Selling your solar home: What you don't know, can hurt you

The family residence is a typical homeowner’s most valuable asset. Capital improvements like a new bathroom or marble countertops can increase the value that investment. But what about adding a solar system to your home? Like any other project, the devil is in the details. How you go solar can significantly impact how much value solar adds to your home.

There are three ways in which a solar system can be financed and installed on your home. These are: purchasing a solar system, leasing a system, or entering into a Power Purchase Agreement (PPA).

Purchasing a system outright means you pay for the system either with a loan or an upfront cash payment. Owning a system means you will retain the rights to all of the project’s additional incentives. This includes the 30 percent federal tax credit, the renewable energy credits generated by your system, and local incentives that may be available. Direct ownership of a system makes sense if you are able to pay for the system upfront or are able to take out a loan.

If you’re planning to sell your home shortly after going solar, it may make sense to purchase the system. Owning the system outright makes it easy to transfer ownership of the panels to the new homeowners and to incorporate their price into the value of your home.

If you do not want to pay the upfront cost of going solar, you may opt for someone else to own the system, either through a lease or a PPA. Going solar in either of these ways can allow you to immediately see a cost reduction from

With a lease, you are allowing a company to install panels on your roof. You are able to use the electricity the panels generate to offset your electric costs. With a PPA, you are buying power from the system’s owner at a cost that is ideally less than what you paid for electricity before the system is installed.

If you lease or have solar through a PPA, you will not be eligible to take the tax credit or use the renewable energy credits the system generates.

Selling your home after going with a third-party ownership model is more complicated as well. You’ll need to pay off the remainder of the lease, effectively purchasing the system. If you don’t wish to pay off the system, the new homeowners will have to agree to take over your current contract and pay off the remainder of the agreement themselves.

The Federal Housing Administration and Fannie Mae allow the value of a solar system to be included in an assessment of your home as long as you own the system. Systems that are leased or installed through a PPA cannot. There may be additional requirements that must be met before a lender approves a mortgage for a potential buyer for a home with a PPA or leased system.

To help homeowners better understand how your solar system impacts your home’s value, Solar United Neighbors has put together a “Selling Your Solar Home Guide”. It’s free and available for download here.