Solar panels are one of those tricky things we all like to believe increase the value of a home. After all they save homeowners a ton of money, right? Well that depends. Says real estate agent Aaron Zapata of Inman, “According to FHA and Fannie Mae, whether solar panels add value or are viewed as a liability is still unclear.”
While many websites selling solar will lead you to believe it’s the best possible investment for your home, the true benefits of solar (especially for a potential buyer interested in your home) depend on quite a few factors. Read on for some definitive truths about solar that can help you decide if and when to install, and how to best market your property if you’ve already made the plunge.
Consider Your Location
Plenty of solar companies like to quote the savings you’ll generate on the hottest and longest days of the year. Says top 1% real estate agent Thomas Braunagel of Bridgeport, CT, “Anybody can quote this super efficient July 15th, but what really counts is when you average it out over the course of the year.” And this means factoring in the rainy months and potentially long winters too.
While that doesn’t necessarily rule out solar in places with long winters and rainy seasons, it’s something to consider. Do your homework and cross-check information to be sure you’re signing up for a solar package that will truly generate savings, not only for you but for future buyers as well.
Do The Savings Apply?
We’ve all heard the quotes like these: “The average Massachusetts household paying $100 a month for electricity can save an estimated $35,900 over the next 20 years — almost $1,800 a year.” And while that all sounds pretty great, the real question remains: Are you planning on staying in your home that long? Because if not, the 10k loan you take to access that savings might not be worth it, especially if you only stay in the home a few more years and end up owing the solar company money when it comes time to sell.
Owning Vs. Leasing Matters
While this might not be at all obvious to the unsuspecting homeowner, there’s a big difference between owning and leasing your solar panels— especially when it’s time to sell the home later on. We’re guessing the solar company might’ve left this detail out, as they like to say leasing is one of the “cheapest and easiest” ways to acquire a solar package— but the truth of the matter is that if you did lease your solar package (and the lease is still current), this complicates selling your home quite a bit.
Assuming buyers are considering your home and leased solar panel package- they’re likely already crunching the numbers on what this transferred lease will cost them. Says Zapata, “I have found that most buyers don’t want to buy a home with a leased solar panel system because of the additional monthly cost. For some reason, buyers don’t see the value in lower energy bills. All they see is the increased minimum monthly payments.”
Difficulty Securing Loans
Another point to consider is that sometimes banks won’t even grant a buyer a loan on a property if there’s a leased solar package involved. Says top luxury real estate agent Pam Zaragoza of Burlingame, CA, “If [the panels] are leased it’s difficult to get a loan, and there are many more steps. If they’re owned it’s easier to buy the house and the loan process is much easier. Certain lenders will not even give loans on a home leased with solar panels.”
The Question of Warranty
Many buyers will also want to know about the warranty on the solar package, especially if they’re not incredibly thrilled to be stuck with solar in the first place. Zaragoza mentions that you should always ask your solar provider what will happen to your warranty if you decide to sell the home. Knowing that you can transfer the warranty to new owners offers them a big peace of mind, and if this isn’t possible, then this might be a reason to reconsider the purchase or lease agreement.
Transferring Leased Solar
The reason transferring leased solar is so complicated is that it’s an outstanding investment of yours that you must now (somehow) pass on to someone else. Imagine yourself as a buyer walking into someone’s home and them casually mentioning a leased car that comes with the property. If you never wanted another car, this would be a problem. Leased solar packages are the same. Ultimately they’re a liability for a new owner who may have never wanted them in the first place, and this type of sticky transaction can make the sale of your home that much more complicated.
Says Zapata, “If a homebuyer decides to purchase a property with leased solar panels, that buyer must qualify for the solar lease with the solar company. This often affects the buyer’s purchasing ability and could disqualify a buyer from purchasing the home once the mandatory solar lease is added to the payment calculations by their lender.”
Do Solar Panels Increase Property Value? The Positives and Negatives, In Short
When Solar Helps
Solar can be valuable investment for future buyers when it’s been recently installed and when you’re living in a location where it’s becoming the norm. Says Ilyce R. Glink and Samuel J. Tamkin of the Washington Post, “If lots of homes in your area have solar panels, and buyers are learning to expect them, adding them might give you something extra to promote your home when it comes time to sell. However, if few homes have solar panels and buyers tend not to pay for the investment, you might not get back the money you put into the panels.”
Another point to consider is if your home has certain features generating high electricity bills that might call for solar. If for example you run a heated inground pool every summer (or all year), then solar might be a way to help mitigate these expenses, and this is a very real application of savings you can explain to future buyers.
When Solar Hurts
Solar hurts when it’s a little older, and leased. As previously mentioned, it can be nearly impossible for buyers to secure a loan when leased solar panels are involved. Technology changes constantly and buyers will be less than impressed with your 10-year old solar dreams than they will with a newer package. Says Braunagel, “I do a lot of [deals with solar], and for me, they’re a pain in the neck, they get in the way of sales. In many cases homeowners don’t know what the contract is like, and most people don’t buy them, they lease them which is a thorn in my side. So many buyers end up asking about a payout to have a contractor come remove them.”
Think Like A Buyer
When installing solar in your home, or figuring out how to market a home with an existing solar package, you really need to think about what the investment looks like from a buyer perspective. According to Glink and Tamkin, “While the investment in the solar panels might be great for you in the long term, if you have to resell the home, will a buyer consider the solar investment something that adds value to the home?”
If you haven’t pulled the trigger on installing solar quite yet, it’s worth considering something called a “solar community”. Depending on where you live you may be able to buy into a solar farm and reap some of the benefits of solar without having to install actual panels on your home— a viable option if selling is in the near future.
As far as the time-old question of if you should install solar in your home, Zaragoza says “Technology changes all the time keeps getting better and better, in my opinion— solar panels still have a long way to go.”
So if you haven’t purchased them yet, maybe hit the pause button on that investment.