A guide to selling a house with solar panels

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Challenges and Barriers to Selling Solar Homes

A solar home can be thought of as any home partially or fully powered by solar energy. Given the broad definition, a solar home can look quite different depending on how you go about it. Get solar panels of your choice is only one option.

Depending on the type of arrangement you have to get your solar power, here are some of the hurdles to overcome when selling your home.

Solar leases or power purchase agreements (PPAs)

If you don’t want to deal in advance solar panel costyou might consider a solar lease or power purchase agreement (PPA).

With a solar leaseyou contract with a specific solar company or solar installer and pay a flat monthly rate for the equipment.

With a power purchase agreement, you pay a fixed rate for each kilowatt-hour generated based on your use of third-party installed solar equipment. With either of these arrangements, the idea is to generate electricity at a cheaper rate and pocket the difference between what your energy bill would be without solar compensation and what you pay to the company to service your equipment.

There are two things to consider if you are looking to sell your home after having one of these arrangements in place. First, because you don’t own the equipment, it doesn’t factor into your property value. You’re not necessarily going to sell your house for more under this arrangement.

Second, if you sell the home before the end of your lease or PPA term, you and the buyer must agree on how the solar lease will be handled given your solar contract options. Although these options may vary, they often include the following:

  • Prepayment: The seller can prepay the rest of the contract. In this case, the buyer would assume all responsibilities under the contract, but not the payment.
  • Assignment or takeover of contract: The buyer assumes all payments and responsibilities of the contract initiated by the seller.
  • To buy: The seller has the possibility to buy the solar panels at the price indicated in his contract so that the buyer does not have to deal with it. Also, if the panels are purchased, they can be included in the value of the house.

It is important to note that if the buyer takes over a solar lease, this is included in his debt-to-income ratio (DTI) for qualifying purposes. This is not the case with a PPA as it is considered a utility payment.

Loans of solar panels

Now suppose you have chosen not to rent your panels, but pay for them over time with a loan. When solar installers make a loan, they often place a lien on a home’s title deed which is removed when the loan is repaid.

In order to sell your property, for buyers arriving with a mortgage, you will likely need to pay off that loan at or before closing time. Mortgage companies want to make sure that new owners don’t take on additional responsibilities.

The good news is that because you own the solar panels, it can be included in your property value to the extent that it makes a difference in your market.

Lack of knowledge

Solar energy is still a relatively new concept to consider in real estate appraisal, so buyers, sellers and their real estate agents can all operate from a limited knowledge base. They may have several issues:

  • How much do solar panels add to the value of the house? This is where having recently sold comparables in the area with solar panels will help. There may be other benefits to being first on your block with solar power, but increasing home value may not be one of them if you can’t find the right buyer. On the other hand, there are tools estimate the value that solar panels bring to your home. Evaluators can also certify the characteristics of the green houseincluding solar panels.
  • How much can I expect to save on energy bills? Energy bills can easily be shared with personal information hidden so that sellers can give this information to buyers using their utility bills before and after.
  • How long can I expect my solar panels to last? This one is a little more difficult, but one thing you can do is rely on the advice of your solar company and/or installers. A good indicator can also be how long they are willing to guarantee the equipment. If there’s a warranty, make sure it stays with the house – and the new owner – once the house sells.

Another important thing to note is that panels don’t have to be on site for you to benefit from energy savings. A group of people can participate in a “green field” project. This is where solar panels are installed on a vacant space and group members help pay for and maintain it. In this case, each person benefits from the savings. You may not be able to include it in the appraised value, but it can be a selling point.

Lack of transparency from the seller

One of the basic tenets of economics is that markets tend to work best when both parties have all the information available to make an informed decision. The more you can tell a buyer how much they can reasonably expect to save, how the system is maintained, any warranty that comes with it, and how long the panels will last, the better. You will attract interested buyers by this.

Seller’s skepticism

On the other hand, you don’t want to be negative either. Solar panels can be a considerable investment and it can take a long time to fully pay off. This timeline is also going to change a bit depending on where you live and how much sun you get. You might be frustrated, but if you describe this, it might be more difficult for you to sell your house.

It is important that you remember that the buyer will not have the initial investment, so the solar panels can pay off in terms of savings much faster for them. It should always be a selling point and not a loss.

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