Buying a House With Solar Panels: What You Need to Know

Is it a good idea to buy a house with solar panels?

For most buyers, yes. A house with solar comes with something few listings can offer: real electric bills you can look at before you buy. The system's monitoring app or the seller's utility bills show what it produces month by month, so you can see the savings instead of taking them on faith.

What deserves a closer look is the arrangement behind the panels. The same roof can come with a system the seller owns outright, one with a loan still on it, a lease, or a power purchase agreement. Each one changes what you take on at closing, what your lender asks for and what happens if you want to change things later. Sellers face the same questions from the other side, which we cover in selling a house with solar panels.

A good first check is simple: put a year of the seller's electric bills next to a year of production. If the system covers a large share of the home's usage and the bills are low, you're looking at savings that carry over to you, whatever the paperwork turns out to be.

What do you take on with owned, financed, leased or PPA solar?

Start by asking the seller one question: who owns the panels? The answer sorts everything else.

An owned system is the simplest: it's part of the house, like the furnace. A financed system is too, once the loan is handled. The Consumer Financial Protection Bureau notes that when a home with a solar loan is sold, the seller usually pays off the balance, or the buyer assumes the loan where the lender allows it. If the lender recorded a UCC-1 fixture filing, it files a termination after payoff so your title is clear. Make sure your title company sees that release before closing.

If the seller isn't sure which kind of system they have, the paperwork will tell you. A lease or PPA comes with a contract from a solar company and a monthly bill from it. A loan shows up as a lender statement and often as a filing in the land records. An owned system has a purchase agreement and no ongoing payment.

Should you buy a house with leased solar panels?

Often, yes. A lease or PPA was designed to come in below the electric bill it replaced, and the company that owns the panels keeps handling monitoring and repairs. If the payment is lower than what the house would otherwise pay for power, taking it over can be a good deal.

To take it over, you apply with the solar company and it approves you, usually with a credit check. Before you agree, get answers to these:

• What is the payment today, and does it rise each year? By how much?
• How many years are left on the contract?
• What does the system produce, and how does that compare with the home's usage?
• What does the contract say about buyouts, roof work and the end of the term?

If you'd rather not take on the contract, you have options. You can ask the seller to buy it out before closing so the system comes with the house as owned equipment, or negotiate a credit on the price. Our comparison of a solar lease vs. a PPA explains how the two contracts differ.

A prepaid PPA is the easiest to inherit. The power was paid for up front, so there's no monthly payment to qualify for. You still sign on with the company, and some prepaid PPAs include a buyout option. Evergreen Solar's lets the owner buy the system and take ownership after five years.

What papers should you ask the seller for?

Ask for the solar paperwork as soon as you're serious about the house, ideally with the other disclosures. A seller who gathered it early makes the whole closing easier.

• Production history: at least a year from the monitoring app or the utility bills, so you can see real output across the seasons.
• Warranties: the panel, inverter and workmanship warranties, and whether they transfer to a new owner.
• Permits and approvals: the building permit and the utility's permission to operate.
• The contract: for a lease, PPA or loan, the full agreement and a summary of what's left.
• Incentives: in Massachusetts, the details of any SMART payments, and how they move to a new owner.

How does solar affect the appraisal and your mortgage?

It depends on who owns the panels. An appraiser can count a system the seller owns as part of the home, and we cover what the research says about that value in do solar panels increase home value.

Leased and PPA panels are different. Fannie Mae's appraisal guidance treats them as the solar company's property, so their value can't be included in the appraised value of the house. That rarely stops a sale, but it's worth knowing before you compare listings.

Your lender will also want to see any lease or PPA, and may ask how the payment fits your budget. Send the contract to your loan officer early and ask how they treat it, so it doesn't surface the week before closing. If the seller has a solar loan, the lender will want proof it's paid off and the lien released.

What should the home inspection cover?

A standard home inspection looks at the roof and the electrical system, so ask the inspector to pay attention to both where the solar connects to them:

• The age and condition of the roof under and around the panels
• Signs of leaks or damage around the mounts
• The inverter, the disconnects and the connection to the electrical panel

Ask the seller to transfer the monitoring account to you at closing, and register any warranties in your name if the manufacturer requires it. Monitoring is how you'll spot a problem early, and a warranty is easier to use when the company already has you on file.

The roof matters most. If it will need replacing in the next few years, the panels have to come off and go back on for that work, so find out who handles it and what it costs before you buy. If you're weighing how solar fits your plans long term, our guide to solar financing walks through how each way to pay works once the house is yours.

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