Picture this–you buy a new home and LIFE. IS. GRAND! You’re in love with the house,
the neighborhood, and all the other joys that come with homeownership…and then you
start getting your electricity bills.
Suddenly, the responsibility of adulting slaps you across the face like an abusive
stepmother. Why does electricity have to be so damn expensive?! You’ve seen some
homes in the neighborhood with solar panels on the roofs and begin to think maybe you
should get them as well. You start researching solar panel companies and notice that
everything they claim is AH-MAZING! Tax credits?! $25 per month electric bills?! Do they
increase the value of my home?! What’s not to love about them?
Weeell…easy there, killer. Let’s look at all the facts AND the fiction behind solar panels.
1. FACT – At the federal level, you are eligible for an Investment Tax Credit of
26% on your installation costs, so long as your taxable income is greater than the
credit itself. So, for example, if your system is $20,000, you could claim $5,200
as a credit on your taxes. In addition to the federal tax incentive, there are
various state incentives as well. You can check for state financial incentives using
the renewables incentives database at DSIREUSA.org.
2. MOSTLY FICTION – Solar panels increase home value. Solar salespeople
LOVE to make this claim as a top benefit of owning solar panels. The truth is, in
MOST states, solar panels add very little to absolutely ZERO value to your home.
I’m going to spend a little more time on this topic because if you’re researching
online, you’re going to find a ton of conflicting information. it’s extremely
important that you understand what you’re getting yourself into should you decide
to make that investment.
Most homeowners stay in their homes for less than 10 years before they sell. If
you’re in that majority and plan to sell sooner, consider this:
If you own the panels outright at the time of sale, you might be in decent
shape. However, you can’t expect $30K worth of panels to add $30K of
value to your home. Depending on which part of the country you’re in, you
MIGHT be fortunate enough to get a few thousand paper edition George
Washingtons at most, but in many cases…sorry to break it to you, but you
won’t get a single copper edition Abe Lincoln.
If you owe a balance on your solar loan, the transaction can get really
complicated, real fast. Some of your options:
Cross your fingers and hope the buyer can assume the loan. Good
luck with that, though. Even if a prospective buyer wants the
panels, the loan may not be assumable…something you’ll want to
find out BEFORE you purchase them! Further, even if the loan is
assumable, it’s an extra loan the buyer would have to take on.
Depending on the debt-to-income ratio, an extra loan might disqualify
the buyer from getting approved for the mortgage.
Maybe the heavens will open up and all the stars will align just
perfectly, and the buyer will be willing to pay the solar balance out
of pocket. Again, good luck with that!
You will have to pay off the solar loan balance from the proceeds of
the sale. This is perhaps the most common case in transactions
involving solar panels.
You could possibly remove the panels and have them reinstalled at
your next home–but that could cost you even more than paying off
the balance at closing.
FACT – Your insurance provider will charge a higher premium if you get solar
panels–if they don’t completely drop your coverage. Roof-mounted systems are
considered a permanent fixture to the home, and the premium increase will be reflected
in your homeowner’s policy. Ground-mounted systems are generally more prone to
damage and most insurance companies will require a separate policy for coverage. The
amount will vary based on the type of system and your location’s general climate.
FICTION – Solar power is free energy. I think we’re all smart enough to understand
there’s no such thing as a “free lunch”, but this is a solar salesperson’s bread-and-butter
pitch. If you haven’t been fortunate enough to be visited by these door-knockers,
chances are you have seen ads on social media promising things like free solar panels
or referencing a stimulus program that doesn’t exist. When you hear someone saying
something is “free”, or that the government is paying for it, you should have all kinds of
bells and whistles and sirens and alarms going off in your head.
The fact is even though you might reap the financial benefits of solar energy over time,
and even with the tax credits and possible rebates, there’s still an initial upfront
investment–and you may not live in the house long enough to break even on that
investment.
The Takeaway
There is nothing “wrong” with solar panels–and there are solid, reputable solar
companies out there. Only you can decide whether solar is right for you, and it helps to
think long-term. If you plan to live in the home for more than 10 years, it might be a
sound financial decision. If there’s a chance you will only be in the home for a few
years, then it most likely won’t be worth the investment.
