Solar and Selling Your Home

April 5, 2019

I’ve recently had a flurry of phone calls from clients who are curious about solar panels and their impact should they decide to sell. Solar salespeople must have been busy lately…because seriously, I’ve received numerous phone calls!

I know that a $1.27 monthly electric bill sounds really appealing, but there are a few points I encourage people to consider before making the costly investment in a solar panel system:

Do You Have a Tile Roof?
If so, an alternative location might be a better option for you. Tile can break easily even with an experienced roofer walking on it. If the roof has any age on it, it may be difficult to locate matching replacement tiles. Instead, I’ve seen homeowners put the panels on hillsides, pergolas or patio covers. I’ve even seen some in the form of garden art! Check out these alternative ideas…

Do You Like the Look of Solar Panels?
No? There are some great options from Tesla that include roofing material where each tile/shingle is one solar cell. Keep in mind that an option like this will be more expensive, but from what I understand, they’ll last longer than a shingle roof.

Is Your Roof Due for Replacement?
If it’s time for a new roof anyway, I would recommend installing solar panels. Similarly, if your roof is getting to the end of its useful life, I would wait until you replace it to install solar panels. No need to incur the extra expense of having solar panels put on, taken off and put on again. Labor isn’t cheap!

Side note: I recommend getting your roof inspected by a licensed roofing contractor to determine how much longer your roof is going to last and whether or not the structure can hold solar panels.

How Long Do You Plan on Staying in the Home?
If this is your forever home, then by all means, solar is a great solution! However, if you’re only going to be in the home for a short period of time, you likely won’t recoup the cost of the system. A client recently told me that it would take 15 years for her to break even on the installation of a leased system on her home.

In my experience, I’ve not yet had a buyer put solar as a “must have” on their list. I’ve found that buyers generally think of solar as a nice bonus in their purchase, but they don’t necessarily want to pay more for a home because of it.

Helpful Hint: Use this calculator if you’re curious about the cost of installing solar panels on your home.

Are You Going to Refinance in Order to Purchase the Solar System?
If you were able to get one of those super-duper interest rate deals at 3%, and by refinancing it’s going to cause your interest rate to go to 4.5%, make sure you have your lender help you with the math before making a final decision. And remember – this will prolong the break-even point for recouping your costs.

Side note: I’m not a big purveyor of refinancing unless it’s done to…

– Shorten the term of the loan to pay it off sooner.
– Eliminate private mortgage insurance while simultaneously taking out the loan for the term currently left (or shorter).
– Obtain a lower interest rate. (Remember to speak with your lender to determine the break-even point on the cost of refinancing. While refinancing in order to purchase vacations, vehicles, etc. may seem like a good idea, I’ve seen many people hurt by using equity for unnecessary wants. A shift in the real estate market can quickly create a situation where you are upside down on the value of your home.)

Are You Going to Lease or Finance the Solar Panels?
Leased systems will show up on a property title report as a notice of solar provider – there will be a solar lease agreement and, possibly, a UCC financing agreement. If you’re looking to finance the system, the HERO program is one of several ways in which to do so. The HERO program will show up on property taxes as an assessment (similar to a Mello – Roos tax) in the form of a Document for Contractual Payment. This is how the lender is assured that the financing will be paid back. Why is it important to know all of this? The way lenders look at these loans during a real estate transaction differ. If a listing agent or the buyer’s lender is unaware of these details, it could negatively affect the transaction.

For example, I recall another agent’s story of how their already-in-escrow buyer became unqualified for the home’s purchase due to a solar-related issue. Because the buyer was taking over the solar payments from the seller, their debt-to-income ratio increased. As a result, the home fell out of escrow and the seller had to go through the process of selling the home again. No one likes surprises! It’s important that real estate agents know these details in advance in order to eliminate delays and potential disappointment for all parties.

Final Thoughts
Research, investigate and analyze your information to determine if a solar system is a good choice for you, your family and your finances. To help get you started, take a look at this educational document from Fidelity Title about solar easements.

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