Selling a home with solar panels requires extra due diligence, but it doesn’t have to be complicated. As solar energy becomes more popular, more homes on the market come with existing solar panel systems. Whether the solar panels are owned outright or financed, real estate agents must take specific steps to ensure a smooth transaction. This guide will walk you through the key steps to take when selling a home with solar panels, so you can confidently guide your clients through the process.
Step 1: Order an Ownership & Encumbrance (O&E) Report
The first step in selling a home with solar panels is to check for any Uniform Commercial Code (UCC) liens recorded against the property. A UCC lien indicates that the solar panels may be financed and not fully owned by the seller.
Why is this important?
A recorded lien means the solar panels are collateral for a loan, and that debt must be addressed before the sale can be completed.
Buyers and their lenders need to be aware of any outstanding obligations on the property.
If a lien exists, it must either be paid off by the seller or assumed by the buyer, which requires additional steps.
Once you have the O&E report, you’ll know whether a lien is recorded and can proceed accordingly.
Step 2: Determine Solar Panel Ownership
Scenario 1: No Lien, and Seller Claims Panels Are Paid Off
If the O&E report does not show a lien and the seller advises that the solar panels are fully paid off, then it’s a simple process:
Mark the solar panels as included in the sale in the MLS listing and purchase contract.
Important: Even if there is no recorded lien, confirm with the seller that they are truly paid off. Some solar companies do not file a lien even if payments are still owed.
Scenario 2: A Lien Is Present on the Property
If the O&E report reveals a lien, the transaction must address it before closing. This means determining whether the seller will pay off the lien or if the buyer will assume the financing.
Step 3: Resolving a Solar Panel Lien
Option 1: Seller Pays Off the Lien at Closing
If the seller chooses to pay off the lien, follow these steps:
Add the payoff amount to the seller’s net sheet to ensure they understand their total costs.
Order a payoff demand from the solar lender so the lien can be cleared at closing.
Confirm that the lien is fully released before or through the closing process.
What if the seller says it’s paid off but a lien still exists?
The seller may need to contact the solar lender and request a release.
The title company can assist in working through the release process, but the seller must notify the closing team if they’ve already made final payments.
Option 2: Buyer Assumes the Solar Loan
If the buyer agrees to assume the solar panel loan instead of the seller paying it off, the process becomes more complex. Here’s what you need to know:
Most solar companies require the buyer and seller to handle the assumption process themselves. Title companies and real estate agents cannot facilitate it.
The buyer’s mortgage lender must be informed to ensure they still qualify for financing with the additional debt.
The solar lender may provide documentation for the title company to record the assumption once complete.
Proof of assumption is required to close. If the solar lender does not provide documentation, the assumption process must be fully verified before closing can proceed.
Since assumption is a lengthy process, both the buyer and seller should begin working on it as soon as possible to avoid closing delays.
Step 4: Disclosing Solar Panel Details to Buyers
When listing a home with solar panels, transparency is key. Buyers will want to know:
Are the solar panels owned outright, financed, or leased?
What are the terms of the financing or lease, if applicable?
How much does the system reduce energy costs?
Are there maintenance responsibilities or warranties that transfer to the new owner?
Will the system be included in the home purchase price?
Providing this information upfront prevents surprises and allows for a smoother transaction.
Step 5: Addressing Solar Panel Lease Agreements
Some homes have solar panels that are leased rather than owned. If the solar system is under a lease agreement:
The lease must either be transferred to the new buyer or bought out by the seller.
The leasing company will have its own process for transferring ownership, which may include credit checks and contract approvals.
The buyer’s lender needs to be informed, as lease payments could impact loan qualification.
If the lease is being transferred, the title company will need proof before closing.
Final Thoughts: Preparing for a Smooth Closing
By taking these steps, you can ensure a smooth sale when a home has solar panels. Whether the panels are owned outright, financed, or leased, addressing the necessary paperwork early in the process will prevent last-minute delays.
Key Takeaways for Real Estate Agents:
✔️ Always order an O&E report to check for liens.
✔️ Confirm solar panel ownership and payment status with the seller.
✔️ If there’s a lien, determine whether the seller will pay it off or the buyer will assume it.
✔️ If the buyer assumes the solar loan, ensure their lender is informed and they begin the assumption process early.
✔️ Disclose all relevant solar details to buyers upfront.
✔️ If the solar system is leased, verify the lease transfer process with the solar company and the buyer’s lender.
Selling a home with solar panels requires extra attention to detail, but with the right steps, you can guide your clients through the process with confidence. By addressing solar panel ownership and financing issues early on, you’ll prevent headaches, build trust with buyers and sellers, and ensure a successful closing.
Questions? Contact:
For more information on handling real estate transactions involving solar panels, feel free to reach out.
📞 Jerad Larkin
By staying proactive and well-informed, you can make the sale of a solar-equipped home as seamless as possible for your clients!
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