Have you considered getting solar panels for your home? You are not alone! We have been getting many calls from our clients recently asking us our opinion. Nationally residential solar installations have increased by 50 percent per year since 2012 and we can certainly see the impact as more panels pop up on rooftops across the Valley.

With the high expense of purchasing solar systems out right, most homeowners choose to lease solar systems at little to no upfront cost. Solar has a lot of upsides: you can reduce your electric bills, it’s “green”, and leasing makes it affordable. Most homeowners assume that the new solar panels will only enhance the value of their home and maybe even help them get a higher sales price when they sell their home, however, there are some challenges that you should be aware of before you sign a solar lease.

First of all, when you lease solar panels the lease stays with the property and has to be assumed by the new owners. This means that a potential buyer will have to qualify with the leasing company. Further, the cost of the monthly lease gets factored into the buyer’s debt ratios which can skew their ratios and impact their ability to qualify for financing. Interestingly the cost savings does not get factored into the buyers debt ratios. Additionally, at this time, FHA won’t finance properties with leased solar panels.

Secondly, before you install your solar panels, you want to make sure your roof is in great shape. Re-roofing once the panels are installed is much more challenging and has additional costs.

The other thing to consider is that it is highly likely that the solar technology will improve within the next 10 years. In ten years when you are ready to sell your home, the panels will likely still work, but a buyer may not be interested in assuming a lease on older technology.

We are starting to see these issues appear in real estate transactions. First the lease can limit the pool of potential buyers who can qualify to purchase the property. Secondly, the new buyers will also have to deal with the lease when they go to sell down the road and this causes them to have pause. Also, once buyers realize they need to assume the lease, they often ask for the seller to pay out the lease. We have heard of several cases in which the solar panels have resulted in buyers backing out or sellers having to pay out the solar lease to get the deal done. Lastly, in many cases appraisers don’t give any value for the solar panels in the appraisal.

While we are not trying to talk you out of investing in solar technology, we do highly recommend that you carefully weigh the pros and cons before making such a significant investment in your home.