As the U.S. solar industry continues to grow, it’s important to understand how solar energy systems factor into the purchase or sale of a home. According to the U.S. Department of Energy, solar panels can increase a home’s value. Another study from the National Renewable Energy Laboratory (NREL) states that homes with solar sell faster than homes without green options, have higher home resale value, offer substantial tax credits, and have lower utility bills. That said, the appeal and value of solar technology can differ significantly depending on various factors — and selling a home with solar panels isn’t always a simple process.
Whether you’re preparing to list and need to refine your sale strategy, preparing to buy and want to get informed, or just exploring your options, it’s important to be informed about how solar panels can complicate the transaction. Below, we’ll break down basic tips, potential issues, and cover what you need to know when you sell.
Leased vs. owned solar panels
One of the most important distinctions is whether the solar panels are owned outright or leased. Owned panels typically add more value and are easier to transfer during a sale. If the system is paid off or purchased outright, this is another significant advantage.
Leased panels, on the other hand, can complicate the sale. The lease may need to be transferred to the buyer, who must meet the leasing company’s credit requirements. Alternatively, the seller can pay off the remaining lease before selling. To avoid delays, have lease or loan documentation ready before listing the property.
Seller transparency and local market conditions
In addition to ownership status, buyers will want other important details about the system, such as installation date and warranty information, monthly savings on utility bills, maintenance history, and manufacturer and installer details.
Most states also require sellers to disclose any solar agreements or liens during the sale. If solar panels are financed, there may be a lien until the loan is paid. Buyers and their lenders will want clarity on this early in the process. Providing this upfront builds trust and can make the property more attractive.
Keep in mind that in some markets, solar is a hot commodity. In others, buyers may not value it as highly. A real estate agent with experience selling solar-equipped homes can help sellers understand how solar affects appraisals in their area, what similar homes have sold for, and how to market solar features effectively.
More on residential solar liens
In addition to the environmental benefits, many homeowners install solar panels intending to save money over time through reduced utility costs. The upfront costs of solar panels, however, can be quite expensive, and large residential solar panel systems can cost anywhere from $10,000 to $30,000 or more. For this reason, many homeowners choose to lease and slowly purchase their panels over time.
These financing agreements may include a UCC-1 filing or UCC lien. A UCC-1 financing statement is a legal form filed under the Uniform Commercial Code (UCC). It serves to publicly notify creditors and other interested parties that a lender has an interest in the personal property of a borrower. In the context of solar panels, the UCC-1 form essentially protects the lender’s interest in the panels, which are often financed or leased rather than purchased outright.
Potential issues with a UCC Lien
Unlike other liens, a UCC lien is not a property lien, but rather a lien on personal property. Thus, it is not attached to the home itself, but rather the solar panels. If a seller’s home still has a solar lease or loan, the buyer may need to assume the agreement, or the lien must be resolved by being paid off or released.
Some mortgage lenders may also flag a UCC-1 filing during title searches. While not a traditional property lien, it may still complicate the process depending on the lender’s policies. Transferring a solar lease or loan often involves paperwork and coordination between the seller, the solar company, the buyer, and their lender. Start this process early to avoid closing delays.
Work with trusted title experts
Selling a home with solar panels doesn’t have to be complicated, but it does require preparation. Title insurance plays a significant role in this process, as it protects both lenders and borrowers and will defend the transaction against fraud or delays. Whether the system is owned, leased, or financed, being transparent, proactive, and informed will make the selling process smoother — and potentially more profitable.
Are you selling a solar home? Work with a title company that understands the value of renewable energy and is dedicated to helping real estate professionals ensure that transactions remain stress-free. If you’d like to speak to someone about working with Landtrust Title, contact us.