Buying and Selling a House in Arizona with Solar Panels – Know Your Rights

Powering your home with solar panels is obviously a popular topic in Arizona, with as many sunny days as we have here.  Since solar panels can lower your electricity bills and make your home eco-friendly, it seems like it should add instant value to your home if you’re selling.  Unfortunately, it’s not that straightforward.  There is a big difference between the ability to include solar panels in a home valuation based on whether you own the solar panels or lease them.  If you are buying and selling a house in Arizona with solar panels, it is important to understand your legal rights and how those solar panels impact the resale value of the home.

Fannie Mae recently updated their guidelines about solar panels on homes.  The guidelines now require the home owner to own solar panels if they are going to be included in the valuation of the home.  If the solar panels are leased, they can not be included in the valuation.  To meet Fannie Mae’s selling guidelines (what Fannie Mae requires to purchase or securitize a mortgage loan), a property with leased solar panels must maintain access to an alternate source of power that meets community standards, and the monthly lease payment for the solar panels must be included in the debt-to-income ratio calculation for the property.  Additionally, the Fannie Mae Guidelines for properties with leased solar panels requires that the lease agreement for the solar panels include clear language that spells out the owner’s obligations to fix any damage or repairs to the solar panels.  These guidelines can decrease the valuation of a home if the solar panels are leased.

A recent report by the Lawrence Berkeley National Laboratory on the valuation of homes in California with solar panels found that for every 1 Kilowatt (kW) of power generated by solar panels, it increased the resale value of the home by around $5,900.  This same report also found that the age of the solar panels played a significant role in the true increase in the resale value.  According to the report, for each year the solar panels have been installed, the expected increase in resale value dropped by roughly 9%. This report also indicates that there’s not necessarily a dollar-for-dollar return from installing solar panels on your home if you are planning on selling.  In other words: You are not likely to increase the value of your home by more than the cost of installing the solar panels.

This is also valuable information if you are considering purchasing a home with solar panels.  You will want to understand whether the solar panels are owned or leased, how old they are and how much power is being produced by the panels.  These should be verifiable with purchase records of the solar panels and records showing how much power has been produced on a regular basis by the solar panels.  You can quickly understand whether the seller is asking for a fair increase in the valuation of the home compared to other homes for sale in the area.  It is one thing to want to own an eco-friendly home, but it is another to overpay for home just because it has some old solar panels that are no longer generating power at their peak performance levels.

The attorneys at MacQueen & Gottlieb can help you evaluate the impact of buying or selling a home with solar panels in Arizona.  Our attorneys have significant experience with the real estate industry and applicable laws for solar panels.  We can assist buyers, sellers, real estate agents and brokers with the details of a transaction involving solar panels and many other facets of a real estate purchase.  Contact us today for peace of mind at 602-562-7218 to schedule an initial consultation.