Does Solar Increase Property Value? | Solar Pitfalls When Buying A House | Oakland | Alameda

Are you planning to add solar to your property or make an offer to a property that has solar in it? In this video, I’m going to discuss the pros and cons of a solar system and what you should consider prior to moving forward with one.  This is a topic that is near and dear to me as I used to sell solar prior to becoming an agent. So, let’s dive in!

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How was it paid for?

Whether you’re buying or selling a house with a solar power system, the first thing you should think of is how it was or is being paid for. Did the original owner pay cash, financing, or a lease it? There may be additional steps you need to do before you can buy or sell your home, depending on how the property’s solar power system was purchased.  

CASH

Solar power systems that were paid for in cash is just like any other cool appliance that comes with the house. It belongs to the house even if there will be a change in home ownership. Additionally, it will also usually not affect or change your buying or selling process.

However, if you’re the buyer, you need to make sure that all the paperwork is in your hands before you close. Most systems have long warranty periods and you need to make sure you get the remainder of that warranty transfered over to you. 

FINANCING

Much like any other type of personal loan, financed solar power systems often have to be paid in full first before you can transfer its ownership.

This type of financing usually lives on the original buyer’s personal credit. If you’re the seller, this means that you really need to read the fine print, especially if you don’t want to write a $10,000 check all of a sudden to the solar finance company. However, if ever you’ll need to, factor that into your closing costs. (Learn how to estimate closing costs for home sellers HERE.)

PACE FINANCING

One less common type of financing but is also an additional option in the East Bay is PACE Financing. PACE Financing is often times advertised as no money down and with low monthly down payment, but it is usually paid for a longer period of time. Sometimes, even as long as 30 years. Most importantly, unlike other financing and loan types, this option lives on your property tax bill, not your personal credit. As a result, there’s a whole section of the Seller disclosures related to it.

As the buyer, if you’re planning to write an offer for a property that has a solar system purchased through PACE Financing, you need to factor in the additional fee on your property tax bill and what it will do to your loan. This will affect your debt to income ratio and can change a number of items related to your loan. On the up side, if you know that you’re going to live in this house for 20 or more years, this may be a good option for you. PACE financing provides you another option to allow you to spend the next 20 years enjoying the benefits of a solar-powered home.

LEASED

Because a buyer needs to apply and be approved first before they can assume a lease, this option usually creates the biggest loopholes in the contract among the four options. 

Generally speaking, if someone can afford a median home in Alameda County, there’s a good chance that they also have the minimum requirements to take on that lease. However, if they don’t and you’ve made the lease a part of the sale, then there is a loophole in the contract. This means that somebody has to take over and pay the remainder of the lease term or cancel the contract. It can be really sticky. 

So whatever side you’re on, make sure to talk to your agent about the ramifications and opportunities that you can use in your favor. Make sure to ask their advice on what you should do to be able to close the loopholes, at least.

Do Solar Power Systems increase property value?

The Federal Housing Admin estimates that every $1,000 savings in utility cost translates to a $20,000 increase in property value. However, based on my personal experience after selling more than $50,000,000.00 of East Bay real estate, not a single time did I encounter homebuyers who decided to pay more than the comps because their utility bills were lower. In fact, very few buyers factor utility costs into their purchasing decision in the first place.

In addition, not a single appraiser or agent has suggested that because a house has a 10-kilowatt solar power system, it should sell for more than the house next door. 

My advice? Think of solar as an added benefit but not as something that adds to the property’s selling price. Look at it as you would a Viking range or a built-in theater system—something really cool that brings value and add utility to the living experience but won’t necessarily raise the property value. However, if you’re the home seller, think of the up side of having a solar-powered home too!  That said, as utility costs go up, this may change in the near future. 

I hope my solar power systems guide for home buyers and sellers has helped you.

If I can give you more context on the process of buying or selling your home, please do not hesitate to reach out. My information is below. 

Here’s to all your success!

Best,

Hans Struzyna,

The market has shifted and you need to be aware of where we are going. I have created a free resource packed with all the information I tell all my clients when they start shopping.

Download my COVID Era Buyers Guide:

(510) 768 - 8228
DRE # 020284245
EastBayHans@gmail.com