Selling a House With Leased or Financed Solar Panels

Does solar help or hurt a home sale?

Solar usually helps. A buyer gets a house with lower electric bills and a system whose output they can see month by month, which is a concrete number in a market full of estimates. We cover the research on value in do solar panels increase home value.

Ownership also matters to the buyer's lender. An appraiser can count a system you own as part of the house. Leased and PPA panels belong to the solar company, and Fannie Mae and Freddie Mac guidelines treat them as the company's property, so they aren't counted in the appraised value. Either way, the lower bill is real, and documented production makes it easy for a buyer to see.

What slows a sale down is rarely the panels. It's paperwork nobody gathered: a loan that has to be paid off, a filing the title company finds at the last minute, or a lease transfer that starts a week before closing. How you paid for the system decides which steps you need, so find your situation below.

What happens if you own your solar system outright?

A system you paid for in cash is part of the house. It transfers to the buyer at closing like a furnace or a roof, with nothing to pay off and no contract to assign. Make it easy for the buyer to see what they're getting:

• Production history from the monitoring app or your utility bills
• Equipment and workmanship warranties, and whether they transfer
• The building permit and the utility's permission to operate
• In Massachusetts, the details of any SMART payments

If you live in Massachusetts and receive SMART payments, tell the buyer and ask the program administrator how the payments move to the new owner after the sale. Net metering continues on the buyer's utility account once they set up service.

Owned solar also means no buyer approval is needed. That's one reason owning appeals to homeowners who expect to stay a while, as our guide to paying for solar explains.

What if you still have a solar loan?

A financed system is still yours, but the lender has a claim on it until the loan is paid. Many solar lenders record that claim as a UCC-1 fixture filing. It's a public notice under the Uniform Commercial Code that the lender has a security interest in equipment attached to your home, recorded in the local land records where your deed is filed.

A title search turns up the filing, and the title company will want it cleared before closing. The usual path:

1. Request a payoff letter from the lender when you list.
2. Pay off the loan from the sale proceeds at closing, the same way the mortgage is paid.
3. The lender files a termination statement (a UCC-3) to release the filing, and the buyer gets clear title.

A few lenders let a qualified buyer assume the loan, but most solar loans don't allow it. If yours was sold to another company since you signed, the payoff and release come from the current holder, so confirm who that is early. Our guide to comparing solar loans covers what to ask about liens and payoff before you borrow.

How do you transfer a solar lease or PPA when you sell?

With a lease or PPA, the company owns the panels and you have a contract with it. When you sell, the buyer takes over that contract, the company approves them, and the remaining payments become theirs. The approval usually includes a credit check, so it helps to know what credit score solar financing looks for.

Most contracts give you a few ways through:

• Transfer to the buyer. The most common path. The buyer applies, is approved and signs the assumption paperwork before closing.
• Buy out the contract. You pay the buyout amount the contract sets, the system becomes owned equipment, and it transfers with the house.
• Prepay the remaining payments. Some contracts allow this, which leaves the buyer with nothing to pay.

The buyer's mortgage lender may also ask about the contract, because a lease or PPA payment can affect what the buyer qualifies for. Solar companies are used to this request and can usually provide a summary of the terms for the lender, so ask for one along with the transfer packet.

Give the buyer the contract terms with your other disclosures, including the current payment, any annual escalator and the years remaining. Buyers are more comfortable taking over a payment they can compare with the bill it replaces.

Should you buy out a solar lease before you sell?

Sometimes. Buying out a lease or PPA turns the system into owned equipment, which removes the buyer approval step and lets an appraiser count the system as part of the house. It also costs money at a time when you are already paying for a move, so weigh it against what a transfer would ask of the buyer.

A buyout tends to make sense when:

• Your buyer, or their lender, is uneasy about taking over a contract
• Only a few years remain, so the buyout amount is modest
• The sale is on a tight schedule and you want one less approval to wait on

A transfer tends to make sense when the payment is well below the bills it replaces and the buyer is happy to take it over. Ask the company for the buyout quote and the transfer packet at the same time, so you can compare the two with real numbers rather than guesses.

Buyers have questions too. Point them to our guide to buying a house with solar panels.

What if you have a prepaid PPA?

A prepaid PPA is the simplest company-owned contract to transfer, because the electricity was paid for up front and there are no monthly payments to take over. The buyer still signs on with the company, but there's no payment to qualify for.

Some prepaid PPAs include a buyout option. Evergreen Solar's prepaid PPA lets you buy out the system and take ownership after five years, so if you're past that point, buying out before you list turns the system into owned equipment that transfers with the house.

What's the timeline for selling a home with solar?

If you're still deciding how to pay for solar and expect to move, factor the sale in now. The tax credit on leased solar can make a lease or prepaid PPA the lower-cost route, and owning keeps the sale simplest.

Frequently asked questions