What to know about purchases involving solar panels
This article on solar panels first appeared on www.utahrealtors.com.
Homes with solar panels are becoming increasingly common in some markets in Utah. The increase in solar companies, government subsidies, and financing options over the past decade have lead many people to view solar as a viable option to decrease their utility payments.
The article on UtahRealtors explains the options that homeowners take to get into solar, one of the most popular being a lease option. Under this option the homeowner leases the solar panels from the solar company. The panels are typically installed at no-cost and the homeowner doesn’t own or maintain the panels. Another common option is to finance the panels through a loan, often times through the solar company.
These two options lead to a number of questions about what happens when selling a home with solar panels when they are leased or financed through a loan.
What if the solar panels are leased?
Depending on the solar company and the contractual agreement the seller may have the option to transfer a lease to a new buyer. Other times the lease is non-transferable and must either be bought out or a cancellation fee must be paid. Some buyers may be willing to take on the lease themselves as part of the purchase agreement. Other buyers may assume that the solar panels are already be paid off and might be surprised to learn that they could owe money for the panels after the purchase. When solar panels are leased, an appraiser does not include them in the valuation of the home. Because they are not real property and could be taken away from the house at any time, they are not considered to be part of the appraisal. Just because a home is selling with solar does not mean the solar panels add value to the home.
What if the solar panels are financed on a loan?
It’s important to see if the solar panels are completely owned or if there are still outstanding payments for the loan. Buyer and seller need to understand the complications of having an additional loan on the property and whether the seller is planning on paying it off before the sale or if the loan is going to be passed to the buyer. Solar panels that are financed or owned can be included in an appraisal, assuming that they are part of the contract between the buyer and seller. Appraisers will typically do a combination of net present value and comparables with solar panels to justify a value. Banks typically will not accept only a net present value evaluation and usually require the appraiser to find comparables that sold with solar panels. Finding specific comparables often depends on how well local realtors update and maintain the local listing service. The more precise the realtors are, the easier it becomes for appraisers to find correct comparables and justify the value of the home to the buyer, seller, bank, or realtor.
The website PVWatts.nrel.gov is a useful resource in determining the value of solar and gives an objective estimate of the value a home can obtain from solar panels.
If you’re looking to value your home that includes solar panels, contact us.