As of January 1st, 2020, all new homes built in California are required to have solar panels installed during construction. But many prospective homeowners are buying homes with solar panels purchased or leased by the homeowner. These homes have increased value over comparable homes without solar power systems, so home buyers can expect to pay more for them.
But depending on how old the system is, you may need some maintenance to get the best possible performance. And if the previous homeowner financed the system with a lease, that can also affect the price of a home.
Homes with solar power systems already installed are a great value for home buyers. But there are some things you should know so you can better anticipate any additional costs, and enjoy the benefits of solar power that much sooner!
If a home’s solar system is on a lease, it can affect your month-to-month costs.
As we’ve discussed before, when homeowners purchase a solar power system, these systems do increase the value of a home, so you can expect to pay more up front compared to one in the same neighborhood without it. But the exact amount depends on whether the previous homeowner owned the system.
Solar power prices have come down in recent years, but in the past many people opted to lease systems, or financed them through solar loans. This can change what you pay for the home from month to month, so it’s important to determine how a solar power system was financed early into the homebuying process.
If the solar system is leased, or was financed through a Power Purchasing Agreement:
A solar system that was installed through a lease agreement or power purchasing agreement (PPA), that means that the current homeowner is making monthly payments on the system. But there are some key differences between a solar lease and a PPA.
A solar lease means that the system is essentially being ‘rented’ to the homeowner. From month to month they pay a fixed rate to a company which owns and maintains the system. These agreements last for 20 years on average, though some companies may offer longer or shorter agreements. It’s important to note that under a solar lease, the homeowner is not eligible for any tax breaks, rebates, or other financial incentives for solar power systems, because they don’t own it. The primary benefit comes from the lower energy rates that solar systems offer versus utilities.
If the solar system was installed as part of a PPA, the homeowner is still paying a monthly fee, but it’s not fixed. Rather than paying for the system itself, you are paying for the power it generates that you use, just as you would pay your utility company. The cost per-kilowatt hour is usually fixed, but your own personal power usage may change depending on the time of year, and current energy rates.
It should be noted that many solar loans and PPAs offer ways for you or the previous homeowners to pay off the remainder of the lease in order to make the system your own. Find out the terms of the lease or PPA early in the purchase process, so you can plan accordingly.
If the solar system was financed through a secured or unsecured loan:
Solar loans typically remain the liability of the homeowner who made the loan. They will either have to pay it off when they sell the home, or continue payments even after selling the home. As a result, you can expect to pay more for a home with a secured or unsecured solar loan, as you will actually own the system.
If the system was paid for with Property Assessed Clean Energy (PACE) financing:
While systems financed through secured or unsecured loans are the liability of the original homeowner, PACE financing is tied to the property itself. If you buy a home with a PACE-financed solar system, you may be obliged to take over the payments for the remainder of the agreement.
Unlike other solar loans or leases, PACE payments are made once a year through assessments added to property taxes. Because PACE financing is attached to the property, if a home is sold before the system is paid off in full, the loan may transfer to the new homeowner. However, situations can vary. You, your lender, or the PACE lender may require that the PACE loan be paid off before the home is sold.
When buying a home with solar panels installed, call in maintenance pros to inspect the system.
The components of a solar system are designed to survive outdoors for many years without requiring heavy upkeep. Most of the time, your biggest concern will be keeping the panels clean enough to maximize energy output. But depending on the age of the solar power system is, parts of it may need to be replaced, such as wiring, inverters, or even the solar panels themselves need some maintenance..
When you’re considering a home with a previously installed solar panel system, you should always find out just how old the system is, and what company manufactured the system, and who installed it.
We recommend calling a certified solar power contractor–like Capital City Solar—to inspect the system and verify that everything is working as it should. They’ll be able to tell you if the system needs maintenance. If you’re still in the middle of the purchasing process, you might be able to use what they report to negotiate a better price on the home, or work out an agreement on how to pay for any fixes.
Another thing to keep in mind is that sometimes, the solar power contractor that installed a system has since gone out of business. This can make it difficult or impossible to take advantage of workmanship warranties.
Buying a home with a pre-installed solar power system is a great way to start living green. If you perform your due diligence, you can enjoy the benefits of solar worry-free. And if you’re in the process of buying a home with solar already installed and want to make sure everything is in order, you can call Capital City Solar at (916) 782-333, or send us a message using our contact form.