Does a solar system help or hurt the sale of a home?
By Al Ricci
The answer is not so simple. It depends.
Without a doubt, especially in sunny Southern California with high electricity consumption and rising rates. Solar is environmentally friendly, and saves lots of money on utility bills, typically 70-100 percent. But does it increase property values? The general answer is “yes,” and “definitely” if you own your system.
But what if you lease, finance, or are on a revenue-sharing program for the payment of your solar system?
Most solar contracts are on a 20-year commitment. There is a chance that the solar system will end up becoming outdated or obsolete as a new technology is right around the corner. There is also a concern about your roof replacement. If it is necessary to replace your roof, the solar panels must be removed and re-installed. In order to avoid that, make sure your roof, under and around the solar panels, is ready for the next 20 years.
Some homebuyers do not want to take on the lease payments or have to qualify, yet again, for another loan to buy a component of a home. It’s like buying a house and taking over the payment of the car in the garage.
As realtors, it is important that we provide a copy of any solar agreement to the prospective buyer, disclose it on our listing agreement and the MLS data. It is a good idea to have the lease and assumption package ready before the first offer comes in.
A typical solar system has a 20-year lease period. If you do not plan to be in your home that long, it probably does not make sense to install solar. In many cases, the seller will end up buying out the solar lease, typically $15,000-$25,000 to transfer the solar system as part of the purchase price. An appraiser will not, and cannot, add any value to the sales price if the solar is leased, only if it is owned outright.
The value of the house is still driven by the comparable sales, so very little value is added by solar systems. However, it is certainly an added value if the solar system is paid for and provides the benefit of reduced electricity bills for years to come.
If you add the price of the solar system to the price of your home, you will wind up with an overpriced listing! Also, solar panels are typically not very aesthetically pleasing. Listings with solar panels that can be seen from the street may drive a potential buyer away.
If you decide to install solar, factor the payback time in energy savings. Most solar systems pay for themselves in the first five to seven years. Do not expect more than a 20 percent return on your investment, based on the system installation.
If you are thinking about solar, interview at least three companies. And don’t forget to ask the important question, “What if I decide to sell while I am still under contract?”