As a Realtor, I’m often asked about the value and wisdom of installing solar power on a home. Does solar add value to a home and are there any potential problems when you sell?
Well… that’s a pretty good question. It’s kind of a double-edged sword. On one hand, it adds to the home’s value since it reduces the electric bill. Plus, people like the idea of a home that can function (somewhat) off the grid. The whole idea of solar feels environmentally responsible.
But it has some down sides. Usually, the system is actually owned by someone else and they take all of the tax breaks and rebates. Also, if the units are leased, it’s usually a long lease, potentially 20 years, which can create a problem when the home is sold. The new owners may be stuck with whatever arrangements the old homeowners made with the solar company. It might be a real issue, if they want out of the contract. The seller may have to buyout the contract to make a buyer happy or to alleviate a problem for themselves. Remember this is a binding and prolonged financial arrangement between the homeowner and the solar company. I get the impression from the documents provided by the solar companies, that they totally intend to exercise their rights for the length of the contract, either with the original homeowner or with the new homeowner.
It’s also a liability if you need any roof work done, since they have to be removed and then reinstalled, although I understand the insurance companies are allowing for cost of re-installation on an insured roof. There’s no way to count on insurance companies to maintain coverage if they don’t like the expense. Don’t forget that insurance companies change the rules for coverage all the time.
There’s also some speculation that lenders are going to have issues with homes with leased solar systems. I’m not sure what their problem is, but it may be a cloud on the title. Potential lenders don’t like clouds on titles. While the solar companies maintain that they don’t attach a lien to the property, they do a UCC-1 financing statement (UCC: Uniform Commercial Code). It’s a legal form giving notice that it has an interest in the personal property of a debtor. The UCC – 1 allows them to claim ownership of their equipment in the event of foreclosure. The solar companies say that in order to avoid creating a cloud on the title, they can drop the UCC-1 during a sale and then put the UCC–1 back a few weeks later.
For the most part, I haven’t seen a big bump in prices on homes with solar. Of course, in this current market almost everything sells at the high end of the price range. It’ll be interesting to see what happens in a couple of years when the market cools some. In the meantime, solar technology will continue to improve, which may make current solar setups less desirable.
It’s certainly going to help sell a home to someone who specifically wants a an eco-friendly house. But, just like a house with a pool, some people really want it, but some will see it as a liability.
But, as far as value goes, I doubt you see a consistent big bump in value, like you would with a new kitchen. Some agents say you could see a $10K bump in value, but I think it really depends more on the buyer’s desire for solar. It’s just not going to be a big deal to a lot of buyers. Many of them just don’t understand it very well. If you purchase the system, it seems to me that it’s unlikely that you’ll ever recoup the cost. I’m not sure if the savings on your electrical bill will make up the difference in a $10,000 to $20,000 purchase. I haven’t seen any numbers that show that it will, especially when you take the inevitable depreciation into the total, although state and federal credits will change the overall cost.
Here’s a recent article in the LA Times that covers reselling a home with a solar electrical systems.
Here’s a couple of articles written by the solar industry, so they have a different take that’s skewed in their favor.
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