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Shining a Light on Solar Panels: A Buyer's Guide for San Francisco Bay Area Real Estate

Valerie Mattei  |  October 20, 2023

Shining a Light on Solar Panels: A Buyer's Guide for San Francisco Bay Area Real Estate

๐Ÿš™ I just recently got a Tesla. Yes, I gave up driving my amazing, but gas guzzling, Jeep Wrangler. Like many of us in real estate, I was driving well over 100 miles a day, and between the ripe age of my jeep and the high cost of gas, my beloved SUV wasn’t working for me anymore. Since the switch to an electric vehicle, I feel relief everytime I pass a gas station. I also scored some “cool” points with my teenage daughter who will not only inherit said Jeep Wrangler, but also gets dropped off at school in what she thinks is a fancy new car. Now that society is moving toward electric as a whole, solar panels are the next logical improvement one can make to their home. What’s not to love? No gas. Charge at home. The sun is free energy. The topic of solar panels on a home is much more complicated than one might think at first. โ˜€๏ธ

๐Ÿ  Let's start with the best-case scenario: The solar panel system is owned outright by the seller. Here's what you should know:

  • The cost of the system is usually factored into the home's sale price, so you might be paying a premium for those eco-friendly benefits.
  • Studies show that a solar-powered home can increase in value by up to $20 for every $1 saved on energy bills, potentially adding thousands to your property's worth.
  • Solar systems may impact property taxes positively or be exempt from assessments in many states.
  • If the seller owns the solar system outright, it won't affect your ability to secure a mortgage.

๐ŸŒค Purchased With A Solar Loan:

In some cases, the solar panel system may have been purchased with a solar loan, meaning the seller hasn't entirely paid it off. Here's how it works:

  • The responsibility for the solar loan rests with the seller, but they might factor their investment into the home's sale price.
  • Buyers will own the system outright after the sale is finalized.
  • In certain situations, you may assume the solar loan payments, but this needs to be formally arranged with the financing institution.

๐Ÿ”Œ Purchased With PACE Financing

Property Assessed Clean Energy Financing (PACE) is another way to finance solar systems, and it's tied to the property itself:

  • PACE loans function as tax liens and are paid annually as part of your property taxes.
  • When a property is sold with an existing PACE loan, the responsibility for repayment transfers to the new owner.
  • Some mortgage lenders may be hesitant to finance properties with PACE loans, so be aware of potential challenges.

๐ŸŒฑ The Dirt On Leased Solar Panels

If the solar panel system is leased, there are several important considerations:

  • Leasing can lead to immediate savings on electricity bills, with maintenance handled by the leasing company.
  • Lease agreements typically last 20 years or more, making the home potentially harder to sell unless the buyer assumes the lease or buys the system outright.
  • Lessees miss out on federal and state tax incentives available to system owners, which can be substantial.
  • Over the lease term, payments can add up to more than the cost of buying the system directly.

๐Ÿ“ Quick Facts About Solar Power Purchase Agreements (PPAs):

Solar Power Purchase Agreements (PPAs) are different from leases:

  • In a PPA, a solar company owns, installs, and maintains the system, charging you for the electricity used at an agreed rate, often competitive with local utilities.
  • PPA rates can escalate over time, while leases have fixed monthly payments.
  • If your utility offers net metering, you can get credits for excess power, but you'll pay regular rates for additional electricity.
  • Like leases, PPA customers miss out on tax incentives and face potentially high termination costs.
  • Selling a home with a PPA can be tricky, as new owners must assume the payments.

Like many of us moving toward electric vehicles, solar is certainly something we need to take into consideration. Understanding the ins and outs of solar panel ownership is crucial. Whether owned, financed, or leased, solar systems can significantly impact your investment, both financially and environmentally. Make sure you're well-informed before making a decision, and consult with a knowledgeable realtor who can guide you through the process.

RISE Homes has helped both buyers and sellers navigate the complicated situation of solar panels many times. Feel free to reach out with any questions! 



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