Selling a House With Solar Panels in California

If you are selling an Orange County home with solar panels, the first question is who owns them and whether anything is still owed. That answer decides what transfers to the buyer, what the buyer's lender will count, how the appraiser treats the system and what escrow has to clear.

In short: a system you own outright transfers with the house like any other fixture. A secured solar loan usually has to be paid off, or its lien released, at closing. A PACE assessment is a lien collected through your property tax bill, and buyers' lenders will typically want it paid off. A leased system, or one under a power purchase agreement (PPA), belongs to the solar company, so the buyer takes over the contract with the company's approval or you buy it out.

On net metering, the news is mostly good. Under Southern California Edison's current tariff, a home on NEM 1.0 or NEM 2.0 keeps the rest of its 20-year legacy period when it sells, as long as the panels stay put. Homes on the newer Net Billing Tariff work differently.

First, confirm which situation you are in

C.A.R.'s solar advisory form warns that some homeowners who believe they own their system outright do not have free-and-clear ownership. Check three places: your solar contract, your property tax bill (PACE shows up there) and a preliminary title report, which will show any filing a solar lender recorded against the property.

Owned and paid off

This is the simplest case. C.A.R.'s residential purchase agreement lists solar power systems among the fixtures included in a sale, and Fannie Mae applies its standard appraisal, insurance and title requirements to owned panels, so the appraiser can consider them like any other improvement.

Owned with a solar loan

Some solar loans are unsecured. Others are secured, either by a UCC-1 financing statement (filed with the California Secretary of State or as a fixture filing in county real estate records) or by a deed of trust. A recorded filing appears on title, and when the panels secure another debt and could be repossessed, Fannie Mae tells lenders to instruct the appraiser not to give them contributory value. Sellers with a secured solar loan usually pay it from sale proceeds and have the lender release the filing. Request a written payoff letter early and ask how the release will be filed.

PACE financing

PACE (Property Assessed Clean Energy) financing, sometimes known by program names such as HERO, is repaid through your property tax bill. The CPUC's solar consumer guide notes that PACE creates a first-priority lien and that a buyer may require you to pay off the balance. The state Department of Financial Protection and Innovation (DFPI) adds that the lien stays until the contract is paid off and can make selling more difficult.

Lender rules explain why. Fannie Mae will not buy a mortgage on a property with an outstanding PACE loan that has priority over the first mortgage, and solar panels financed with PACE are ineligible unless the balance is paid in full at or before closing. HUD made homes that remain encumbered by PACE ineligible for FHA-insured forward mortgages in 2017. Plan on paying PACE off through escrow with a payoff demand from the program administrator. Our guide to Orange County property taxes explains how special assessments appear on the tax bill.

Leased

With a lease, the solar company owns the equipment and you make scheduled payments to use it. At sale you can usually transfer the lease to the buyer, which requires the company's approval and typically a credit review, or buy out or prepay the contract. The CPUC's guide cautions that a buyout could cost thousands of dollars and suggests asking the company what happens if the buyer does not want the system or does not qualify.

The buyer's lender will review the lease too. Under Fannie Mae's rules, leased panels are personal property, so their value cannot be included in the appraisal, and the monthly lease payment generally counts in the buyer's debt-to-income ratio. A "precautionary" UCC filing that covers only the solar equipment, not the home or land, is acceptable to Fannie Mae.

Power purchase agreement (PPA)

A PPA works much like a lease, except you pay for the electricity the system produces. Transfer still requires the company's approval, and the panels are still excluded from the appraised value. One difference: Fannie Mae allows PPA payments calculated solely on energy produced to be left out of the buyer's debt-to-income ratio.

What happens to your net metering with SCE

SCE serves most of Orange County. Anaheim runs its own city electric utility, and SDG&E serves parts of south county, so if that is you, ask your utility the same questions.

NEM 1.0 and NEM 2.0 homes keep their legacy period. SCE says moving in or out of a home with a net-metered system does not affect the system's eligibility period, and its NEM 2.0 tariff says an eligible system keeps its status with a new owner as long as it stays at its original location.
The clock does not restart. The 20 years run from SCE's original permission to operate (PTO) and end with the billing year that closes on or after the 20th anniversary. If your system went live in the mid-2000s, a buyer may inherit only a short remaining period.
Most buyers do not need a new interconnection agreement. For a system of 30 kW or less, the new customer takes service under the existing agreement, though they may need to sign an affidavit. Larger systems need a new agreement.
Expansions can matter. Adding more than 10 percent of the original capacity or 1 kW, whichever is greater, can affect eligibility. If you added panels or a battery later, ask SCE which tariff the account is on.
Net Billing Tariff homes are different. For systems on the Net Billing Tariff (applications submitted on or after April 15, 2023), the nine-year legacy period and locked-in export prices belong only to the original customer or an eligible same party, such as a spouse. A buyer gets the terms in effect when they enroll.

Closing your SCE account ends your 12-month billing period early and SCE settles the account, so expect a final true-up bill. Lawmakers have debated changing net metering at the point of sale, so confirm the current rule with SCE before you list.

Pricing and appraisal: what the evidence supports

There is no reliable rule of thumb for how much solar adds to a sale price. The most useful research we found is a 2021 study by researchers at Fannie Mae and Lawrence Berkeley National Laboratory using appraisal data from 2011 to early 2020 in California, Connecticut, Massachusetts and Oregon. Owned systems were associated with higher selling prices, while leased and PPA systems showed no added value or slightly lower values. Premiums for owned systems shrank as installation costs fell, and appraisals often missed solar or did not record who owned it. That data predates the Net Billing Tariff, so treat it as direction, not a number.

What you can control is information. The Appraisal Institute's Residential Green and Energy Efficient Addendum can be completed by a homeowner or installer and records system details, including whether it is owned, leased, financed with a UCC filing or under a PPA. Give a completed copy and supporting documents to your agent for the appraiser. The CPUC also suggests working with agents and appraisers experienced with solar homes.

Paperwork to gather before you list

SCE's permission-to-operate letter and your interconnection agreement, which set your legacy clock.
The full solar contract, including any transfer, assignment and buyout sections.
Payoff letters for any solar loan or PACE assessment, or a written buyout quote for a lease or PPA.
Records of any UCC-1 or fixture filing and how it will be released.
Panel, inverter, battery and workmanship warranties, and whether each one transfers.
At least 12 months of production data and your recent SCE true-up statements.
City permits and the final inspection sign-off.

For the rest of your prep, see our guide to maximizing your home's value before selling.

California disclosures

C.A.R.'s residential purchase agreement requires the seller to deliver all known information about any solar system, and the Solar Advisory and Questionnaire (C.A.R. Form SOLAR) is the form it points to. Sellers must also disclose items that are leased or subject to a lien and hand over the related documents, and buyers get a contingency to review those items, with solar panels and PACE or HERO liens named as examples. If your home carries a PACE assessment, California Civil Code section 1102.6b requires a good-faith effort to obtain the agency's notice of the assessment and deliver it to the buyer. Disclose known issues too, such as roof leaks around mounts or a replaced inverter.

This is general information, not legal or tax advice. Confirm your contract and disclosure questions with a California real estate attorney, and tax questions with a CPA.

Escrow, timeline and presenting solar in a listing

Payoff letters and lease transfers are the usual sources of delay, so start them as soon as you decide to sell. If a buyer will assume a lease or PPA, have them apply with the solar company early in escrow. Escrow can pay a solar loan or PACE balance from your proceeds once it has a payoff demand.

Presentation matters too. Our listing at 5967 Jacaranda Ln in Yorba Linda states plainly that the solar system is owned and paid off and that the home has a Tesla EV charger, so buyers know from the first read there is no lease to assume and no solar loan to clear.

How Remark Homes can help

We help Orange County sellers sort out solar before it becomes an escrow problem: confirming ownership, requesting payoffs and transfer packets, preparing disclosures and describing the system accurately. Learn more about selling with Remark Homes or contact us to talk through your home.

Frequently asked questions

Does my NEM 2.0 net metering transfer to the buyer?

Under SCE's current tariff, yes. The system keeps the rest of its 20-year legacy period, measured from its original permission-to-operate date, if it stays at the same address.

Do I have to pay off my solar loan before I sell?

If the loan is secured by the system or recorded against the property, expect a payoff or release at closing. Some solar loans are unsecured, so check your loan agreement.

Can a buyer refuse to take over my solar lease?

Yes. The buyer must agree to assume it and be approved by the solar company. If they decline or do not qualify, your options are usually a buyout or prepayment.

Do leased panels count toward my home's appraised value?

Not under Fannie Mae's rules. Leased and PPA panels are treated as personal property and excluded from the appraised value.

Do I have to pay off a PACE assessment when I sell?

Plan on it. Fannie Mae and FHA rules generally do not allow financing on a home that stays encumbered by a priority-lien PACE assessment, so the balance is typically paid through escrow.

Selling a Home With Solar Panels in California: Owned, Leased, PPA