June 7, 2024 by Justin Gesso
In this post on the hidden costs of solar, I want to share some eye-opening experiences with solar systems and their often-overlooked costs. If you’re considering adding solar to your home, or you’re dealing with a property that has solar panels, this information could save you a lot of headaches and money. I have bought many houses with solar and I have run into many issues that many people have no idea about.
The Foreclosure Solar Fiasco
Recently, I bought a foreclosure property at an auction. The winning bid was $249,000, which was lower than expected, possibly because the house had a solar system. Here’s where things got tricky. The title company refused to insure the house due to a $38,000 lien on the solar system. The previous owners owed this amount, and the lien survived the foreclosure.
This almost cost me the deal and my $122,000 earnest money deposit. Thankfully, my title company confirmed that the lien was against the equipment, not the property. So, the solar company could technically reclaim their equipment, which was fine by me as long as I kept the house.
Many people think solar systems are a great deal because they reduce electricity bills. However, these systems are not free. You’re often taking on significant debt that affects your debt-to-income ratio, making it harder to buy another house. If the system is leased, the new buyer might have to qualify for the lease, or you might need to pay off the system before selling the house. In my case, this amounted to nearly $40,000.
Replacing Roofs with Solar Panels
In another deal, I had to replace the roof on a house flip. The house had solar panels, and removing and reinstalling them cost an additional $5,000. This wasn’t covered by insurance, which only added to the overall expense. Furthermore, insurance premiums might increase due to the extra cost associated with solar panel maintenance.
Solar Makes Selling Difficult
I’ve come across several interesting stories involving solar panels. For instance, a property listed for sale had a $99,500 lease transfer fee for the solar system. This fee could deter potential buyers and complicate the sale.
On other deals, the buyers needed to qualify for both the home loan and to take over the solar panel lease. While they were able to qualify for the house, they weren’t able to also qualify for the solar lease. Both together pushed above their limits. In these cases, either the seller needs to pay off the solar panels completely or the buyer needs to terminate.
Ultimately, when there’s a solar lease, the buyer’s “buying power” is reduced by the amount of the lease, which can be very substantial. In many cases, buyers will quickly learn they can get much more house for their money by avoiding ones with solar panels.
If you’re looking to add value to your house, instead of going solar, see my article: What Remodel Projects Add the Most Value to a House?
Key Takeaways for Homeowners
- It’s Not Free: Understand that installing solar panels often means taking on significant debt. This debt doesn’t disappear if you sell the house or face foreclosure.
- Potential Selling Issues: If the solar system is leased, the new buyer might need to qualify for the lease, or you might have to pay it off before selling.
- Higher Insurance Costs: Solar panels can increase your insurance premiums and might not be fully covered in case of damage.
- Hidden Fees: Be aware of possible lease transfer fees, which can be prohibitively expensive.
- Maintenance Costs: Replacing roofs or dealing with panel damage can incur additional costs.
- Due Diligence: Always ask about the potential implications of selling or refinancing a house with solar panels.
If you’re thinking about installing solar panels or buying a house with them, make sure you understand all the potential costs and complications. The savings on your electricity bill might not be worth the financial headaches.
What’s your experience with solar panels?
Let me know in the comments below. And don’t hesitate to ask any questions.
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