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Solar Boosts Home Values But Selling Can Be a Trial

Homes with solar panels tend to sell for higher prices than comparable homes with conventional energy, studies show. One study, released two years ago by Lawrence Berkeley National Laboratory, found solar homes selling for a 15 percent premium. But selling these homes can require extra preparation if you’re an agent in the transaction.

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The biggest issue is how the panels were financed. If the owner simply bought the panels and the accompanying inverter, there shouldn’t be any problem for buyers. But if the panels and inverter were financed or leased, some hurdles can arise and you can provide the greatest value by understanding these hurdles so you can help your clients avoid getting snagged.

If the panels were leased, then you will need to make sure the lease contract is in order and transfers properly to the buyer. That shouldn’t pose too much problem if the seller has the contract in order. But if the panels were financed using public assistance, the hurdles can be higher.

There are different forms of public assistance for solar panels but the one you need to be the most aware of is PACE, a federally funded state and local program that stands for Property Assessed Clean Energy.

The challenge with PACE is the lien that’s placed on the home. Homeowners use the assistance to finance the purchase and installation of the panels and pay the assistance back over time, typically through their property tax bill.

If the borrower defaults on the PACE loan, the lien that’s placed on the home is in a super-priority position, which means it must get paid back first, just liked a tax lien. That can pose a problem for homebuyers trying to obtain mortgage financing to buy the home. Loan programs differ, but under some programs, including some that rely on federal backing, lenders aren’t able to make loans as long as that lien is in place.

This is where you can help, because knowing what loan programs allow funding to go forward when with PACE funding attached is a time- and money-saver.

The possibility of financing hurdles in some loan programs shouldn’t obscure what’s good about homes with solar panels. First, the home’s energy bills can be lower, because each kilowatt of power the panels generate is one less that has to be paid to the utility company. Second, homeowners can get a federal credit each year on their taxes. The state might offer its own credit as well.

Currently, about 1.2 million homes have solar panels and the trend is pointing steeply up. According to data from the Solar Energy Industries Association, the cost of solar panels and their installation has dropped 70 percent over the last decade or so and the growth of solar panels has risen by a similar percentage during that same period.

Bottom line: More homes will have solar panels in the years ahead and that means the chance of you having to list or sell a solar home is increasing every year. The panels pose a challenge but they are also a big business opportunity. Homes are more valuable with them and many people want them because they like the idea of using renewable energy.

The opportunities and challenges are detailed in the latest Voice for Real Estate news video from NAR. View and share the video.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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Comments
  1. PACE is not government-funded. It is funded with private capital.

  2. Robert Freedman

    Thanks for your comment. You’re right. In some municipalities a public agency provides financing directly but in most programs private lenders participate. But in all cases, the state government has to care a special development district and issue municipal bonds to pay for improvements in the district.

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