for the home to pay off the loan immediately, owning the panels outright.

If the buyer decides to take over the loan, the amount paid each month for a solar loan is usually the same or less than what a typical electrical bill would be. Solar loans allow homeowners to save money because they have a fixed cost each month instead of a variable electric bill.

Suppose the loan is paid off before the warrantied life of the solar panels. In that case, you will have free or extremely cheap electricity for the years your panels continue to produce electricity.

If transferring the loan, watch out for these scenarios

Depending on the previous owner and their payments, you might have no problem transferring the solar loan into your name. If there are missed payments on the system, it is best to walk away from that house because it will be challenging to get a mortgage approved. Banks will want to avoid lending you money for both a house and unpaid solar loans.

One thing to note is that if a solar panel system is on loan, the home may be the collateral, depending on if the loan is secured on unsecured. If it's a secured loan, the lender can place a lien, or Uniform Commercial Code filing, on your property. Then, if a loan payment is missed, the bank can take the house.

Some solar installers might remove the solar panels when the house is sold, but don't count on it. Once a solar system is installed on a roof, even if it is leased, it is considered a part of the home. Solar panel installers will not take time out of their day to remove a system that is not paid off.

If you're buying in California or Florida, the solar panels may be financed using a property-assessed clean energy loan, or PACE loan for short.

Local and state governments finance these loans. With a PACE loan, a lien is placed on the property until the loan is paid off, meaning the loan is attached to the house itself, not the person. PACE loan payments are made as part of the home's property taxes.

PACE loans take precedence over mortgage payments, so many mortgage lenders will not give you a mortgage for a property with an existing PACE loan. In this case, do not buy the house.

Leased solar panels and Power Purchase Agreements

Pros	Cons
A solar option if you care about the environment but cannot afford to pay for solar	Cannot be easily transferred to a new homeowner
No money down solar install	You will never own the panels unless you buy them for a likely higher cost than they’re worth
Energy bill savings and predictable pricing	The company that they are leased from gets all of the monetary benefits, i.e., incentives and tax credits
Access to net metering	An escalator clause could increase your monthly fees over the lifetime of your panels
Not responsible for system maintenance	Escalator clauses can make solar power more expensive than grid power
	Not the owner of the solar panel system
	No access to money-saving incentives
	Lower saving potential over the lifetime of the panels
	Challenging to transfer to a new homeowner
	Locked into a long-term contract

Leased solar panels are the worst-case scenario when buying a house with solar panels. With solar leases and solar Power Purchase Agreements (PPAs), the homeowner does not own the solar panels, the solar company does. The homeowner gets to use the solar energy generated by those panels to lower their electricity bills, but they also have to make a monthly payment to the solar company that is slightly less than what the pre-solar electricity bill would have been.

As the home buyer, these agreements are tough for a few reasons:

1. You have to enter a long-term contract with a company that you do not know

2. The contract is based on the energy usage needs of a different family

3. You cannot take advantage of solar savings incentives

4. At the end of the lease, you will never own the panels outright, so they will not generate free electricity

Additionally, leased solar panels could have a sneaky hidden escalator clause that increases the monthly payment cost as the years go on. Your relatively cheap monthly payment could increase to the point where it was more financially feasible for you not to have solar panels at all.

To make buying a house with leased solar worth it, the home's seller can buy out the solar system or take some money off the house's price. The only tangible benefits to a leased system are that the homeowner has predictable electricity bills and access to clean energy.

Unless the current owner buys out the solar panel lease to own the panels, do not buy the house if the solar panels are leased, it is not worth the headache.

A unique lease option is a Power Purchase Agreement (PPA), which allows you to install solar panels with no upfront costs. A PPA will enable you to lease a system from a third-party owner for anywhere from 5 to 25 years.

Each month, the homeowner would pay the system owner for the electricity that the solar panels produce for less than they would pay their utility. PPAs are tough because, usually, homeowners would save more money over the system's lifetime if they just took out a loan for the system. But, if you cannot afford the upfront cost of solar panels, a PPA can get you renewable energy quickly.

Under a PPA agreement, homeowners will not get tax credit advantages or incentives like SRECS.

What other factors should you consider?

It's true, we did say to buy the house if the solar panels on it are paid for, but there are a few more factors to be aware of before submitting that offer letter.

The age of the solar panels

Although they can last longer, solar panels typically have a warranty of 25 years. If the panels on your potential new roof are over 15 years old, you should pause and consider this.

Panels operate less efficiently as they age, so the older they are, the less power they can produce. Older solar panel systems may also need to have their inverters replaced eventually.

The age of the solar panels shouldn't completely deter you from buying the home, but it's something to remember while house hunting.

The condition of the roof

Your roof should be assessed prior to installing solar panels. If the roof needs to be replaced, this should be done before the solar panels are installed.

But, this best practice might not have been carried out by the current homeowner. Make sure you find out how old the roof is because removing and reinstalling the solar panels will be costly if it needs to be replaced.

The company that installed the solar panels

Ask what solar company completed the installation and do some research. Are they still in business? Do they have good customer reviews? If it doesn't seem like the company has a great reputation, that may be something to think about before you make an offer on the house.

Here at SolarReviews, we prefer local solar installation companies that have been in business for over five years. They tend to be more trustworthy and typically provide good customer service if there are ever issues with your panels.

You can hear SolarReviews founder Andy Sendy discuss more of the most important things to look for in a solar company in this video:

Why are solar panels good for a home?

There are many reasons why you would want to buy a house with solar panels. The pros and cons of solar panels will vary depending on your unique situation, but in general, you can expect the following benefits:

• You will save money on energy bills

• You can increase the future value of your home

• Reduces CO2 emissions

• Increases energy independence

• Shields you from rising utility rates

Remember, solar panels will make updating and replacing your roof challenging. Additionally, unless you have a solar battery, you still need to rely on grid power for nighttime electricity.

Save money on electricity bills

When a solar panel system is designed, the number of panels used is enough to cover the average use of that particular home's electricity usage. Unless you use much more electricity than the previous house owners, you can expect to have low electricity bills. In some cases, your monthly electricity bill will be eliminated!

The exact solar savings will depend on many factors, like your energy usage, utility rates, and the net metering policy in your area. But generally, moving into a house with solar panels means more savings for you.

Increase the value of your home

Numerous studies show that solar can increase the value of your home by roughly 4%. There are a lot of factors that could make this increased property value higher or non-existent. Namely, if the solar panels are leased, that might genuinely devalue the home price.

At SolarReviews, we believe that the increased home value that paid-off or loaned panels can provide is valid.

Reduce CO2 emissions

Currently, most of the U.S. electric grid is still powered by fossil fuels. Using solar panels as your power source will reduce how much dirty grid power your home uses. Instead, you can run your home on clean solar power and reduce your carbon emissions!

Reduce your emissions even more by charging an electric car with your panels.

Increases energy independence

Solar panels are the easiest way for people in residential neighborhoods to rely less on the grid and take power into their own hands! To maximize your energy independence, you'll want to install a solar battery to power your home on solar power at night and keep the lights on when the power goes out.

Even solar panels installed on their own give you more independence from your utility company.

Shields you from rising utility rates

Much like death and taxes, you can expect that utility rates will rise year after year. They might be minimal increases, but over a lifetime, it can be thousands of dollars. Solar panels shield you from this increase.

Your electricity bill would be close to $0 if your panels were paid for. With a loan, you will have the same monthly payment, not one that rises with the volatile energy market costs.

How to decide if you should buy the house

Buying a house is a huge investment, so ask these questions to the current owner or real estate agent to make sure you are not on the hook for solar panels that do not make sense for you.

1. How were these panels purchased or paid for?

   • If loaned: will the seller pay off the loan? Will it be transferred to you? If so, what is the loan payment?

   • Was this purchased with cash, and does it have transferable manufacturer warranties?

   • If leased, no, thank you.

2. What year were the panels installed?

   • Have there been issues with the panels, or did you need to enact any warranty contingencies?

3. Was the roof replaced before the solar panels were installed?

   • If not, how old is the roof, and what is its condition?

4. What solar company installed the panels, are they still in business?

   • Please provide their contact information.

At the end of the day, solar panels should not be the make or break point in buying your home unless there are legal issues that can cause your home to be taken from you via a lien. If you are actively looking only for a house with solar panels, just ensure the current homeowner completely owns them to make the process as smooth as possible.