What Do I Need To Know If I'm Buying A Home With Solar Panels?

In a world of rising energy costs, the idea of purchasing a home with a solar power system already installed can seem very attractive. Solar energy is more environmentally friendly and can be less expensive than conventional power sources. Frequently, owners of solar panels can take advantage of tax incentives and other available credits, and in some cases, are even able to sell excess power back to the grid.

However, buying a home with solar panels isn't always everything it's cracked up to be. Before finalizing a sale on a solar home, there are some questions you'll want to ask to ensure that the home's solar energy system is a good investment. Understand more about what you need to know if you're buying a home with solar panels.

Understanding How The Home's Solar Panels Are Financed Is Critical

Solar panels can be acquired in a number of ways, including an outright purchase, a loan, a lease agreement, or a Power Purchase Agreement (also known as a PPA). Knowing how the original homeowner obtained the panels can make a big difference in how they can impact your purchase.

If The Panels Were Purchased Outright Or Using A Loan

If the solar panels were purchased outright by the homeowner, or the homeowner took out a loan to finance their purchase, they are a part of the home, and you'll want to collect more information to understand their value. First, you'll want to review the purchase agreement, which will identify the date the system was bought and installed, the system's cost, the actual equipment installed, and the terms of any manufacturer or installer's warranty. Understanding the age of the system can help you assess how much it is likely to cost you in repairs or replacement over the short- and long-term. 

Second, you'll want to review the homeowner's interconnection agreement. This is the contract between the homeowner and the local utility company. This document will identify the manner in which the utility company accounts for the power generated by the solar system. This document will also describe the terms of any agreement to sell excess electricity back to the local power grid. 

Finally, if you can, you'll want to get an understanding of the system's impact on the home's electric bills. If the system is improperly placed, too small, or otherwise not generating much supplemental power, the value it adds to the home may be minimal. Over time, the cost of maintenance and repairs may, in fact, outweigh any benefits you receive. Newer systems should have a monitoring system that allows you to review the energy output — if you can, ask the homeowner to allow you access to this system. The more you can understand about the home's energy costs, the more you can weigh the value of the solar system.

Solar Lease Or PPA

If the solar panels are leased from a third party company or installed under a PPA, they do not belong to the homeowner. In both cases, a third party company owns and maintains the solar system. Under a lease arrangement, the homeowner pays a set amount each month to lease the system, and then receives the energy generated by the system. In a PPA, the solar provider owns the panels and sells the electricity generated by them to the homeowner at a fixed rate determined by contract. 

In both of these scenarios, prospective buyers should proceed with caution, as they may have to take on the obligations of the contract with the leaseholder or PPA provider. In the case of PPA agreements, which can be as long as 20 years, annual rate increases are usually built into the contract, and can in some cases make the solar-generated energy more expensive than that provided by the local utility. In addition, if the buyer refuses to assume responsibility for the contract, the PPA or leaseholder can put a hold on the sale via a UCC filing, effectively a lien against the property, that can halt the sale of the property or interfere with financing. 

If you're purchasing a property with leased panels or a PPA, be sure to understand all of the terms of the contract you're assuming. Reviewing the contract, the history of the home's energy costs, and the benefit or cost of the system is a crucial part of valuing your investment in your new home.

The Benefits Of Solar Panels

For many homeowners, solar panels result in reduced monthly energy costs. These cost savings generally mean the solar panels "pay for themselves" over time, although this "payback period" varies based on the homeowner's energy usage, the power generated by the system itself, and the various incentives and tax breaks available to solar owners. In addition, solar panels are a great way to benefit the environment and take strain off of the electrical grid, all without changing much in the way of your energy consumption. 

Finally, the independence associated with generating your own energy means you may be less vulnerable to problems with the electrical grid, offering some relief from power outages or other issues.

Deciding Whether To Buy A Solar Home

Whether a home with solar panels is right for you is a complicated calculation, and a solar home is not always a net benefit for a buyer. Before choosing a solar home, make sure you understand how the panels have been financed, and have the system inspected by a professional who knows how to look for problems with the panels, inverter, and other system components. If the panels have been financed or installed under a PPA agreement, talk through all of the implications of the agreement with your real estate agent, so you understand your options. In some cases, a seller will agree to pay off the remaining balance on the agreement to finalize a deal, and in some cases, assuming the agreement's responsibilities can mean net savings for a buyer. Doing the work to understand the implications of these agreements is the only way to know whether you're getting a net benefit from your home's solar system.

When Home Means More, You Need A Team With More To Offer

Buying a home is complicated. If you're ready to maximize your investment in a new home, it's time to chat with a knowledgeable agent. Home is about so much more than just four walls. Buying or selling a home is a big deal, and our homes have never been more important. That's why your local Baird & Warner agent is with you at every step of the way, from finding the perfect home to connecting you with local experts in mortgage and title. Whether it's the beginning of a story or the end of a chapter, we're here to help.