The Truth About Buying a House with Solar Panels
What You Will Read In This Article
Solar panels are a great way to cut your power bills and greenhouse gas emissions, but they can be costly. So, you should know what you’re getting into before you buy a house with solar panels.
Solar Panel Ownership Types
When buying a home with solar panels, you have different possible ownership types. It’s essential to understand the various options and their implications before deciding because it dramatically affects how much value your home will retain.
Fully Owned Solar Panels
If you buy a home with fully owned solar panels, you will own them and their benefits. You’ll benefit from any grants available at the time of purchase and pay less to your energy provider since you generate your power. However, if these panels stop working or need replacing after the warranty expires, you will have to cover the replacement cost.
Additionally, the solar panels will stay with the house if you move to a different property. Unfortunately, that means you won’t be able to take them with you, so you’ll have to re-purchase new panels for your next house.
Leased or PPA Solar Panels
You don’t own the system outright with leased or power purchase agreement (PPA) solar panels. Instead, you sign a contract with a third party who owns the panels, usually for 20 years. Since you do not own them, there is no cost to you if they stop working or need replacement after their warranty expires.
However, this also means that you will not benefit from any grants available when installing the panels since a third party owns them. It also means that if you move to another property with leased solar panels, you cannot take them with you, so you’ll have to purchase new ones in your next house.
If you buy a home with PPA solar panels, you will usually have a lower monthly payment than if you leased the panels.
Financed Through a Solar Loan
If you finance the solar panels through a loan, you will usually pay more than if your energy provider did it. However, you can generally take that money and use it for something else because there is no contract attached to the loan. Plus, you benefit from the incentives and tax breaks at the time of purchase.
If your home with solar panels is sold or refinanced, any remaining balance on your solar loan will be transferred to the new owner with no additional out-of-pocket expense. Selling a home with a financed solar system can also provide some advantages, including reducing the time it takes to sell your home and providing an eco-friendly appeal to potential buyers.
A significant drawback is that solar loans are not as standard as leases or PPAs, so it may be challenging to find a lender who offers them.
PACE-Financed Solar Panels
A relatively new way to finance solar panels is through Property Assessed Clean Energy (PACE) financing. This allows homeowners to borrow money, then repay through their property taxes.
The advantage of PACE-financed solar panels is that the loan is attached to the home, not the person who owns it. That means if you sell the home, the loan follows it to the new buyer. The solar panels also remain with the house once you sell them, so if they stop working or need replacement, you won’t have to pay for them out of pocket.
The disadvantage is that PACE financing can be expensive and have higher than average interest rates.
Advantages of a House with Solar Panels
At Energy Center of the World, we are big advocates for solar panels for homeowners. There are many advantages to owning a home with solar panels. In addition to the monetary benefits, solar panels also have environmental and health benefits.
Lower Electricity Bills
As mentioned above, there are multiple ways to save money on your energy bills when you buy a home with solar panels. If they are financed through property taxes, you benefit from any government tax benefits. However, if they are leased or owned by a third party, you will probably pay more than if the energy company owns them, but you will still save money on your energy bills.
Higher Home Equity
If you finance your solar panels through your home’s mortgage, they are considered an improvement to the property. It means that if you sell the house, it will likely increase in value by some amount.
Additionally, if you finance them through your property taxes, then your home value increases by the solar system’s value, which can make it easier to get a home equity loan.
Low Maintenance Costs
Once your solar panels are installed, the only costs you will have are the occasional cleaning and any repairs or replacements that may be needed. While the panels usually come with a warranty, most warranties only last 10 or 20 years.
After that, you will have to pay for any repairs out of pocket. However, most panels last for 30 or more years, so you will likely have many years of free maintenance.
Solar Panels Have a Long Lifespan
Speaking of which, solar panels have a lifespan of around 30 years. That means you will get the majority of your money back in the form of free energy in the last 10 to 20 years of the panels’ life. While you will have to pay for any repairs after the warranty expires, solar panels are a very low-maintenance option and can save you money over the years.
Cool House Factor
Houses with solar panels look cool and will generate buzz in your neighborhood. Once installed they are a great conversation starter at your neighborhood block party. You may be the first in your neighborhood to have them, and you will be able to give tours of your system. You can even brag about how much money you saved on your energy bills!
Need a Mortgage?
Disadvantages of a House with Solar Panels
Although there are many advantages of a house with solar panels, they have a few disadvantages that you should be aware of when considering buying a house equipped with solar panels.
Solar Panels Increase Cost of Roof Replacement or Repairs
Depending on your homeowner’s insurance agreement, replacing the roof due to damage caused by solar panels may not be covered under your policy. Additionally, if you want to repair or replace portions of the roof or gutters damaged by installing the solar panels, you will have to pay for it out of pocket.
Also, with solar panels installed in your roof, you’ll have to pay more to get your roof repaired in general than if you didn’t have solar panels installed in the first place.
As mentioned earlier, solar panels attract critters because they provide a warm, safe place to live. While this may not be a problem for some people, others may not want animals living on their roof or in their homes. Some of the critters you might have include:
- Other rodents
The best prevention for this is to ensure that you have a good roof, sealed soffits, and a good critter control plan. Doing this will help keep the critters out of your roof and solar panels and keep the damages caused by the animals at a minimum.
Inverters Don’t Last as Long as the Panels
Solar panels are made to last for decades, but inverters tend to have a shorter lifespan. If you don’t know what inverters are, here is an explanation. They are an essential part of a solar system – without them, the energy from your panels would just be going to waste.
Inverters change direct current (DC) electricity produced by your solar panels into alternating current (AC) electricity that you can use in your home or business. The inverters are usually installed on the back of each panel and are connected to a central controller.
While the inverters usually have around ten years, some can last for 20 years. However, if something happens to your inverters and they need to be replaced before the end of their lifespan, it can be expensive.
9 Questions to Ask Current Homeowners About Their Solar Panels
If you’re thinking of purchasing a home with solar panels, it’s essential to do your research. One way to do this is by talking to the current homeowners. Here are nine questions you should ask them.
1. What is Your Current Electrical Bill Each Month?
Asking about the current homeowner’s monthly electrical bill will give you a good idea of how much money you can expect to save each month with solar panels. Additionally, it will help you to determine whether or not solar panels are the right investment for you.
Some homeowners may not be as impressed with the savings as others because they use a lot of appliances and larger air conditioners. Still, homeowners who use less electricity can expect to save more, thus making it worth it to buy a home with installed solar panels.
2. Who Owns the Solar Panels?
If the current homeowners installed the solar panels, they will likely still be owned by them. If the previous homeowners or a company installed the solar panels, you would need to ask who owns them. You’ll also want to find out if there is a transferable warranty on the solar panels and, if so, for how long it is.
Remember that there are different warranties, so make sure you know what is covered. In addition, if the solar panels are leased, you will be responsible for paying the solar company each month. If you buy a home with leased solar panels, make sure the lease is transferable to your name.
3. If Financed, Who is Paying the Solar Panels Off?
Who is paying for the solar panels if the current homeowner financed them off? If it’s not you, you should find out if there are penalties for early payment. Also, suppose they’ve paid the solar company in full and are now trying to figure out what to do with their excess electricity generation. In that case, they may offer to sell you power at a reduced rate or give it completely free.
4. Who Manufactured the Solar Panels?
Not all solar panels are created equally, and this applies to the solar company. Some companies make better quality solar panels than others. If you can find out who manufactured the solar panels, it’s a good idea to do some research on them. You’ll want to know:
- How long they’ve been in business (and if they’re still in business)
- The quality of their products
- If they have a good warranty
- What kind of reviews the company has
5. Who Installed the Panels?
Along with finding out who the manufacturer of the solar panels was, you’ll also want to find out who installed them. It is essential to do this because some solar companies are better at installation than others.
In addition, you’ll want to know how long ago they installed the panels and if they’ve been maintaining them or not. If not, you may want to call a different company specializing in repairs or solar installations.
6. Is There a Current Warranty?
If the solar installation was recently completed, you wouldn’t want to buy a home with solar panels without knowing what kind of warranty is in place. Unlike other warranties (which can also be transferable), a photovoltaic (PV) or solar panel warranty typically will not last forever.
Instead, it generally lasts for about 25 years. You’ll want to determine what is covered under warranty and how long it is valid. If the warranty is about to expire and you’re not sure if you’re going to go ahead and buy the home, you may be able to negotiate to get a new warranty with the current homeowners or with the solar manufacturer or solar panel installer, as long as they are still in business.
7. Is There a Current Service Plan?
Just like with a warranty, you’ll also want to find out if the homeowners have a current service plan. It is essential because solar panels will eventually need to be serviced, like a car. You’ll want to know how often they get serviced, what’s included in the service plan, and how much it costs.
If the homeowners don’t have a service plan, you’ll need to factor in the cost of getting one before making your decision. You likely don’t want to do this yourself if you don’t know what you’re doing. Not only can it be dangerous, but you may also void the warranty if something isn’t done correctly.
8. How Large is the System?
Just because a home has solar panels doesn’t mean that they power the entire house. Most homes only have a fraction of their roof covered in solar panels. It is something you’ll want to keep in mind if you’re thinking about buying a home with solar panels.
How much of the electricity bill will you be able to offset by the solar panels? If it’s not a lot or not what you expected, then you may not want to buy the home.
9. Is Net Metering a Possibility?
Net metering is when the homeowner can sell their excess electricity back to the utility company. Not all states have this option, so you’ll want to check with your state to see if it’s available. If it is, find out what the rates are and how often they get paid. Some advantages to net metering include:
- Being able to sell excess electricity back to the utility company for a profit
- Reducing your bill during certain months of the year because you can use your credit rather than pay for it
- Using that as a selling point if you decide to sell the home in the future
Read More: Feeling Scared After Buying a House?
Solar Panel Implications For a Mortgage
While the presence of solar panels on a home shouldn’t affect your mortgage terms, there are some things you should be aware of. First, you’ll want to determine if the solar panels will increase your property taxes and how much they will go up.
It’s also a good idea to assess solar panels’ impact on the home’s market value. If you’re not sure how to go about doing this, or if you have any other questions, your mortgage lender should be able to help.
Just because a home has solar panels doesn’t mean that it’s free and clear. There may be liens on the property that you’ll need to consider before making an offer. It could be anything from a home equity loan to a second mortgage.
You’ll want to know what the liens are, how much is owed, and who the lender is. If you’re not comfortable taking on the responsibility of those liens, you may want to reconsider buying the home because it could be difficult and costly to get them removed.
PACE loans are a relatively new type of loan that helps homeowners pay for solar panels, energy efficiency upgrades, and water conservation. They’re typically offered through municipalities and come with low-interest rates.
You’ll want to be aware that PACE loans are attached to the property, not the homeowner. This means that if you decide to sell the property, you’ll likely have to repay or refinance this loan. It can affect your refinance options and how much money you will get from the sale of the home.
There are a few other things you’ll want to consider when buying a home with solar panels. For example, how will the panels affect the roof? If you need to replace the roof in the near future, that could add to the cost of the panels. You’ll also want to find out if any maintenance or cleaning needs to be done regularly.
Finally, ask the seller how long they’ve owned the home and how much they paid for the solar panels. It can help you get an idea of how much money you may recoup if you decide to sell the home in the future.
Need a Mortgage?
What Your Home Inspector Should Inspect
A home inspection is essential when you are considering buying a home. First, however, it’s necessary to know what your inspector should inspect when it comes to solar panels. Some things may not be on the list, but you’ll want them checked anyway. Doing so will give you peace of mind and help you negotiate a better price on the home.
Solar Panel Cracks and Electrical Wiring
The two most important things for your home inspector to check are cracks in the solar panels and any electrical wiring that may be exposed. Cracks in the panels can allow water to seep in, damaging the electrical wiring. This is a safety hazard you should fix immediately. Likewise, the exposed electrical wiring can also be a safety hazard and should be fixed as soon as possible.
When you put in solar panels, there’s no doubt that you want them to do their job. However, when your home inspector comes for the inspection, they should be looking at whether or not all of the wirings are concealed and if any visible wires are running along the roof.
If it seems like the installation wasn’t done correctly and there are any safety hazards, you may want to reconsider buying the home.
Roof Remaining Lifetime
Your home inspector will look at the condition of the roof. They’ll check to see if there are any visible holes, broken tiles, or missing shingles, but they might not go further than that. This is where you need to show them what state the solar panels appear to be in and how long it’s likely to last.
If the inspector finds any damage to the roof, it could affect the lifespan of the solar panels. Your roof should last at least as long as the solar panels.
Inverter and Metering System
The inverter converts the direct current (DC) from the solar panels into alternating current (AC). Your home inspector must check this to ensure it’s in good condition. They should also check the metering system, which is how you measure how much energy your solar panels are producing.
If there are any problems with the inverter or metering system, it could affect your ability to sell the home in the future. While the inverter doesn’t have to be replaced often, a specialist should check the metering system at least once a year.
How Solar Panels Impact the Property Taxes
Lastly, you’ll want to know how solar panels impact property taxes. In some cases, homeowners may get a break from their property taxes because of the solar panels. For example, you can get a property tax break for installing solar panels in some places.
However, this varies from state to state, so it’s essential to check with your local government. One way to understand how your solar panels impact your property taxes is to go online and look up other homes in your area with the same features. You could also talk to your real estate agent to get an idea of how it works in your area.
Jenny Kim is the managing director at Energy Center of the World where she is responsible with helping make solar power more accessible and affordable to anyone that wants to take advantage of the many benefits of solar energy. Jenny holds a Master of Science in electrical engineering from Virginia Tech where she paid her way through college as a top-performing inside sales representative for SolarCity.
You can connect with Jenny on LinkedIn here.