Buying a home with solar panels: what you should know

In this article:

If you want to save on your monthly bills and to be a bit more eco-friendly, solar panels may be at the top of your home buying wishlist. Solar panels can add value to a home and can help homeowners save a pretty penny. 

Let’s take a look at what buying a house with solar panels involves and what you need to know about the process if the sellers leased the solar panels. 

What are solar panels and their benefits?

Solar panels convert sunlight into energy and can generate electricity that can be stored in either batteries or thermal storage. It’s becoming increasingly common to see solar panels added to residential properties, especially in sunny states where homeowners can get a lot more bang for their buck.

While solar panels can save you money on your electricity bill, how much you save really depends on the size of your solar energy system, your home’s exposure to sunlight, how much electricity you use, and if you choose to lease or purchase your solar panels. Your utility company can also impact your savings, depending on the electricity rate they set and how they’ll compensate you for any excess solar energy you send to the grid. The National Utility Rate Database shows the current electricity rates in your area.

Are solar panels going to impact your purchase? 

Solar panels will only impact the sale of a home if the solar panels are currently leased from a solar company. If this is the case, the seller will need to transfer the lease to the buyer or the buyer will need to purchase the panels from the solar company, which will wrap up the lease early. The buyer will choose how and if they want to proceed. 

The seller benefits when they transfer their solar lease. Doing so helps them eliminate extra costs when they sell their home because they will no longer owe any payments throughout the life of the lease. 

It can take quite a bit of negotiation to determine how to handle a solar lease and you may need to extend the closing period until the solar company approves the buyer to take on the lease. There may also be a lease transfer fee involved and deciding who pays that fee may affect your negotiations. 

Will solar panels affect your mortgage opportunities?

Again, this really depends on the seller’s situation and how they obtained the solar panels. If the seller purchased the solar panels with a loan, they are the ones who need to pay off that loan. They may want to account for these costs when they sell their home, as the buyer should receive full ownership of the solar panels at closing. 

If the seller leased the solar panels, the buyer may need to take on that lease as well. The buyer needs to be aware of how this lease may impact their debt ratio. Your debt ratio affects your lending opportunities, rates, and terms. 

Before you buy a home with leased solar panels, ask the homeowner the following questions: 

  • Who manufactured the solar panels?
  • What warranties are available?
  • How long are the parts and equipment covered by warranties?
  • Who installed the system? 
  • Did they provide workmanship warranties?
  • What is the size of the solar energy system and how much electricity can they offset? 
  • How much have past energy bills cost? 

It’s important to get the solar agreement the original owner of the home signed and provide it to your mortgage lender (we’ll walk you through how to do this shortly). The mortgage lender will want to confirm that the agreement includes a transferable warranty that won’t require you to be on the hook for expensive future repairs that will make it difficult to pay your mortgage. 

Do solar panels increase home value?

Buying solar panels generally helps increase the value of a home. Alongside potential savings on energy bills, additional value comes from the convenience of purchasing a home with solar panels already installed. 

Leased solar panels are a different story. Fannie Mae does not include leased solar panels in a home's valuation and the Federal Housing Administration (FHA) doesn't offer much guidance on how to determine their value. 

When it comes to fully paid off solar panels, the National Renewable Energy Laboratory found that each additional $1 in energy bill savings from solar panels adds $20 to a home’s total value. For example, in a sunny state like California, a small system has the potential to increase the average value of a medium-sized home by over $18,000.

What if the seller wants me to assume solar lease?

When a homeowner leases solar panels, they make monthly payments to the company that installed the solar panels. If you want to assume the lease, it’s important to contact the solar panel company to learn what the lease entails, including whether or not you’ll need to pay monthly fees and if the payments will escalate at some point. You’ll need to pass a credit check in order to transfer the lease to your name.

So, what happens if you have your heart set on buying a home with leased solar panels, but you don’t have a desire to take on a lease? If you decide you don’t want to take on the lease, negotiate with the seller for them to pay off the remainder of the lease or to compensate you for the monthly payments you will need to make.

How to transfer a solar panel lease

Typically, the transfer of a lease goes pretty smoothly. Lawrence Berkeley National Laboratory found that 77% of solar panel leases transferred successfully to the new owners, and only 20% of sellers reported that their leasing agreement scared off potential buyers.

To transfer a solar power lease, the first step the home seller will take is to contact the solar panel company that provided the solar panels. They’ll most likely put them in touch with a service transfer specialist. This specialist can provide the seller with a copy of the solar agreement so they can work with their real estate agent to properly communicate the situation with potential buyers. Once the seller finds a buyer who wants to purchase the home, they will give them a copy of the solar agreement and connect them with the service transfer specialist so they can learn more about the lease. 

Next, the buyer will give the solar agreement to their mortgage lender who will review the agreement and confirm that it includes a transferable warranty that means the buyer isn’t responsible for any potential expensive repairs that could affect their ability to pay their mortgage. 

Once the mortgage lender does its due diligence and approves their mortgage, the solar lease transfer representative will send the service transfer form to both the seller and the buyer. Both parties will fill out and sign the form. 

One of the last steps of the transfer process will be a credit check on the buyer’s end so that the solar company can gauge how likely they are to make their monthly payments. Usually a credit score of 680 or higher is necessary. 

After the company approves the new home buyer, they will become the new tenant under the solar lease. This approval process may take as little as two to three days. When you close on the home, you can inform the solar transfer specialist and they will finalize the transfer. 

Should you keep the solar panels? 

Whether or not you choose to keep the solar panels is up to you. If they are already purchased and paid for, you stand to gain a lot of energy bill savings, so it wouldn’t make sense to pay to uninstall them. If you don’t want to pay the lease on your home’s solar panels, you can play hardball with the seller and require them to pay off the lease or reimburse you for the costs. If you truly don’t want solar panels installed on your new home, it would be best to look for a different house entirely to simplify the buying process.

Guaranteed your home sale— and so much more

On top of Orchard’s Home Sale Guarantee, we list, prep, and show your old home after you’re all moved out.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Close more deals with Orchard brokerage

Grow your business and make $50-$70K more per year.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Closing Fees
$0
$0
$0
$0
Other Costs to Consider
$0
Orchard can help you avoid overpaying additional selling and moving costs
$0
$0
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimated Net Proceeds
$0
Home Sale Price
$0
Total Cost to Sell
$0
Get my free valuation
Orchard is 30% more accurate than leading estimates.

Sell for more with value-boosting improvements

When you list with Orchard, we’ll get your home show-ready and make repairs to increase your home’s value at no upfront cost.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Closing Fees
$0
$0
$0
$0
Other Costs to Consider
$0
Orchard can help you avoid overpaying additional selling and moving costs
$0
$0
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimated Net Proceeds
$0
Home Sale Price
$0
Total Cost to Sell
$0
Get my free valuation
Orchard is 30% more accurate than leading estimates.

Buy a new home knowing you’ve sold your current one

Orchard guarantees your home will sell, so you can buy your next one worry-free.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Closing Fees
$0
$0
$0
$0
Other Costs to Consider
$0
Orchard can help you avoid overpaying additional selling and moving costs
$0
$0
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimated Net Proceeds
$0
Home Sale Price
$0
Total Cost to Sell
$0
Get my free valuation
Orchard is 30% more accurate than leading estimates.

Guaranteed your home sale— and so much more

On top of Orchard’s Home Sale Guarantee, we list, prep, and show your old home after you’re all moved out.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Closing Fees
$0
$0
$0
$0
Other Costs to Consider
$0
Orchard can help you avoid overpaying additional selling and moving costs
$0
$0
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimated Net Proceeds
$0
Home Sale Price
$0
Total Cost to Sell
$0
Get my free valuation
Orchard is 30% more accurate than leading estimates.

How much can I make selling my home?

Use our home sale calculator to estimate your net proceeds.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Closing Fees
$0
$0
$0
$0
Other Costs to Consider
$0
Orchard can help you avoid overpaying additional selling and moving costs
$0
$0
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimated Net Proceeds
$0
Home Sale Price
$0
Total Cost to Sell
$0
Get my free valuation
Orchard is 30% more accurate than leading estimates.

Don’t navigate the market alone

Our Home Advisors are experienced local agents who know how to sell for top dollar and help win your dream home.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Closing Fees
$0
$0
$0
$0
Other Costs to Consider
$0
Orchard can help you avoid overpaying additional selling and moving costs
$0
$0
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimated Net Proceeds
$0
Home Sale Price
$0
Total Cost to Sell
$0
Get my free valuation
Orchard is 30% more accurate than leading estimates.

Let’s match you with a real estate agent

All Orchard Home Advisors are experienced agents who know your local market inside and out. Request a consult today.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Closing Fees
$0
$0
$0
$0
Other Costs to Consider
$0
Orchard can help you avoid overpaying additional selling and moving costs
$0
$0
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimated Net Proceeds
$0
Home Sale Price
$0
Total Cost to Sell
$0
Get my free valuation
Orchard is 30% more accurate than leading estimates.

Close faster with a cash offer

Did you know cash offers are 4x more likely to be chosen by a seller? Let us help you make one on your next home.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Closing Fees
$0
$0
$0
$0
Other Costs to Consider
$0
Orchard can help you avoid overpaying additional selling and moving costs
$0
$0
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimated Net Proceeds
$0
Home Sale Price
$0
Total Cost to Sell
$0
Get my free valuation
Orchard is 30% more accurate than leading estimates.

Know what your home is really worth

Get the most accurate free home valuation — in minutes

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Closing Fees
$0
$0
$0
$0
Other Costs to Consider
$0
Orchard can help you avoid overpaying additional selling and moving costs
$0
$0
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimated Net Proceeds
$0
Home Sale Price
$0
Total Cost to Sell
$0
Get my free valuation
Orchard is 30% more accurate than leading estimates.

Curious what your monthly mortgage payment would be?

Orchard Home Loans shops the market to find your best rates.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Closing Fees
$0
$0
$0
$0
Other Costs to Consider
$0
Orchard can help you avoid overpaying additional selling and moving costs
$0
$0
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimated Net Proceeds
$0
Home Sale Price
$0
Total Cost to Sell
$0
Get my free valuation
Orchard is 30% more accurate than leading estimates.

Stand out to sellers with a cash offer

A cash offer is 4x more likely to be chosen by a seller. Get qualified today.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Closing Fees
$0
$0
$0
$0
Other Costs to Consider
$0
Orchard can help you avoid overpaying additional selling and moving costs
$0
$0
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimated Net Proceeds
$0
Home Sale Price
$0
Total Cost to Sell
$0
Get my free valuation
Orchard is 30% more accurate than leading estimates.

Don’t miss out on your dream home

Make a cash offer now, and Orchard will sell your old home after you move.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Closing Fees
$0
$0
$0
$0
Other Costs to Consider
$0
Orchard can help you avoid overpaying additional selling and moving costs
$0
$0
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimated Net Proceeds
$0
Home Sale Price
$0
Total Cost to Sell
$0
Get my free valuation
Orchard is 30% more accurate than leading estimates.

Your dream home is waiting for you

Tell us your must-haves to see personalized home recommendations that meet your criteria.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Closing Fees
$0
$0
$0
$0
Other Costs to Consider
$0
Orchard can help you avoid overpaying additional selling and moving costs
$0
$0
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimated Net Proceeds
$0
Home Sale Price
$0
Total Cost to Sell
$0
Get my free valuation
Orchard is 30% more accurate than leading estimates.

The stress-free way to buy and sell

With Orchard, secure your dream home before you list. Avoid home showings, rentals, and double moves.

Learn More