4 solar panel pitfalls I've faced with real estate clients

As Realtors, we are often asked if people should install solar panels.

There is no question that the addition of solar panels is on the rise. According to the Solar Energy Industries Association, “In 2015, California installed 3,266 MW of solar electric capacity, ranking it first nationally.” And, “Over the next 5 years, California is expected to install…more than 2 times the amount of solar installed over the last five years.”

Solar companies offer benefits such as improving the environment, drastically reducing or eliminating your electric bills, removing upfront costs, and even increasing your home value.

Some have claimed that, “solar homes have higher property values and sell more quickly than non-solar homes.”

But is this really the case?

According to FHA and Fannie Mae, whether solar panels add value or are viewed as a liability is still unclear, and that the financial burden likely increases when leasing the solar panels rather than owning them.

Why wouldn’t homebuyers want to purchase a home with solar panels? The simple answer is that there isn’t enough research and data to show that homes with solar panels are worth more. Also, according to the National Association of Realtors, “solar panels can sabotage a deal when it comes time to sell.”

Here are some downfalls that I have found while selling homes with solar panels:

Additional monthly costs

Leased solar panels come with low upfront costs; however, when homeowners lease the solar panels, they are opting for a payment until the lease is up. These leases are typically 20 years long and increase in cost every year.

I have found that most buyers don’t want to buy a home with a leased solar panel system because of the additional monthly cost. For some reason, buyers don’t see the value in lower energy bills. All they see is the increased minimum monthly payments.

Qualifying for a solar lease

If a homebuyer decides to purchase a property with leased solar panels, that buyer must qualify for the solar lease with the solar company. This often affects the buyer’s purchasing ability and could disqualify a buyer from purchasing the home once the mandatory solar lease is added to the payment calculations by their lender.

Additional loan payments

Even when homeowners purchase their solar panel system through a loan, as opposed to leasing, many homebuyers are not interested in taking on the additional loan payments.

This has happened more than once to my clients. In most cases, the buyer refuses to take on the additional loan payments and either walks away from the property or demands that the seller pay off the solar panel loan prior to the close of escrow. If the seller agrees to pay off the loan, proceeds from the house are used and the seller ends up with less equity.

Or, the seller can refuse to pay off the loan, leaving his or her property on the market until a new buyer, who is willing to assume the loan, is found.

Hidden costs

One hidden cost comes in the form of unexpected repairs. Recently, clients of mine, who have solar panels on their home, decided that they needed to install a new roof on the house before they sold it.

They contacted their solar panel company, which had been sold to another company, to have the panels removed.

After the new roof was installed, the city inspector wouldn’t allow my clients to put the panels back on the house without a permit.

My clients contacted the new solar panel company to ask for a copy of their plans so they could submit them to the city for the permit. The new company, however, didn’t have their original plans and charged my clients $800 to have them redrawn.

In addition, they charged them $4,200 to remove and reinstall the panels. In the end, my clients shelled out over $5,000 only two years after the initial installation!

This is by far the worst story I’ve heard, but it illustrates the fact that there are hidden costs homeowners don’t expect. As my client said, “Any money I saved over the last two years…and then some…has been completely lost.”

Since the installation of solar panels appears to be a continuing trend, the question becomes: Is it ever a good idea to install solar panels?

The answer is a qualified “yes.”

If the owners can pay for the system without a lease or a loan, negotiate a great installation price (or do it themselves), understand the contract completely, plan to stay in the home for five or more years, and can recoup their entire cost within five years, then solar panels are a good investment.

If, however, they are considering solar panels in any situation other than that, they’ll probably lose money on the solar panels and regret their decision.

Aaron Zapata is a licensed real estate broker and ranked in the top 1 percent nationwide among Realtors. Impact Properties, Inc. is a real estate agency serving all of Southern California. Connect with Aaron on Facebook or Twitter.