It’s popular to “go solar” these days. If you’re like many New Jersey residents, you’ve probably had at least one solar company knock on your door promising huge returns for little to no investment. Too many of these solar companies have created more problems than they’ve solved, not least of which is scamming customers and then promptly going out of business.
Not every solar company does business this way, but some notorious ones have, and it’s left homeowners with an albatross on their hands when they’ve tried to sell their homes. The solar industry is fairly new and we’re just starting to see the effects on real estate as people who invested early – and probably didn’t have an attorney read their contracts – are trying to sell their homes now.
If you’re thinking of investing in solar panels but may want to sell your home one day, or if you’ve already got those shiny silicon cells gracing your roof and wonder whether they’re going to burn you down the line, here are some of the complexities of selling a home that’s equipped with solar panels.
They May Not Add The Value You Think
When you make an investment in something as popular and pricey as solar panels, you may assume that it increases the value of your home. On the contrary, solar panels can actually be a deal breaker when it comes to selling your home if buyers – and their attorneys – are savvy enough to understand the drawbacks and risks.
If you’re leasing your solar panels as part of one of the many “zero down” programs, solar panels add exactly zero dollars in value to your house. In fact, unless you outright own your solar panels, you’re prohibited by Fannie Mae and Freddie Mac, two of the largest government-backed loan companies, from listing them on your appraisal.
If you own your solar panels free and clear, then they may actually add value to your home, but given the investment and the programs typically offered to homeowners, the vast majority of people have either a lease or loan to manage.
Unless You Own Them, Someone Has To Keep Making Payments
If you’re leasing solar panels, then selling your home is contingent on transferring the lease to the buyer. That means the solar leasing company has to agree to the transfer, and that means your buyer needs sufficient credit not only to qualify for a mortgage but to qualify to take over solar lease payments.
The same is true if you’ve financed solar panels with a loan instead of a lease. The loan on your solar panels is just like any other loan, and that means someone has to make the payments. And just like any other loan, your home is collateral, and that means you can suffer a foreclosure if you fail to make payments.
Whether you choose to pay off the balance before selling your home, or hope the buyers qualify (and agree) to apply for their own loan to take over payments, the complexity can be an added source of stress.
Solar’s Reputation Precedes It
Sadly, solar panels may be environmentally beneficial and even save you money on energy bills, but they’re not considered particularly attractive. If you or your buyer decide that they’re ugly, your options are limited. It can be expensive to remove them, and if you’re still paying off a loan or lease, it may be impractical.
And with some of the more nefarious solar companies in the news these days, your buyer may already be primed to distrust them. If that distrust is warranted, it can kill the sale, no matter how much money you’ve poured into curb appeal, upgraded bathrooms or a custom kitchen.
Energy Savings May Not Be A Selling Point
If you’ve purchased or financed your solar panels, then you can enjoy the tax credits and SRECs (Solar Renewable Energy Certificates) that come with producing your own electricity, and possibly even generate income from selling surplus credits back to the utility company.
But if you’re leasing solar panels, the leasing company gets those credits in exchange for providing you with a low- or no-money-down investment. That means you can’t tempt your buyer with promises of extra income from SRECs.
Worse, you may be bogged down by payments that increase over time. Some leases stipulate a 2% increase each year for the life of your lease, for example. If that’s an added expense that your buyer must absorb, that may spell the demise of your sale.
Solar Panels Are Often Misunderstood
As a relatively new addition to real estate deals, solar panels have been a source of confusion for real estate agents who are unfamiliar with their complexities. From the legalities of a lease to the transfer of ownership, there are issues that a seller – and buyer – must contend with.
For instance, a lease agreement must be disclosed to a buyer’s attorney, which is sometimes overlooked in the sale and can complicate matters later for everyone. In addition, all purchase agreements are contingent on review and acceptance of a solar panel re-lease.
Given the nature of the complexities, you can understand why it’s important to consider the implications of solar panels on your ability to sell – or even buy – a home. It helps to speak with an experienced attorney, especially before you sign that solar contract on the dotted line. Understanding, accepting and even mitigating the risks will save you from financial and emotional hardship later.
If you’re looking to buy or sell a home equipped with solar panels, or thinking of installing them and want to understand your options, get in touch with us and let us know. We’re here to protect your interests and your investment.