So you probably stopped on this post because you were considering solar, or a solar salesman knocked on your door, or you just wanted to learn about one of the greatest scams out there right now. Trust me, you’ve come to the right place. This might be a hot take, but solar panels don’t add value to your home and you will more than likely lose so much money by choosing to go solar. In this post, I break down exactly why. Make sure you stay around to the end because I bust common myths you might hear Solar companies or salesmen say.
I get asked all of the time my opinion on solar and until recently, I’ve been hesitant to make a public statement about this. If you were to google why solar is bad, your first page of google will be filled with Solar companies telling you why it’s actually good. Unfortunately, there is not a ton of hard data out there to show you why solar is a bad fit for you, but that’s because there’s not an “anti solar” crowd per say. There is, however, a massive solar lobby that will continue to feed you absolute bull crap, so hopefully this blog gives you an alternative viewpoint. And my perspective is mostly anecdotal as a real estate agent out here in Charleston, South Carolina, so some other markets will be different. But my boots-on-the-ground perspective should make you think twice about getting solar.
First, before we get into the reasons why you should avoid solar, let’s talk about the main types of solar panel contracts you might come across, just so you know how this industry works.
Some companies will try to sell you not solar panels themselves, but a lease instead. There are two types of leases, one called a Power Purchase Agreement and the other called a Solar Lease. A power purchase agreement allows solar companies to install solar panels on your home and then sell you the electricity it produces back to you, often times much cheaper than the utility companies would. The other type of lease is just a standard solar lease, where you pay a flat monthly fee in order to have solar panels on your home, and you get the electricity it produces for free.
In both types of agreements, the Power Purchase Agreement and the Solar Lease, the solar company tends to cover installation, maintenance, and removal of the solar panels. In these agreements, though, you don’t actually own the solar panels, so the tax credits actually get passed on to the company, not you as a homeowner. These companies will advertise this as no-cost solar, but that can’t be further from the truth. And these contracts you get locked into? They’re an absolute doozy. They will be on the order of 10 to 25 years in length. And they typically MUST transfer with the sale of the home or you will pay an extremely steep penalty, often tens of thousands of dollars, to terminate the contract.
The other common type of solar is a traditional purchase of solar panels. According to bankrate.com, the average cost of a solar unit is around $31,000 before factoring in tax credits and incentives, but these can go much, much higher. You can either purchase the system outright, or you can finance the system over a period of ten or twenty years. You’ll find that this is hardly worth it, either, and that leads me to the first reason why you should avoid solar. That is, the breakeven point.
When I talk about the breakeven point, I mean at what point do you actually start to save money and come out ahead on your initial investment. Remember when I said the average system is around 31 thousand dollars? Well, after we take into account 30% in tax credit, it actually comes out to be $22,000 that you’ll finance over a period of twenty years. At a 6% interest rate, this is approximately 160 dollars per month.
So now, let’s imagine your electric bill is, on average, $250 per month. So, on average, you’re saving 90 dollars per month. That is approximately 1100 dollars per year in electric savings, but don’t forget, you took out a 22 thousand dollar loan. In order for the savings to exceed the cost of the system, your breakeven point would be 20.5 years. But wait, what if your electric bill is actually 200 per month? In that case, your breakeven point would be 45 years. For a 300/month electric bill, your breakeven point would be 13 years.
In other words, it only makes sense for you to get a solar panel system if you plan to be in your home for longer than the breakeven point. From a financial standpoint, it makes literally no sense for you to do otherwise.
And let’s talk about why exactly this is a terrible idea with statistics. According to a 2018 study by the US Census Bureau, the average length of homeownership is 8 years and the median age is 13 years. In other words, there is a 50% likelihood you won’t be in your home 13 years from now. But remember, the average length of homeownership is 8 years, so it’s likely that people who have found their dream or forever home skew this number upwards, whereas the numerous younger people who are in the early or middle stages of their career skew this number downwards. And what happens if you do decide that you’ve found your dream or forever home? Well, not so fast. Things change and life happens. If you were to go back ten years ago, can you see yourself where you are right now? Nobody can foresee the future and taking on debt to buy something that has no value whatsoever and the only tangible benefit is only realized decades in the future is a terrible idea.
Which brings me to my next point, which might surprise you. Solar panels do not add value to your home. Let me say this one more time. Solar panels do not add value to your home.
At least here in Charleston, SC and a ton of similar markets. Now, does owning the panels outright add value to the property? Theoretically it does, but functionally it typically does not. But you’re probably watching this video because you’re thinking about getting solar panels yourself. You are who I am talking to right now. Let’s stop and re-evaluate.
Let me give you an example. This past year I had a buyer purchase a home with paid off solar panels on the back roof. The home was an elevated two story home with a small backyard where you couldn’t even see the roof, and as a result, the appraiser missed them. The house ended up appraising for 570 thousand. At the very end of the purchase, my buyer’s lender realized that the appraiser forgot to include the solar panels in the report. So the appraiser ended up correcting the appraisal by adding solar panels. Guess what he didn’t change, though? The price. That’s right, even though $30,000 worth of solar panels were on the home and paid off by a previous owner, that did not add a cent to the value of the home.
Here’s why. Appraisers still have to use the comparable sales approach. When a home is already the nicest home in the neighborhood, the appraiser isn’t going to go out on a limb and give a seller credit for the solar panels when prices around the home don’t support an elevated price. Here’s Fannie Mae guidelines for appraisers to use when navigating solar panels. As you can see, if they are owned or financed as real property, the appraiser “may” consider adding them to the value. Keyword here is may, but most appraisers are old school and will not count them. If they are financed as personal property, or if you have a power purchase agreement or solar lease, then the appraiser is expressly prohibited from including them.
And here’s the anecdotal. Ask your real estate agent friends who are consistent top producers. We are the boots on the ground navigating solar panel fiascos every single day. 9 of 10 will probably advise you not to do solar panels. Why? Because they don’t add value, and if an appraiser does include the value of the panels, it’s not going to be dollar for dollar. And if you have a solar lease or power purchase agreement in place, forget it. Not only are you not adding value to the home, you are scaring away 90% of potential buyers who don’t want to assume a costly lease with a lot of risk.
I have never seen someone want to buy a home because it has solar panels, but time and time again I have seen buyers refuse to even consider a home because it has solar. The only time where I have seen solar panels being a non-issue in a home purchase is when they’re already paid off, or when the seller pays it off at closing. And guess who is typically losing money on that? The seller. Every. Single. Time. Here’s why – if someone is selling a home that has solar panels, they probably got them in the past 1 to 8 years. Solar really only came into prominence in the last decade after prices fell and the government subsidized the heck out of the industry. There are a ton of companies making record profits, propped up by generous government programs, little regulation, and unsuspecting homeowners who don’t do their own research.
Which leads me to my last and final point. That is, the industry is filled with unscrupulous salespeople who will say anything to get a sale. Whether it’s door-to-door salesmen, online advertising, cold calling, or email blasts, these companies just want to get you to sign the dotted line. Unlike medicine, real estate, or law, the solar industry does not have any elevated legal standard to look out for your best interests. There is no fiduciary duty that a company has to fulfill.
And the sad reality is I see, time and time again, homeowners walking away from selling their home with little to no equity. The solar panels and solar companies have effectively stripped them of any money that would have made in the sale of their residence, which is typically where the bulk of homeowners net worth lies. It’s infuriating to see people taken advantage of in this way, especially the elderly, but the solar companies don’t care. Their pockets are full and they are happy. Earlier this year I saw a gorgeous home in the Charleston area being sold for 250k. Looking at the home, I thought it was easily a 350 thousand dollar home. I actually had two of my buyers inquire about it after they themselves found it online. Everyone wanted to take a look at it! But then I dug deeper, and I found out the home had 90 thousand dollars worth of solar panels that were financed. The seller owed about 230 thousand on the home. After real estate commissions and other selling costs, he was going to walk away with nothing. He had to sell the home for 250 thousand. It was sad to see solar ate away about 25% of the homes value and 100% of the homeowners equity.
But solar salesmen don’t care. Many will do all of the shady salespeople tactics. They’ll try to force a deal without a contract, or attempt to close a deal without giving you time to explore all of your options. They will make lofty promises or give you a quote without ever seeing your property. They will tell you that they work with a utility company, but then when you press, they’ll be hesitant to give the name of the actual company, or vague about licensing and certifications. They will start with the line asking how much your electric bill is, then look how much you can save with solar, but you know better now. They will then explain how much value solar adds to your home, but again, you know now better. Please, please don’t fall for the sales pitch. Rarely do solar panels make sense for an everyday homeowner.
About once a month I get a call from a solar company asking if I will refer my real estate clients to them. They know I have a position of trust with my clients. In return, the solar company will cut me a check anywhere between one and three thousand dollars. It’s crazy. There is so much money flowing around this industry, and unsuspecting homeowners are paying the price. If you can’t tell already, never would I recommend solar to any of my clients.
So let’s do some solar mythbusting.
Myth number 1, You can sell excess power back to the grid. This is actually not true for much of the country, and especially not here in my area. Companies will not allow you to do this and will certainly not pay you for it.
Myth number 2, Solar is maintenance and worry free. While it’s true that many service providers will install panels and service panels for the life of the contract, that doesn’t mean you don’t have anything to worry about. For instance, if you purchase add-ons like a battery, oftentimes the warranty doesn’t extend to these. Also, adding solar panels can and will invalidate your roof’s warranty, if you have one. What happens when the roof leaks start because it’s old? Well, you’ll need to get roofers up there to replace the roof. Now they’ll need to remove the solar panels to do that. Guess what your roofers just did? They just invalidated the warranty on the solar panels because they aren’t licensed to touch them. If you were to get the solar company out to take them off and then reinstall them, they’ll probably charge you a ton to do that.
Myth number 3, solar is easy to transfer between owners. I feel like we just spent the video talking about this, but let me give you yet another perspective. Say you have a buyer for your home, but they’ll need to assume a solar lease or contract. Well, now the lender needs to take that into account for their debt-to-income ratio and guess what? Now they may no longer qualify for a loan altogether.
Myth number 4, there are no hidden costs with solar. This couldn’t be further from the truth. Many solar companies will have hidden costs and fees associated with their panels. One not-so-hidden cost you should consider is that your homeowners insurance premium will probably go up because now they need to insure the value of the panels. It could also change your wind and hail deductible since solar panels are just as prone as roofs to get damaged in severe weather.
Myth number 5, the tax credit will help offset the cost of solar. And this actually isn’t a myth, it’s partially true, but it’s upsold to a ridiculous amount. The tax credit is only available if you’re eligible and many people aren’t. The tax credit is also only available if you purchase the panels, not lease them. And the tax credit, at most, might only save you 30% of the cost of solar if you’re eligible for it in the first place.
So there you have it. Solar doesn’t make sense for most people. In the future, if prices continue to come down, then sure. Maybe by the year 2040 we’ll all have solar. But for now I will continue to advocate against solar, not because I despise green energy, but because the industry is flawed and rarely does it give an advantage to homeowners.