If your house has solar panels, the question that drives the sale is not whether buyers want them. Most do. The question is how the panels were financed, and whether there is a lien attached to the roof that your buyer's lender refuses to take second position behind.
Three situations, three different outcomes. Here is how to read which one you are in.
Owned solar panels: the clean transfer
When a solar system was purchased outright, whether cash, or with a solar loan now paid off, the panels transfer with the deed. There is no separate contract, no UCC-1 financing statement on title, and no monthly obligation the buyer has to absorb.
Lawrence Berkeley National Laboratory's Tracking the Sun dataset, which covers hundreds of thousands of solar installations across the country, found a premium of roughly 3 to 4 percent for homes with owned solar systems. On a $285,000 Albuquerque home that is roughly $8,500 to $11,400 in extra value, assuming the system is sized correctly for the house and the panels are not past their productive life.
The caveats matter. An 18-year-old system with no documentation of inverter replacement, panels past their 25-year warranty, or a system oversized for the current household, all reduce or eliminate the premium. An appraiser credits the contributory value of the system, not the original installation cost. A $22,000 install that is now 15 years old and showing output degradation is not worth $22,000 on an appraisal.
Leased solar panels and PPAs: the UCC-1 problem
When a solar company installed the system without the homeowner buying it, the homeowner is in one of two arrangements. A solar lease charges a fixed monthly payment for the right to use the panels. A power purchase agreement (PPA) charges per kilowatt-hour generated rather than a flat fee. In both cases, the solar company owns the equipment.
To protect their ownership interest in hardware affixed to your roof, solar companies file a UCC-1 financing statement in the county recorder's office. This is a public notice that the panels are not your property, even though they sit on your house. When a title search runs at closing, that UCC-1 shows up.
For the sale to proceed, one of three things must happen:
- Lease assumption: The buyer agrees to take over the remaining lease term and passes the solar company's credit check. Most leases run 20 to 25 years. A lease signed in 2015 means the buyer inherits 9 to 14 years of monthly payments.
- Lease prepayment: The seller pays the remaining lease in a lump sum before or at closing. Companies typically offer a buyout amount; it is not always the sum of remaining payments.
- Lease buyout: The seller purchases the system outright, takes title to the panels, and the house sells as owned solar.
The financing wrinkle: Fannie Mae Selling Guide B2-3-04 treats the monthly solar lease payment as a debt obligation in the buyer's mortgage underwriting. A buyer absorbing a $195 per month solar lease carries that payment in their debt-to-income ratio. In a tight DTI situation, that is the number that pushes a buyer out of a loan. The narrow exception applies when the lease contains a specific production guarantee with fixed payment terms, which allows some lenders to exclude it from DTI. Most residential leases do not qualify for that carve-out.
PACE loans: the one that blocks conventional financing
Property Assessed Clean Energy loans, called PACE, are a different category entirely. A PACE loan is financed through your local government and repaid as an additional line item on your property tax bill. Because it is a property tax assessment, it attaches to the land with a lien priority that in most PACE states sits senior to your mortgage.
California runs the largest residential PACE market in the country. Its program operates under the Property Assessed Clean Energy Act, Cal. Sts. and Hy. Code sections 5898.10 through 5898.24. Florida's residential program is authorized under Fla. Stat. section 163.08. Roughly two dozen states have PACE-enabling legislation, though active residential programs are concentrated in California, Florida, and Missouri.
The problem for selling is structural. The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, prohibits those entities from purchasing mortgages secured by properties with a super-priority PACE lien. Fannie Mae Selling Guide B5-3.4-01 codifies this: Fannie will not buy a loan on a property with an outstanding PACE balance that holds first-lien position. FHA has taken a similar position, as has the VA. A buyer who needs conventional, FHA, or VA financing cannot purchase a house with an unresolved PACE balance in a first-lien position.
That leaves cash buyers and portfolio lenders, which are banks that hold loans on their own books instead of selling them to Fannie or Freddie. Portfolio lenders are harder to find and typically carry a rate premium. If you are in a PACE state and your solar was financed through a PACE assessment, run a title search before you list. If there is an active PACE balance, you either pay it off from proceeds or you need a buyer who can close without agency financing.
A worked example with real numbers
New Mexico averages 300 sunny days per year, which makes it one of the higher solar-adoption markets in the Mountain West. Take a $285,000 ARV house in Albuquerque with a 7.5 kW system installed four years ago.
Scenario A: Owned system. The system was purchased outright. No UCC-1, no lien. An appraiser credits approximately $9,500 in contributory value (roughly 3.3 percent of ARV, consistent with Lawrence Berkeley data for the Southwest). Full buyer pool: FHA, VA, conventional, cash. At 6 percent agent commission, 2 percent closing costs, and 45-day carry at $1,600 per month, net proceeds land around $252,300.
Scenario B: Leased system at $195 per month, 11 years remaining. Panels add zero to appraised value under agency guidelines. UCC-1 on title requires resolution at closing. If the buyer's DTI is already at 42 percent and the lease adds 1.5 percentage points, the loan does not close. You either find a buyer with sufficient DTI headroom or pay the buyout, typically $8,000 to $14,000 depending on the company and remaining term. If you pay the buyout at closing, net proceeds drop by that amount.
Scenario C: PACE loan at $19,000 outstanding. FHA and conventional buyers are out. Your listing sits longer because you have eliminated most of the buyer pool. Days on market extend from a typical 35 to roughly 80 in the current Albuquerque market. The carrying cost of 45 extra days at $1,600 per month is $2,400 in additional expense. A cash offer at $257,000 closes in 10 days, PACE balance paid from proceeds at closing: net roughly $236,600. The traditional path at $285,000 would yield about $252,300, a $15,700 difference. The distinction is not always that dramatic, but the buyer-pool problem is real and a listing price does not solve it.
What disclosure law requires
No federal law requires solar-specific disclosure, but most states capture it through their general disclosure statutes.
New Mexico requires sellers to complete a Residential Property Disclosure Statement under the Real Estate Disclosure Act, NMSA 1978, section 47-13-1 et seq. The statement requires disclosure of known liens, assessments, and encumbrances against the property. An active PACE assessment, a UCC-1 tied to a solar lease, or an unpaid solar loan all fall within that requirement.
California goes further. Cal. Civ. Code section 1102.6 requires sellers to include solar system details in the Transfer Disclosure Statement, and a separate obligation to provide the buyer with a copy of any existing solar lease or PPA before close of escrow.
In any state, failing to disclose a known PACE assessment or solar lease exposes you to post-closing liability for material fact omission. Disclosure is the answer, not omission. A buyer who finds out about a $19,000 PACE balance after closing has a claim; one who found out before signing does not.
If the solar situation has created a buyer-pool problem, whether an old PACE balance, a lease the prior owner signed without full documentation, or a grandfathered net metering agreement that will not transfer cleanly, a cash buyer works through the paperwork without a lender adding a second layer of requirements. We buy houses with our own funds in New Mexico and all 50 states, with no commissions and no closing costs. Call us at 208-540-8257 or request a written offer at get-a-cash-offer.
One honest caveat: if your system is owned, your house shows well, and you have the time to list properly, a traditional sale will almost certainly net you more. The premium from owned solar is real. A cash offer makes sense when the solar arrangement has created a buyer-pool problem, not when solar is an asset working in your favor. For more on selling with title complications, see our guide to selling a house with liens and back taxes and our overview of buying houses for cash in New Mexico.
Common Questions
Can you sell a house with leased solar panels?
Yes. The lease must either be transferred to the buyer (subject to the solar company's credit approval), prepaid, or bought out before or at closing. If the buyer cannot qualify to assume the lease or the monthly payment pushes their DTI above the lender's limit, the deal may fall through with a financed buyer. A cash buyer is not subject to lender DTI requirements, which simplifies the transaction when lease assumption is the sticking point.
Does a PACE loan have to be paid off when you sell?
Not by law, but effectively yes for most buyers. Fannie Mae and Freddie Mac will not purchase mortgages on properties with a super-priority PACE lien (Fannie Mae Selling Guide B5-3.4-01), which eliminates conventional financing. FHA and VA buyers are similarly blocked. A PACE balance can transfer to a buyer who pays cash or uses a portfolio lender, but most sellers pay it off from closing proceeds because the buyer pool otherwise shrinks to a small fraction of the market.
Do solar panels add value when selling?
Owned solar panels add value in most markets, roughly 3 to 4 percent of appraised value based on Lawrence Berkeley National Laboratory research across thousands of sales. Leased panels add zero to appraised value under Fannie Mae, FHA, and VA appraisal guidelines because the seller does not own the equipment. A PACE-financed system may reduce effective sale value by restricting the buyer pool, even if the panels themselves perform well.
What happens to the federal solar tax credit when you sell?
The federal Investment Tax Credit (IRC section 25D for residential installations) is claimed by whoever purchased and installed the system in the tax year it was placed in service. It does not transfer to a buyer. If you took the 30 percent credit in 2022 and sell in 2026, the buyer receives no additional federal credit. State credits follow the same rule in most states. This is also why a seller who paid $22,000 for a system but received a $6,600 tax credit has an effective cost basis of $15,400 for depreciation and gain calculations.