Solar panels are included in a home appraisal only if you own them. Panels bought with cash, or financed through a loan that doesn’t let the lender repossess the equipment, count as part of the real property and an appraiser can assign them a dollar value. Leased panels and systems under a power purchase agreement belong to a third-party company, so they’re left out of the valuation entirely. That single ownership question shapes the documentation you need, the loan programs you can use, and whether the panels help or complicate your sale.
Owned, Leased, and PPA Systems
Fannie Mae draws the line clearly. If you bought your panels with cash or paid off the financing, an appraiser may include them in your home’s value using standard methods. If the financing is still outstanding, the appraiser can still count them as long as the terms don’t allow repossession for default.1Fannie Mae. Appraising Properties With Solar Panels Freddie Mac uses the same rule: panels must not be included in the appraised value if the financing agreement allows repossession.2Freddie Mac. Guide Section 5601.4
Leased panels and PPA systems are treated differently under both agencies’ rules and cannot be included in the appraised value, because the homeowner doesn’t hold title to the equipment.1Fannie Mae. Appraising Properties With Solar Panels The solar company usually files a UCC-1 financing statement in the public record to protect its interest. That filing appears in a title search and tells the lender, appraiser, and any prospective buyer that the panels aren’t part of the real estate.3Freddie Mac. Solar Panels FAQs
PACE-Financed Systems Are a Separate Problem
Property Assessed Clean Energy (PACE) financing creates a lien repaid through your property tax bill, and that lien typically takes priority over the mortgage. Fannie Mae will not purchase a mortgage secured by a property with an outstanding PACE loan unless the PACE program doesn’t provide for lien priority over the first mortgage. If you’re refinancing and leaving the PACE loan in place, the payment has to be included in your monthly housing expense and debt-to-income calculation, though it won’t factor into the combined loan-to-value ratio.4Fannie Mae. Property Assessed Clean Energy Loans If you have enough equity, the lender may require you to pay off the PACE balance as a condition of the new loan. Many sellers assume the assessment will simply pass to the buyer; the mortgage market often won’t allow that.
Buying Out a Lease Before Selling
If you have a leased system and want the appraiser to include it in your home’s value, the direct route is buying out the lease. Most solar leases allow a buyout starting around year six of a 20- to 25-year agreement, with the price based on the system’s fair market value at that time. That figure reflects the system’s age, expected future energy production, local electricity rates, current installation costs for comparable equipment, and the condition of the panels and inverter.
Buyout prices tend to run higher than what an upfront cash purchase would have cost, which makes the math frustrating. But if the appraised value increase from owning the panels exceeds the buyout figure, the transaction can still make sense. Some contracts also give you the option to take ownership at no additional cost at the end of the full lease term. Before listing, review the lease or contact the solar company for a firm buyout number. Converting to ownership before the appraisal is the only way to get the panels into the final valuation.
How Each Loan Program Handles Solar
Conventional Loans
Both Fannie Mae and Freddie Mac let appraisers include owned solar panels in the property’s value, provided the appraiser compares the home’s energy-efficient features against comparable properties and analyzes how the market reacts to them.1Fannie Mae. Appraising Properties With Solar Panels Freddie Mac also requires the appraiser to comment on the home’s marketability with solar present and confirm the panels were recognized in the opinion of value. For leased panels, Freddie Mac allows the monthly payment to be excluded from your debt-to-income ratio if the lease guarantees a specific amount of energy production and compensates you when output falls short.2Freddie Mac. Guide Section 5601.4
FHA Loans
FHA goes further for owned systems. The cost of a solar energy system can be added to the FHA mortgage amount, and the maximum insurable mortgage limit may be exceeded by up to 20 percent to accommodate it.5HUD. FHA Single Family Housing Policy Handbook That helps buyers who want to finance the home and the installation together.
For leased systems and PPAs, FHA allows financing only when the agreement doesn’t restrict the borrower’s ability to sell the property. If the lease requires the solar company to approve the new buyer, FHA treats that as an impermissible restriction on transfer and the property becomes ineligible for FHA insurance, unless the homeowner can terminate that provision at no cost.5HUD. FHA Single Family Housing Policy Handbook Older solar leases often contain exactly that kind of credit-approval clause.
VA Loans
The VA excludes leased solar systems and any system with a UCC filing from the valuation entirely. Systems financed through a personal loan with no lien on the equipment may receive market value in the appraisal. The VA requires the appraisal report to describe the system’s size, type, and cost, and to explain the reasoning behind any value adjustment or the reasoning for not making one.6Department of Veterans Affairs. Energy Efficiency and VA Home Loans
How Appraisers Put a Number on Your Panels
Two methods are commonly used. Under the sales comparison approach, the appraiser finds recently sold homes in the same market that match yours in every way except for solar, then isolates the premium buyers paid. A Lawrence Berkeley National Laboratory study analyzing 22,822 home sales found that solar homes sold for roughly $4 per watt of installed capacity, or about $15,000 for the average 3.6-kilowatt system at the time of the study.7Lawrence Berkeley National Laboratory. Selling Into the Sun – Price Premium Analysis of a Multi-State Dataset of Solar Homes More recent market analyses suggest a premium in the 4 to 7 percent range of home value, and today’s typical residential system is closer to 8 kilowatts.
Where solar adoption is still uncommon, paired sales may not exist. Appraisers then turn to the income approach, which calculates the present value of the energy savings the panels will produce over their remaining life. Inputs include your utility rates, the system’s measured output in kilowatt-hours, its remaining productive life, and expected degradation of roughly 0.5 to 1 percent per year. The Appraisal Institute publishes a tool called PV VALUE built specifically for this calculation, and pointing your appraiser to it can help if they’re unfamiliar with solar valuation.
Documents to Have Ready
An appraiser can only assign a value they can justify in writing. Without supporting paperwork, even a valuable system may receive no credit. Have the following ready before the appraisal visit:
- System specifications from the original installation contract: total size in kilowatts, panel manufacturer and model, and inverter type.
- Energy production history from the manufacturer’s monitoring app, showing actual kilowatt-hour output over the past 12 months.
- Twelve months of utility bills showing reduced grid purchases compared to before installation.
- Original gross installation cost before any tax credits, which anchors the depreciation calculation.
- Installation date and warranty terms, including panel warranty (typically 25 years) and inverter warranty. Note whether the warranty is transferable and any transfer fee.
- Proof of ownership: loan payoff documentation, purchase receipt, or the original sales contract confirming no third-party ownership or repossession rights.
If the Appraisal Comes in Low
Fannie Mae, Freddie Mac, and HUD all allow borrowers to request a reconsideration of value. You get one request per appraisal report, and it goes through your lender rather than directly to the appraiser.8Fannie Mae. Reconsideration of Value The lender prepares the submission form based on agency guidelines.
A strong submission includes comparable sales of solar homes the appraiser may have missed, an income approach calculation showing the present value of the energy savings, and any documentation the appraiser didn’t have at the original visit. If the request doesn’t meet the lender’s minimum requirements, the lender should work with you to fill the gaps before sending it to the appraiser.8Fannie Mae. Reconsideration of Value Concrete data the appraiser overlooked is what moves the number; vague disagreement won’t.
What a Higher Appraisal Means for Property Taxes
Roughly 36 states offer some form of property tax exemption for residential solar installations, though the specifics vary. Some exclude 100 percent of the added value permanently; others use time-limited exemptions that expire after five, ten, or fifteen years. A handful of states leave the decision to local jurisdictions, so treatment can differ from one county to the next.
If your state offers an exemption, you generally have to apply for it; it doesn’t happen automatically with installation. Check with your county assessor before assuming a higher appraised value won’t affect your tax bill. In states without an exemption, owned solar panels will raise your assessed value and the tax along with it, though the energy savings usually offset the increase.