It seems like a no brainer that solar panels add value to your home in Arizona. With our endless sunshine and fair weather, solar panels are a natural fit here in the Valley of the Sun. However, while we are one of the best places in the world to tap into the sunshine’s power, that does not mean solar panels automatically increase your home’s value.
Dollar for dollar value to your home? (No)
Here are the numbers. It costs roughly $20,000 to install solar panels on your house. If you buy the panels for a $250-thousand home and can document the amount of savings reaped by the solar panels on your monthly electric bill, research shows it will increase your home value and selling price. It does not guarantee a $20,000 increase, but you are looking at netting up to two or three percent more on the sale of your home. So, for example, your $250-thousand house could potentially sell for $5,000 to $7500 more with solar panels.
But I paid $20,000
That’s right, you paid $20,000. You shouldn’t add solar panels because you think you will make back your investment and then some when you sell your home. Think of the people who build a $30,000 pool in their backyard. The beautiful pool with the lovely water feature and built-in jacuzzi will maybe add $10,000 in value to the house. Solar panels offer additional benefits beyond a return on your initial investment. They can lower your electric bill and shrink your carbon footprint— but solar-powered panels do not have the power to yield a quick or even large return on your investment.
Jokes on you—I leased my solar panels! (No)
Okay, you say, but I’m not shelling out that huge lump sum for my solar panels! I am leasing them! Ha ha! Now, who’s laughing? Before you dissolve into maniacal laughter, we’ve got some good news and bad news for you. The good news is, you are enjoying lower electric bills and those solar panels are creating a clean, sustainable source of power. The bad news? If you try to sell your house with leased solar panels, it will sell for three to eight percent less.
Leased solar panels = lower home value (sorry)
Here’s why. Your lease on those panels is another loan. It’s a contract between you and the solar power panel company that you will rent those panels for 15 years (or whatever the agreement maybe.) When you decide to sell your home, you are essentially breaking the lease, unless you can transfer it to someone else—your buyer. That means your potential buyer must now qualify not just to buy your home but also to take over your lease for the solar panels. Many buyers are understandably hesitant to enter into such an agreement. Plus, the lease amount for the panels could add another few hundred dollars to monthly mortgage costs.
Valley real estate agent, Kurt Nishimura says leased solar panels mean two things if you’re trying to sell your house, “One, the house won’t fetch as high of a price as a comparable home that either has purchased solar panels or none at all, and secondly, it will take longer to sell.”
Appraising rules = no sunshine for leased solar panels
Another reason homes with leased solar panel systems are not selling for higher prices, has to with property appraisals. Fannie Mae regulations say that appraisers cannot add any value to a property that has a leased solar panel system. The government-sponsored mortgage buyer says leased panels do not constitute something permanent to the structure so appraisers can’t use them to determine a home’s value. Considering Fannie Mae and Freddie Mac back nearly half the home-purchase mortgages in metro Phoenix, homes with leased solar panels are destined to sell for a little less.
And yet– most of the solar panel systems, some 75%, in the metro Phoenix area are leased systems. It’s easy to see why. The lease option allows homeowners to install the solar panels without having to layout large lump sums of money. So, are solar panels a bad idea? No, but understand the facts. Yes, you will save money on your electric bill and live a greener existence. No, you are not going to receive a dollar for dollar trade-in on your investment. In fact, if you lease a solar panel system, you will lose some home value when you go to sell. You just have to decide what is most important to you.
Here at Landmark Title, whatever is important to you is important us. We offer personalized title and escrow services for both commercial and residential transactions. If you have questions about our services or need assistance with a real estate transaction, please call us at (602) 768-2800 or visit our website.