June 7, 2024 Justin Jesso
In this post on the hidden costs of solar power, I want to share some surprising experiences with solar power systems and some costs that are often overlooked. If you are considering adding a solar power system to your home or are dealing with a property that has solar panels, this information could save you a lot of headaches and money. I have purchased many homes with solar power systems and have encountered many issues that many people are not aware of.
Video: The hidden costs of solar power
The fiasco of seized solar power generation
We recently purchased a foreclosed property at auction. The winning bid was $249,000, lower than we expected, probably because the home had a solar power system. Now things got complicated, and the deed company refused to insure the home because there was a $38,000 lien on the solar power system. The previous owner owed this amount, and the lien survived the foreclosure.
This nearly cost me the deal and my $122,000 deposit. Thankfully, my real estate agent confirmed that the lien could be exercised against the equipment, not the property, so the solar company could technically get the equipment back and it was fine for me as long as I had the house.
How to Buy a Foreclosure Property
Hidden Costs of Solar Power Systems
Many people think that solar power systems are a good deal because they lower their electric bills, but the system is not free. It often puts you in a lot of debt, which affects your debt-to-income ratio and makes it harder to buy your next home. If you lease the system, the new buyer may have to qualify for the lease or you may have to pay off the system before selling the home. In my case, this came to about $40,000.
Replace your roof with solar panels
In another transaction, the roof needed to be replaced on a home resale. That home had solar panels that cost an additional $5,000 to remove and reinstall. This was not covered by insurance, further increasing the overall cost. Additionally, insurance premiums are likely to go up due to the additional costs associated with maintaining the solar panels.
Solar power is a tough sell
We've seen some interesting stories regarding solar panels, including one property for sale that had a $99,500 lease transfer fee for the solar system, which can scare off potential buyers and complicate the transaction.
In other transactions, the buyer needed to qualify for both a mortgage and a solar panel lease. They qualified for the home but not the solar panel lease. The combination of both would put them over the limit. In these cases, the seller must either pay the full amount for the solar panels or the buyer must back out of the contract.
After all, with a solar lease, the buyer’s “buying power” is reduced by the amount of the lease, which can be very large. In many cases, buyers will quickly realize that they can buy more home for the same amount of money by avoiding homes with solar panels.
If you’re looking to increase the value of your home rather than solar power, check out my article, “Which Renovation Projects Add the Most Value to Your Home?”
Key takeaways for homeowners
It's not free: Understand that installing solar panels often means taking on a large amount of debt. This debt doesn't go away even if you sell your home or face foreclosure. Potential selling issues: If you lease your solar system, the new buyer may have to qualify for the lease or pay off the lease before selling. Higher insurance premiums: Solar panels will increase your insurance premiums and you may not be fully covered if damaged. Hidden fees: Be aware that there may be lease transfer fees, which can be prohibitive. Maintenance costs: Replacing the roof or dealing with damage to the panels can incur additional costs. Due diligence: Always ask about the potential impact of selling or refinancing a home with solar panels installed.
If you're considering installing solar panels or buying a home with solar panels, it's important to understand all of the potential costs and complexities. The savings on your energy bill may not be worth the financial burden.
What is your experience with solar panels?
Let me know in the comments below and feel free to ask any questions you may have.