Brandon Doyle, ABR, e-PRO, is a second-generation real estate pro with RE/MAX Results in the Twin Cities. He is also coauthor of the book M3—Mindset, Methods & Metrics: Winning as a Modern Real Estate Agent. Learn more about Doyle at www.doylerealestateteam.com.
9 Steps to Help Decide on Solar Energy for a Home
Provide value-add for your green-minded clients and walk them through what they need to consider before installing solar panels.
February 5, 2021
- A homeowner should make their home as energy efficient as possible before investing in a solar system so they don't pay for a bigger system than they need.
- A solar system is an investment with a typical payback period of eight years.
- Your clients should know the warranty terms of a solar system and who will maintain the system when there are inevitable issues.
With federal tax breaks for solar panels ending in 2021, this could be time for you or your clients’ home energy independence. When it comes to deciding if an investment in solar will pay off, the homeowner has to do research and make smart decisions for their home and financial situation. Here are some steps to take along the way.
Step 1: Figure out the home’s solar potential.
To get an initial idea about a roof’s solar potential, you can enter the address at Google Project Sunroof or check out solar resource maps from the National Renewable Energy Laboratory. One common misconception is that solar panels only pay off in hot, sunny parts of the country. To test this idea, a homeowner should look around their yard. Are there trees and other green plants? Plants use the sun’s energy to grow their leaves, so they are a good indicator of solar energy in your yard. Solar panels actually perform more efficiently in cooler temperatures.
Step 2: See what the home’s utility bills tell you.
Are the annual utility bills high enough that a solar investment will pay off in a reasonable period of time? For most homeowners, a utility bill tells you one basic fact: monthly usage. But a high monthly electricity bill can be caused by many factors ranging from old appliances to inefficient HVAC systems to poor insulation. Make the home as energy efficient as possible before buying a solar system so you’re not paying for a bigger system than you need.
Step 3: Plan ahead.
Will your clients be living in the same house in the next decade? A solar system is a big investment with a typical payback period of eight years. If the homeowner plans to move in the next couple years, buying or leasing solar panels could be a money-losing decision. If they decide to move after leasing, they’ll need to buy the system, persuade the new homeowner to assume the lease, or pay the provider to terminate the lease altogether.
Step 4: Establish an accurate baseline.
A home energy monitor like Sense will track energy consumption both before and after solar is installed. Get a couple months of data and use that information to calculate how much of the current bill can be offset with solar and how big an installation is needed. A homeowner in Oklahoma used Sense Solar to track down her energy hogs before installing her solar panels and it paid off in significant savings (see her story here).
Step 5: Consider financing and payoffs.
Solar panels are an investment that needs to pay off financially. A homeowner should take her or his time analyzing whether buying or leasing will be most advantageous. If you or your client decides to buy, most solar providers and websites like EnergySage will factor the 26% federal incentive into their estimates as well as any state incentives. Together, those incentives have a big impact on the final cost. If the homeowner needs financing, they should talk with their bank, mortgage provider, or a lender like Dividend Finance, which offers solar-specific loans and resources. A homeowner should do the math to figure out how much they’ll need to invest and when that investment will pay off.
Loan and lease options are attractive because they can be cash-flow positive as soon as the solar panels are installed without a cash outlay in advance, but with a lease, customers don’t benefit from the federal tax credit. But a homeowner shouldn’t view leasing as a short-term decision since most loans and lease agreements are for longer than 10 years. The monthly lease prices of a solar system in the U.S. vary depending on how much energy a house requires and can produce. The higher the electricity bill, the higher the lease cost will be since it will demand higher solar productivity. To get an idea, Tesla calculates solar panel rentals based on the home’s address and electricity bill.
Step 6: Decide on storage or no storage.
Energy storage is still a premium option, but prices are dropping significantly every year. To help a homeowner decide if they need storage, consider two factors: when they use electricity and how frequently it’s interrupted. In areas with rolling brownouts or downed power lines from storms, solar storage can get you through without an interruption and batteries can store solar energy to use at night or on cloudy days. Do the math to figure out the payoff for storage.
Step 7: Make a short list of providers.
Once a homeowner has decided to install solar panels, he or she should research providers online and check their reviews. Identify three or four companies that look promising and ask for online quotes based on remote solar audits, then, narrow the candidates down to two or three installers. Their construction experts will visit the house to measure and assess the roof, conduct a shade analysis, and check to see if the electrical panel will need to be upgraded. Their final quote will reflect all those factors. When evaluating proposals, be sure it includes any costs to update the roof or remove trees that create shade.
Step 8: Ask more questions before deciding on a provider.
Once a homeowner has two or three final estimates based on in-person home assessments, they should ask the providers about how they’ll handle the installation. For instance, does the provider design and install the systems themselves, or do they subcontract to local companies? If the provider uses subcontractors, are the subcontractors licensed? Make sure the contractor can explain the components of the solar system they’re installing.
The homeowner should ask if they’ll file the necessary permits, including the electrical permit, building permit, and the dedicated solar photovoltaic permit. A reputable provider will help the homeowner file for rebates and tax incentives or do it for them. Make sure your clients know the warranty term and who will maintain the system when there are inevitable issues. And, finally, if the homeowner is leasing, they should ask the provider to disclose what the system is worth so they’ll have that information if they decide to sell their home.
For more, check out my video outlining a financial analysis on solar and why I decided to install solar panels on my own home this year.
Step 9: Patience required.
The homeowner should evaluate all the proposals to make sure they correctly address the home’s energy needs, then choose a provider they can trust. Once a contract is signed with a provider, the installation and permitting process can be surprisingly long as contractors file all the paperwork on behalf of the homeowner with the utility and municipality. It can take a few weeks to get permits sorted out before the installer can get the solar panels on the roof.
When the system is installed and connected to the utility, it will start producing energy whenever the sun shines. The homeowner will save money on their utility bill while relying on clean energy that’s good for the planet.