Question: Does a solar system add value to a property?
Answer: A solar system, also called a solar array, can add value depending on the situation.
“Some consider it debatable whether a solar array increases a home’s value and salability. Yet it’s not so much that it will add value to your home — the question is how much value. The research by both Redfin and Zillow shows increased property value with solar installed,” said Randy Cole, president of Fox Valley Electric & Solar, a Rosie-Certified Partner.
Leased systems do not add value to the home because they are not the property of the homeowner.
Owned and financed systems add value to the home in most cases, but the value can vary based on when the system was installed. Some homes have solar systems that have old leases. It is critical to have a knowledgeable agent who can navigate the issue.
When property values increase, so do the property taxes. While solar panels are not factored in the valuation of property, Arizona offers a 100% solar sales tax exemption for the value of the panels.
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Whether you are buying or selling a home with an installed solar array, some things need to be considered and questions asked.
Q: What do I need to know about buying a house with solar panels?
A: The following are the most important questions a buyer must ask before signing the contract. Neglecting to ask them could cost the buyer much more money down the road.
1. Who owns the solar panels? Are they leased? Did the homeowner buy them outright? Are they still being financed?
Solar panels can be purchased outright or financed. They can also be leased. The main difference between them is ownership.
With purchased solar panels, the homeowner has full ownership over the system that should have a transferrable warranty. “This is the simplest and easiest, as the value of the panels will be rolled into the new mortgage like all the other assets of the house,” Cole said.
In a lease, a third party owns the solar equipment with leased solar panels or a signed power purchase agreement. Leased solar panels are common and a nightmare for realtors. If it isn’t clear in the MLS listing that the solar panels are leased, a buyer may assume they’re included with the sale. The buyer’s agent must clearly communicate with the seller’s agent about the status of the solar panels. Are they paid off or still under a lease? The listing must be clear. Many realtors have added a solar addendum because of leased systems.
A leased system doesn’t transfer from one homeowner to the next. The homebuyer must apply to take over the lease, like a credit check, which affects the credit score and purchase price. If the panels are leased, the buyer will need to be approved to take over the lease. The panels are not assumed as part of the mortgage. Buyers may want to consult with an attorney regarding issues related to the transfer of the lease.
2. Who installed the panels?
It’s important to validate that a reputable business installed the panels. Make sure that the company is still in business and check for any existing warranties or maintenance plans with the installer or manufacturer that will transfer to the buyer upon closing.
In addition, the buyer needs to know the reputation of the system’s provider, the conditions of the warranty, and costs related to the leased solar panels. There have been countless companies that either popped up or don’t have a background in electrical. Check out how long they have been in business or installing solar. Do they do the installations, and do they have a service department? They will be needed years later for maintenance.
3. What is the status of the solar array?
As a buyer, it is imperative to know the status of the solar panels. Leasing vs. financing may affect the buyer’s ability to get a mortgage. If the solar panels are leased, then a lease transfer will be required, and there is no guarantee of approval.
4. What is the output of the existing solar array?
How much solar power can the system produce? Multiply the household’s hourly energy requirement (get the figures from the seller’s real estate agent) by the peak sunlight hours in that area and divide by panel wattage. This will determine whether the existing solar array should offer enough “coverage” for what the home will require.
Once in the home, the new owners may be disappointed that the system doesn’t provide the output the previous owner claimed it did. Assuming the seller was honest about their usage, the buyer needs to realize that the array wasn’t designed for them.
It was designed for the previous owner who may have had different schedules, the number of people in the home, and preferred different temperatures. Factor in that information with the calculation when considering whether to buy the house.
5. Is the same utility rate as the previous owner available?
TEP, APS, SRP and other utility providers will probably not tell you the previous owner’s rate. They will sign you up for a new rate plan. The buyer should try to transfer the seller’s rate plan and get the balance of what they left behind. For example, if the seller was five years into their system, there may be 15 years left of dollar-to-dollar value, which is significant.
Q: What do I need to know about selling a home with solar panels?
A: The seller’s listing should not imply that the solar panels are part of the sale if they’re actually leased. Errors or misleading information, even accidental, in MLS listings can lead to lawsuits. Not being clear about leased solar panels could cost the seller a contract — and lead to a lawsuit.
Q: Can I take the solar panels with me when I move? I paid for them in full.
A: If the seller wants to remove and take the panels and install them on another house, Cole notes, “Legally they can be removed and taken to another house, however, it is not practical or cost effective. Solar systems are much like most home improvements and are designed to be permanently installed and fully automatic. Much like you wouldn’t think to take your new AC to the next house or the appliance package.”
Both the buyer and the seller need to factor in all of the complexities of a home with a solar array. Getting those considerations figured out will save both parties a lot of headaches and money down the road.
An Arizona home building and remodeling industry expert since 1988, Rosie Romero is the host of the syndicated Saturday morning Rosie on the House radio broadcast, heard locally from 10 to 11 a.m. on KNST (790-AM) in Tucson and from 8 to 11 a.m. on KGVY (1080-AM) and (100.7-FM) in Green Valley.