With the cost of electricity going up more people are talking about solar so I thought I'd post about its effect on real estate

Submitted by CTRealtorCarl t3_z8z19p in Connecticut

Disclaimer: This is a long read and only touches on the basics, there are a ton of factors like tax credits/incentives that I do not mention. Also, I do not intend to sound negative, I think solar is a great option for a ton of homeowners and can save them a lot of money. However, it is not a decision to be made hastily. With rising electricity rates solar salespeople will be looking to cash in on homeowners thinking it will save them money.

TLDR; Is solar a good idea? If you are going to live in the home for a long time, probably. Make sure you do the research and READ THE FINE PRINT.

With utility companies seemingly increasing rates across the board I’m seeing and hearing a lot more chatter about installing solar panels. There is no doubt that for some homeowners it can save them a TON of money. However, make sure you are doing your due diligence before signing on the dotted line. I hate to sound pessimistic but sometimes it is a terrible idea. It could hinder a future sale and/or you may just not save any money.

First and foremost, you need to have a solar audit done to see if your home is a good candidate and how much electricity your system could produce. Southernly facing roof with little to no shade from trees or other obtrusions? Good chance that you’ll be able to produce a lot of electricity. Keep in mind that geographic location matters too, sunlight hours are going to vary. Panels in Arizona are going to get more sunlight per year than panels in Maine, especially when snow is taken into consideration. Ideally the auditor won’t be someone that benefits from giving you an inflated estimate of how much electricity your system could produce.

So you’ve got your audit and you know how much electricity your system will potentially produce on a yearly basis. Now there are options.

Buying Outright

This option will give you cost savings on your electric bill. No interest or monthly payments to worry about. You will also add value to your property by doing so, however at a steep discount compared to what you paid. A typical system may cost in the range of $20k-$30k but only add $10k-$15k in the eyes of an appraiser. Definite cost saver in most cases if you plan on owning the home for 10+ years.

Financed Purchase

Use your solar audit to figure out when your break-even point should be. For example, if your typical electricity bill is $300 a month prior to solar, and you expect to save 50% that equals $150 per month in savings. If your system paid in full with interest costs $35k its going to take a little over 19 years to start capitalizing on the savings.

A financed solar system does add value to your home, however, if you sell the home before its paid off you will need to do so at closing. Or you can always keep paying for something you no longer own.

Leased System

They can save you money, but you need to read every line of the lease and make sure the math works out.

Leased panels do not increase the value of your home. In fact in many cases they can become a hindrance to selling because you will either have to buyout the lease (exorbitantly expensive) or the buyers need to qualify to take over the lease.

Anecdotally, on 2 occasions when comparing the lease payments and utility bills I found the homeowners to be losing a substantial amount of money in the long term.

Solar leases can save you money, but you need to shop around, read the fine print, and do the math.  

Homebuyers should ask the following:

1.     Does the system actually save the homeowner money?

2.     Is there maintenance involved? (One of the positives of a lease is no maintenance)

3.     What if the roof needs to be replaced?

4.     Do I need to qualify for and take over a lease?

5.     Do the panels detract from the curb appeal and potential marketability?

6.     What is the system’s life expectancy? Am I going to need to deal with removing them soon?

Need to sell your home with solar panels?

1.     Make it easy for the buyers to form a decision, have utility bills etc. ready to go so you can show off your savings to potential suitors.

2.     Document the yearly cost of maintenance.

3.     Be prepared to pay off the loan or lease if necessary.

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Comments

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[deleted] t1_iye7euv wrote

Thank you for this post! It does a great job explaining that solar is not a magic bullet for everybody, while it still has potential to work on some homes.

The best thing I recommend people do is to just get a solar audit, so that way you can make an informed decision on whether or not solar would help you and your family. If you have an audit and don’t like what you see for savings, don’t move forward with solar.

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No-Common1953 t1_iyebd2f wrote

Thanks for the great info, we had considered it and this gives us something to think about.

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CTRealtorCarl OP t1_iyeea64 wrote

You're welcome!

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No-Common1953 t1_iyevtu9 wrote

Btw, within minutes of posting I had a rep from Sunrun reach out through the app, that's the kind of thing that definitely goes in the negative column

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ooObrenOoo t1_iyf2uet wrote

You said you were considering it. Someone is doing their job and trying to help you. What are you even complaining about?

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No-Common1953 t1_iyf3x5z wrote

Ouch

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Malkor t1_iyf9eet wrote

I think "everyone" has Social Media Specialists these days.

I interacted with someone in my company who did it... They pretty much did what I do while wasting time, but hate it intensely!

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LostSoul5 t1_iyekfgf wrote

Great post from a realtor's perspective OP!

>Use your solar audit to figure out when your break-even point should be. For example, if your typical electricity bill is $300 a month prior to solar, and you expect to save 50% that equals $150 per month in savings. If your system paid in full with interest costs $35k its going to take a little over 19 years to start capitalizing on the savings.

You should have ended this section at Use your solar audit to figure out when your break-even point should be It's difficult to make a blanket statement like this on payback period as there are many factors at play. This would deter most who are considering solar to walk away. Many will oversize their system these days to the maximum allowable size to lower their payback period. There are too many factors at play to generalize about this, and you are correct in saying the solar audit is key before moving forward.

Solar leases work for very few and generally come with crippling terms and conditions to end or transfer the lease. If at all possible, always buy outright. There are significant savings when buying outright over financing.

Your tips for homebuyers and sellers are helpful in RE transactions that have solar panels on the property.

Truthfully without even touching on the incentives out there, your post would dissuade many from going solar. Incentives for clean energy generation can be found by zip at dsireusa.org and this helpful infographic breaks down the solar tax credit, but keep in mind that the 10% bonus for domestic equipment is for commercial solar projects:

https://imgur.com/SDWWU5t

If you are considering solar, have a read through this post:

https://www.reddit.com/r/Connecticut/comments/v79wnx/comment/ibjkkv8/?utm_source=share&utm_medium=web2x&context=3

There are many helpful tips that go beyond examination from a real estate perspective, and they dovetail nicely with this post.

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kittytittymeowmeow t1_iyep3m9 wrote

This is also a super informative post

I think most residents would love to buy outright but few can throw away 30k in a day.

I wish the state could have a nonprofit solar company to increase solar access and utilization. Maybe using extra electricity for town buildings or something. I don't know. I just feel like we are behind in green energy. We're a small state so we need to find more compact resources. We can't have massive solar or wind farms. I'm rambling at this point.

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StodgyBottoms t1_iyerm7x wrote

Every new box store in the country needs to have solar on its roof. I don't know why we aren't doing that, it seems like a no brainer.

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kittytittymeowmeow t1_iyethsx wrote

Absolutely!! And strip malls and shit too. Schools, town buildings.

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HazelFrederick t1_iyexafr wrote

Most public schools in Connecticut either have solar now or can through the state microgrid program.

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Swede577 t1_iyevcsp wrote

I used a low interest home equity loan from my credit unit 8 years ago to finance my panels. I believe energizect.com also has low interest loans. Every month for the 6 years it took to pay off my panels my monthly payment was less than or equal to my average Eversource bill. My Eversource bill has been just the $9.62 connection charge since I installed them. I basically paid my credit union for 6 years instead of Eversource. You may also be able to deduct the interest on the home equity loan when you do your taxes.

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kittytittymeowmeow t1_iyewc08 wrote

Have you looked at the rates?!?? No thanks. Now is not the time. I'm so sick of people sharing there experiences pre-pandemic.

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AhbabaOooMaoMao t1_iyenrji wrote

On leases or PPAs (power production agreement).

The panels get less efficient as the system ages, but every year the monthly contract price goes up even though every month you produce slightly less power. This is called panel degradation. I think the inverter also loses efficiency but not as marked.

As soon as you sign the lease, the contract is likely to be sold to a third party. In my experience from a practical and legal standpoint, these companies have very little incentive to maintain systems or work with home owners if something major happens like a tree falls on the panels/roof or if the roof otherwise needs replacement.

The companies advertise no cost of maintenance as you pointed out but you still owe money for the power the panels would have produced even if they stop producing for reasons outside of your control.

So if you get a tree branch through your system, they have no reason to rush to remove the panels so a roofer can come in (you're not allowed to remove the panels) because you still owe them the same amount of money each month regardless of whether the system is functioning. Instead of paying for what you actually produced, you owe for what you should have produced.

They also advertise no cost removal of the panels if you want to end the lease and that is true but you still owe monthly payments for the entire lease duration, which could be twenty plus years. They just don't charge a separate line item to remove a system (why would they, since they can lease it to someone else).

Just thought I'd add some detail because I hate leases so much.

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Swede577 t1_iyeu6s2 wrote

Just curious OP if there are still issues with people selling homes with leased systems on the house. Are a lot of sellers still having to pay those outrageous buyouts to end the lease. It seems like it's so well known how bad some of these leases are that most buyers I have heard refuse to want to take them over.

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CTRealtorCarl OP t1_iyewatx wrote

Definitely still an issue. I've had buyers walk away from homes because of the lease and the sellers refusing to pay the buyout.

Some of the buyout numbers I've seen are absolutely mind boggling.

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smackrock t1_iyey3gk wrote

Anyone have any good resources for finding solar contractors?

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iwanttobehappy2022 t1_iyeahkh wrote

So I think we can agree like solar isn’t as good as coal for generated electricity. When coal powered our nation we didn’t have these issues.

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MostlyHams t1_iyeugur wrote

What point are you trying to make here? The post is talking about home solar setups which are equivalent to having your own mini power plant on your property. There was never an option to do that for coal (or any other fossil fuel) so of course the pros and cons will be different.

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