Factors to consider before you buy or lease solar panels
We live in Phoenix, Arizona - the Valley of the Sun. So solar power should be popular, right? But it feels we're getting the hard sell to install residential solar panels on our roofs. If it is such a great idea, why do we need a hard sell?
- Appraisers give NO VALUE to solar panels - Na-Da, zip, nothing, $0.00 when you go to sell your home. Ouch! That $40,000 solar panel system you bought does not add a penny to your appraised value. The desired lower power bills is a future benefit, providing your solar system is properly cleaned and maintained. The buyer will appreciate the gift - without the ability or desire to compensate you for your investment.
- You can make your Phoenix Arizona home much more energy efficient for far less than the cost of solar panels by installing radiant barrier, reflective material to the underside of the plywood roof panels between the rafters and blowing in more attic insulation. Installing High SEER rated/energy efficient HVAC units help reduce your utility costs and are far less expensive than solar.
- Concrete roof tiles have up to a 50-year life expectancy, but the waterproofing material beneath the tile roof has a much shorter life expectancy - as little as 10 years for older Arizona homes with 15 lb material. If you need a new roof, solar panels will have to be removed before the new roof can be installed and then reinstalled afterward. If you are going to install solar panels, have a roofer check the roof beforehand to determine its remaining serviceable life. If it is less than 20 years, it will be cheaper to install a new roof now, rather than later once the solar panels are there. Plan $8000 for a new roof for a typical Phoenix Arizona 3 bedroom home. It is a good investment, but when it occurs at the same time as you install a solar system makes, it is an expensive proposition.
- There is as long as a 32-year payback on energy savings to justify the cost of the solar system. Since the average homeowner moves every 5-7 years, this is a problem. To solve it: solar systems will have to be less costly, energy costs have to skyrocket or appraisers have to assign current value to a purchased solar system to justify buying them.
- Those homeowners who lease a solar system may have problems selling their Arizona home unless their buyer can qualify to assume the remainder of their solar lease. There have been stories about cash buyers having an insufficient FICO score, less than 720 needed to qualify for the lease. Say bye, bye to those cash buyers and to many other buyers with FICO scores under 720 trying to purchase with your home loan.
- The mandatory solar lease payment may impact buyer back end loan ratios and reduce the maximum home sales price they can qualify to purchase. They have the credit score, but not sufficient income to afford the lease payment, too. The buyer's loan qualification has to take into account the assumed lease payment.
- Rental property managers will need to develop equitable lease terms for solar powered Arizona homes or rental properties with solar panels won't be rentable.
My recommendation is to only install solar panels if you plan to remain in the home through the 20 year lease period, or have a lease buy out clause so you don't burden your buyer with the cost of a solar system lease they don't want, can't afford and/or can't qualify to assume. If you buy a solar system, do so realizing you are doing it to lower your energy bills, but you may have to throw away the investment you made when you sell.
The take away is a residential solar system reduces your energy cost but is going to make selling your home more difficult. Get an energy audit and learn what you can do to inexpensively reduce energy costs and then show your low energy bills to your prospective buyer.
Solar systems are very practical when applied properly. Apple is building a power-gulping iCloud Data Center in Mesa, Arizona. They are building a solar farm located in a remote area of Pinal County to supply to the electrical grid energy generated by their solar panels to offset their data center power usage in Maricopa County. SMART and a very environmentally sensitive plan! California installs auto sun tracking 25 MW solar power generators in the desert to power cities. Another smart idea.
But installing costly, high maintenance (you have to clean the panels to maintain top efficiency) residential solar systems on the roof of a home is not smart or practical, in my opinion. And don't forget, the power companies will have to charge you a connect fee to offset the cost of maintaining the grid that provides the electricity to power your home when the sun is down!
Comments welcomed and appreciated!
Arizona Associate Broker, CRS, GRI, e-PRO, SFR
Berkshire Hathaway HomeServices | Arizona Properties
Contact Sam to discuss your Phoenix real estate investment plans and schedule an appointment to discuss how he can turn your plans into action.