Selling (or Buying) a Home with Leased Solar Panels
Solar panels on a roof look like a selling point. Sometimes they are. But if the panels are leased, or covered by a power purchase agreement, they’re less like a feature of the house and more like a contract that comes with it. That contract has to be dealt with before closing, and the earlier you start, the smoother it goes.
Owned and leased panels are different things
The first question for any solar home is who owns the panels. The answer changes almost everything that follows.
- Owned outright. The homeowner paid cash, or paid off the financing. The panels are part of the house, like a heat pump.
- Financed. The homeowner owns the panels but still owes on a solar loan. That loan has to be paid off or otherwise handled at closing.
- Leased or under a power purchase agreement (PPA). A solar company owns the panels. The homeowner pays a monthly lease, or pays for the power the panels produce. Terms of 20 to 25 years are common.
This article is about the third category, because it’s the one that surprises people.
Leased panels don’t add appraised value
This is the part sellers least want to hear. For a conventional loan sold to Fannie Mae, its Selling Guide says plainly that leased panels and panels under a PPA can’t be included in the appraised value. That makes sense once you think about it. The buyer isn’t buying the panels. The solar company still owns them.
So if you’re pricing a home with leased solar, the panels don’t justify a higher price on their own. What they might offer is a lower electric bill, and that’s a benefit to discuss with buyers, but it isn’t the same as appraised value.
The lease payment can affect what a buyer qualifies for
Under the same Fannie Mae guidelines, a monthly solar lease payment generally counts in the buyer’s debt-to-income ratio. The exception is a lease built around a set amount of energy at a fixed payment, with a production guarantee that pays the homeowner back if the panels underperform. Payments under a PPA that are based only on the power produced may also be left out.
In plain terms: depending on how the lease is written, a buyer may qualify for less house because of the solar payment. Other loan programs have their own rules. A buyer’s lender will want a copy of the lease or PPA early, so have it ready.
The lease has to go somewhere
When you sell, the agreement doesn’t vanish. There are usually a handful of paths, and the lease itself spells out which ones are available:
- The buyer takes over the lease. This is the most common route. The solar company typically has its own approval process for the new owner, often including a credit check, and it runs on the solar company’s timeline, not yours.
- The seller buys out the lease. The seller pays to own the panels, which turns them into a regular feature of the house.
- The seller prepays the remaining payments. The buyer gets the panels’ output without a monthly bill. Not every lease allows this.
- The panels come off. Some agreements allow removal, often at a cost, and someone needs to make sure the roof is properly repaired afterward.
What sellers should do before listing
- Find the full lease or PPA, not just the welcome packet. If you can’t find it, call the solar company and request a copy.
- Learn the transfer process, how long it takes, and what it costs.
- Get a buyout figure in writing, even if you don’t plan to use it. It’s useful leverage in negotiations.
- Look up the remaining term and any payment increases built into the lease. Buyers will ask.
- Tell your agent about the lease at the start. Surprising a buyer with a 20-year contract after they’re under contract is how deals fall apart.
What buyers should ask
- How many years are left on the agreement?
- What is the monthly payment, and does it go up each year?
- Is there a production guarantee?
- What happens if the roof needs replacing during the lease? Who pays to remove and reinstall the panels?
- What does the solar company require for the transfer, and how long does approval take?
The bottom line
Leased solar is not a deal-breaker. Plenty of buyers are happy to take over a lease that lowers their power bill. It just has to be handled like the contract it is: read early, priced honestly, and disclosed up front. Start the paperwork before you list, and the panels become a talking point instead of a closing delay.
[CTA: Contact Jennifer Pardee, REALTOR®, MKB REALTORS® — phone, email, link to contact page]
This article is general information and is not legal, tax, or lending advice. Lending guidelines change and vary by loan program; confirm current requirements with your lender. Review your specific solar agreement with the solar company and, if needed, an attorney.
