Choosing solar for your home can have wonderful financial advantages - ONLY if your home NEEDS solar. You are not advised to get solar if your utilities are typical. You are not advised to get solar just because it is trendy or you think it will add value. You should only get solar if the home NEEDS it.
Two main reason for being so cautious:
Hence, be VERY cautious about the decision to get solar for your home. Make sure it is a benefit for the property. Do not let a cold-call or door-to-door Solar sales rep convince you that you suddenly need solar. They get paid big bucks to convince someone they need solar.
Before you choose to get solar, there are so many other things you can do first that may help your utility bills. For example:
Homes that would benefit from solar typically are homes that have much higher utility bills than the average home, such as larger 2-story homes, or homes with pools and/or SPAs, or large families.
After careful research, if you find your home will benefit from solar, how do you know whether you should BUY or LEASE your solar panel system?
Most homeowners are not sure if they should buy or lease solar, so this is a very common question. Every home owner’s situation is different to find this answer, so this page may offer some insight covering the following topics:
Solar has a life span of 30 years or more, is very durable, and has little to no maintenance. Solar is a fast growing trend with even HOA neighborhoods such as Serrano in El Dorado Hills approving solar panels on roof tops. There are two main financing options when installing solar panels on your home:
Both have benefits.
If you plan on living in your home for a LONG TIME and have plenty of cash in the bank, buying solar outright is the BEST way to maximize savings and returns as all the savings go directly into your own pocket. Additionally when you sell your home, the solar system will always be seen as a benefit because owning the system means there is no solar lien attached to the property - less confusing. Yearly returns can be from anywhere between 40%-100% depending on the size of the solar system, size of the house, and your personal utility usage.
Owning solar has become far less of a trend these days. Why? Because buying and owning solar is VERY expensive. Buying solar can cost anywhere between $10,000-$80,000 or more depending on the size of the house and the size of the solar system. The investment is so hefty, you may not even begin to "break even" on your investment for another 5 to 10 years depending on size of home, size of system, and your personal utility usage. This is precisely why ONLY if you plan to live in your home for the LONG HAUL should one even consider purchasing the solar system strictly from an investment point of view. Unless of course you are wealthy and have plenty of money to burn.
If you don’t have the kind of cash you need to purchase solar, you can take out a loan to purchase the solar as banks now have loans specifically tailored for purchasing solar which allows you to still technically “own” the panels, but you would have a loan on the panels just like you have a mortgage on a house. With solar loans, you can own your system with zero money down. However, again, only consider a loan if you plan on being in your home a long long time; because you will have to pay off that loan at the sale of your home, and clearly all benefits of actually saving with solar will be taken away from the sale proceeds of paying off that solar loan. With interest accruing on that loan, you may have paid out more on the loan than if you just didn't get solar in the first place. Solar loans are not the best option when it comes to trying to "own" your solar for that very reason.
Buying and owning solar means you can potentially take advantage of the federal Investment Tax Credit (ITC), a federal tax bill that may help give some relief to the hefty cost of a solar residential or commercial project. The ITC allows you to take 26% of the cost of your system from your tax bill, if you have a tax bill. Initially this tax credit expired December 31, 2016; however, it has since been extended. Be aware, this tax credit does not help everyone who purchases solar. Always speak to your tax professional for anything tax-related. If you do qualify for it, this will help reduce the cost and time it takes to start saving when purchasing solar. See more info here: ITC
When you own the solar panels, all the maintenance and any repairs are your responsibility once warranties expire. Warranties expire typical around 10 years. That varies from company to company. Always read contract. Granted, solar panels have little to no maintenance, so this is a low risk aspect. Solar companies do have a roof warranty of some sort in place for a certain period of time as well if their solar panel installation causes roof damage or leaks.
In short, if you plan to sell your home within 5 years, buying solar will likely not be a financially sound decision since purchasing solar is so expensive that you may not break even for many many years. The exception to this, again, is if you are wealthy with money to burn. Otherwise, it would be wise to make sure you will be living in the home for the long haul before purchasing the system. If you don't have the money to purchase a solar system, and your utility bills are really really high, leasing solar would be your next option to consider.
Leasing solar means you don't own the solar - the solar company owns it. There are no up-front costs, and you start saving money on day one. Most Solar companies offer installation for free when choosing to lease. Although the yearly returns may not be as high as when you own the solar system, one can still expect to save on average 30%-60% depending on the size of solar system, lease program offered, and your personal usage. Always be sure to contact at least 3 different solar companies before you choose one. Also be sure to get advise from solar experts outside the solar company making sure the lease agreement is a proper cost on the 'pay off' amounts and lease payments. Never simply take the word of the solar company.
DO YOUR HOMEWORK. If you don't do your homework, you could be stuck with a leased system that was considered too big for your home, with too high of payments, and the pay-off amounts astronomically high. The wrong leased solar system on your home could potentially make your home un-sellable. So make sure the lease agreement is going to be an asset to the next home owner, not a liability. Be sure to ask what the full lease pay off amount is so you are aware, and also the full pay off to own - because when you go to sell your home, you may be stuck with paying off the lease in full if a Buyer demands this as part of the sale.
When you lease your solar system, you sign an agreement with the company that owns the solar panels. In exchange for a set monthly payment schedule (Lease), or purchase the power generated by the system per-kWh (Power Purchase Agreement- PPA), they install the panels on your property for you to use and enjoy the electricity produced for the length of the contract.
The home owner may also have the option to purchase the solar panels, or upgrade, during the lease agreement. Hence, just because you lease them at first, doesn't mean you can't eventually purchase them later or upgrade later if you feel its a sound investment for your personal needs. All depends on the terms of the lease contract. Additionally, at the end of the lease, the solar company is obligated to remove the solar panels, which can be a great thing because by that time the solar panels may likely out-dated and new and improved panels would be available for a new system. Technology is always improving and when you lease solar, you have a benefit in not being stuck with an out-dated system forever like you potentially would with an owned system.
An advantage of leasing - no maintenance. The company that owns the panels will be responsible for any repairs for the entire lease contract. Solar companies also guarantee to repair any roof damage or leaks caused by the solar panels for a certain period of time. However, you are required to make sure the solar panels are not purposefully damaged in any way and that you keep trees, shrubs, shades away from blocking the solar panels.
When you sell your home, the solar lease can simply be transferred to the next home owner when the home is sold (if the Buyer agrees to this). During the escrow, the future new owner will always have a chance to review the lease details and ask the solar company any questions they have. The new owner themselves will be financially approved by the Solar company, usually with a simple credit check.
BE AWARE there are many buyers out there that are not comfortable with a "lease" on the home. So make sure you confirm this system is value added to your home - not a liability. Think long and hard about this question - "am I sure my home needs solar?" Pre-paying the entire lease payments in full is also an option to offer the Buyer when going to sell the home. Ask your Solar company for a "pay off" for both pre-paying the lease, and for pre-paying to own. These are hefty amounts - so always good to know these amounts BEFORE you install solar on your home as well.
What's the difference between between solar called "solar lease" and solar called "solar PPA?" While the terms “solar lease” and “solar PPA” (Power Purchase Agreement) many times are used interchangeably, and technically are very similar, there is a key difference between the two. With a solar lease, you agree to pay a fixed monthly “rent” payment, which is calculated using the estimated amount of electricity the system will produce, in exchange for the right to use the solar energy system. With a solar PPA, instead of paying a fixed monthly “rent” for the solar panel system, you agree to purchase the power generated by the system at a set per-kWh price.
In summary, leasing solar has become the trend. It is easy. It costs you nothing to install. You start saving money on day one. The lease is simply transferred to the next home owner (if agreed by Buyer).
Whether the solar is owned or leased, purchasing a home with solar is a perk. All the work of installing the solar has already been done for you, and you get all the benefits of saving money on utilities straight-out-of-the-gate. The ownership or the lease is simply transferred to you as the new owner at close of escrow. If the home's solar is leased or a PPA, a Buyer is always provided a copy of the lease agreement in advance during the escrow to conveniently review the contract and also to be able to ask the Solar company any questions they may have regarding the solar service.
When a Buyer is purchasing a home with leased solar, the solar is shown on the pre-liminary title report. Many people refer to this as a lien. Although, it is technically not a lien as if it is a "cloud" on your title - it is merely a financial instrument recorded on the title notifying anyone of interest that a financial instrument is attached to this property. Hence, the Buyers mortgage company will need to approve the lease on the home as part of the loan approval process when purchasing a home with solar panels that are leased.
However, leased solar is now such a popular trend that all the professionals handling the escrow know how to push the process along efficiently. An escrow that includes leased solar panels has become a smooth and streamlined process on all aspects of the transfer. Be sure to review the contract top to bottom, and also ask what the two pay-offs are when paying off the lease or paying off to own it. These are good numbers to know as the next owner before you agree to move forward with your purchase of the home and taking on the lease payments.
When a home has solar that is "owned," there is no recorded financial instrument on the pre-liminary title report, and there is no transfer approval process. Unless of course the home owner took out a loan to purchase the solar, then that loan would show up on the pre-liminary title report just like their mortgage, and would be removed at the closing sale with Sellers paying it off at closing.
Something to be aware of when purchasing a home with solar, if a roof inspection is performed, the roof professional does not certify any part of the roof structure that is covered by the solar.
A general note, when you purchase a home with solar, always good for a buyer to understand how PG&E bills when a home has solar. In short, along with your monthly Net Metering Statements, you will receive an "Annual True Up Statement." Once a year at the end of your “true up” period, PG&E sends you a True Up Statement. It shows the overall amount of credits that you earned by sending power to the grid and the charges that you incurred for using power that PG&E generated.
This is the way that PG&E settles your account. If you incurred more charges than credits, you will need to pay PG&E for the cost of the power you purchased from them. If you produced more power than you used over the course of the year, you don’t owe PG&E anything more than the minimal amounts you’ve already paid monthly to be connected to the grid. MORE ABOUT ANNUAL TRUE UP STATEMENT
Solar panels specifically for heating a pool are completely different than solar for the home's energy. When you see solar panels on a roof you are purchasing, be sure to double check the Solar's purpose. Sometimes you may see two or three different kinds of solar on a property.
Do your research. Just like any home project on your home, you should also follow those same guidelines and get at least 2-3 bids from different solar companies to see which company offers you the best service and costs that specifically fit your needs. If you have a neighbor that has installed solar, ask them directly about how they feel about that company and if the answer is positive, include them in your three companies to call.
However, do not just choose a company just because your neighbor chose them - do your research.
Additionally, do not allow a Solar company to convince you to get solar when you may not even need solar. If your utility bills are already low or comfortably average, then getting solar really isn't a necessity, right? Hence, always think long and hard about whether you really need solar. Do not purchase solar just because its trendy or you think it will add value. Those are not reasons to get solar. Only get solar if you actually NEED it.
Simple answer - YES. No matter if the solar is leased or owned, the solar will add some value to your home if it is a home where utility bills are typically really high without the solar (Keep in mind if leased, the lease agreement needs to be the 'correct' type of agreement to add value. The wrong lease agreement can potentially de-value your home and make the home more difficult to sell).
In general, solar is NOT considered a major value addition like a pool or a kitchen remodel. Solar is simply considered an “upgrade." NEVER install solar simply because you think it will add value to your home. Only consider installing solar IF the home NEEDS it. If you are not sure either way, the best choice would be to NOT get solar. Only get solar if you are absolutely sure it is the right thing to do.
In summary, whether you buy or lease solar, solar may be a great option for a home owner to save on high utility bills no matter if the solar is leased or owned. One just needs to examine their situation and decide which option is best for them. Once researched, the choice to buy or lease will become clear - OR the choice to NOT install solar may also become the choice once the solar situation is fully researched.
This page is strictly for informational purposes. You are always advised to contact your tax professional, accountant, financial adviser, or attorney for any tax, financial, legal advise regarding purchasing a home with solar and advise regarding solar contracts - no matter if the solar is owned or leased. Real Estate brokers and real estate agents do not provide legal, financial, nor tax advise.
Cheri Elliott | 916-812-0382 | EMAIL
4601 Post Street - El Dorado Hills, CA 95762
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