Selling a House With Solar Panels in California

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

If you own your solar system outright, it sells with the house like any other improvement. If it’s leased, on a power purchase agreement (PPA), on a solar loan, or financed through PACE, the agreement has to be paid off, transferred to the buyer, or ended before closing, and the buyer’s lender has its own rules for each. Start by pulling your solar paperwork and a title report before you list. That shows which path you’re on and whether a lien or UCC filing is attached to the property.

First, identify how your system is owned

The CPUC’s California Solar Consumer Protection Guide describes the main ways homeowners pay for solar. Each one changes what happens at sale.

How you have solar	Who owns the panels	What usually happens at sale	Buyer’s lender treatment (Fannie Mae example)
Paid in cash	You	Conveys with the home like any improvement	Standard appraisal, insurance and title rules
Solar loan secured by a fixture filing	You, subject to the lender’s security interest	Pay off at closing (and clear the filing), or the buyer takes over if the lender allows it	Debt counts in DTI and CLTV; a senior fixture filing must be subordinated
Solar loan not on title	You	Pay off or keep paying it yourself, depending on loan terms	Debt counts in DTI; panels get no contributory value
PACE assessment	You; the assessment is a lien on the property, repaid on the tax bill	Usually paid off through escrow; FHA won’t insure the buyer’s loan otherwise	Fannie Mae won’t buy loans on homes with a PACE lien that has priority over the first mortgage
Lease	Solar provider	Transfer the lease to the buyer, buy it out, or end it early	No panel value in the appraisal; lease payments usually count in DTI
PPA	Solar provider	Transfer to the buyer, buy out, or end early	No panel value in the appraisal; production-based payments may be excluded from DTI

The lender columns come from Fannie Mae Selling Guide B2-3-04 and B5-3.4-01, and from HUD Mortgagee Letter 2017-18 for FHA. Other loan programs and portfolio lenders set their own rules, so the buyer’s lender has the final word.

Owned systems: the simplest sale

A system you paid for in cash is part of the home. The CPUC guide says a purchased system can be included in the sale like any other major home improvement. To support the price:

Gather the installation contract, permits and final sign-off, warranties (panels, inverter, workmanship, roof penetrations), monitoring login, and utility permission-to-operate letter.
Pull 12 months of utility bills or true-up statements so buyers can see actual savings.
If you added a battery, include its warranty and permit records.

On property tax, buyers should know that California’s new construction exclusion for active solar systems ends at a change in ownership. The Board of Equalization’s Letter to Assessors 2024/031 says an excluded system stays excluded only until a later change in ownership. The section is set to repeal January 1, 2027, for new construction. So the exclusion doesn’t carry over to a buyer, and the new assessment can include the system’s value. Point buyers to our supplemental tax bill guide.

Financed systems and UCC-1 fixture filings

Many solar loans are secured by a UCC-1 fixture filing, a public notice that a lender has a security interest in equipment attached to the house. According to the California Secretary of State, fixture filings may be recorded with the county where real property mortgages are filed, and most financing statements are effective for five years unless continued.

Why it matters: a fixture filing often shows up on the buyer’s preliminary title report. Fannie Mae requires a senior fixture filing to be subordinated, and the debt counts in the buyer’s loan ratios if it stays. A common approach is to pay the solar loan off through escrow and have the lender file a release or termination.

What to do before listing:

Ask your solar lender for a payoff statement and its process for releasing the filing after payoff.
Check whether the loan carries a prepayment penalty or a re-amortization feature tied to a tax credit.
Have your title officer confirm what’s recorded against the parcel, including any older filings that lapsed or were never terminated.

PACE assessments: verify the payoff early

PACE (Property Assessed Clean Energy) financing is repaid as an assessment on the property tax bill. The CPUC guide says PACE creates a first-priority lien on the property, and that a buyer may require the balance to be paid off.

California’s Department of Financial Protection and Innovation (DFPI) licenses PACE program administrators under the California Financing Law. DFPI says the lien stays on the home until the PACE contract is paid off. State rules since AB 1284 (2017) also require ability-to-pay checks and cap the financing relative to home value.

Lender rules make payoff the norm:

FHA: HUD Mortgagee Letter 2017-18 says properties with PACE obligations are no longer eligible for FHA-insured forward mortgages.
Fannie Mae: won’t purchase a loan on a property with an outstanding PACE loan that has lien priority over the first mortgage.

Order the PACE payoff demand when you open escrow, and ask whether the amount includes the installment already on the current tax bill. Ask escrow and the PACE administrator to confirm in writing how the payoff will show on future tax bills. If a payoff will cut into your proceeds, run it through a seller net sheet before you price the home.

Leases and PPAs: transfer, buyout or termination

With a lease or PPA, the solar company owns the panels. The CPUC guide lists three paths when you sell: pay the provider the remaining contract value, transfer the contract to the buyer, or end it early, and it warns that buyouts can cost thousands of dollars.

A practical sequence:

Read the contract for the transfer section, any transfer fee, the buyer credit requirements, and the buyout formula. Note the annual escalator (the CPUC guide says 1 to 3% a year is typical).
Contact the provider before listing and ask for its transfer packet, timeline and a written buyout quote.
Disclose the agreement and give buyers a copy early, so they can decide whether to assume it and their lender can review it.
Start the transfer in escrow. The buyer usually applies directly with the solar company. Build its approval into your contract timeline.
Plan a fallback. If the buyer won’t assume or doesn’t qualify, decide in advance whether you’ll buy out the contract or offer a credit.

For the buyer’s lender, Fannie Mae gives leased or PPA panels no appraised value. A precautionary UCC filing covering only the solar equipment is acceptable, and the agreement must address damage, insurance and the lender’s rights at foreclosure.

Interconnection and net metering: NEM vs. Net Billing Tariff

Your system’s grid export credits run under an interconnection agreement with your utility. According to the CPUC’s net metering page:

Customers who applied for interconnection on or after April 15, 2023 take service on the Net Billing Tariff (NBT), which credits exports at a value usually below retail.
NEM 2.0 customers may stay on that tariff for 20 years from their interconnection date.
Under NBT, the original customer who interconnected is guaranteed the tariff for nine years.

The CPUC page doesn’t say how a sale affects a legacy period, and the NBT guarantee is written for the original customer. Ask your utility in writing what tariff and legacy period will apply after the account moves to the buyer, and share the answer. The buyer will need to set up their own utility account. Advise buyers not to add panels or make changes before confirming the effect on the system’s tariff.

Disclosures for solar homes

California sellers must disclose known material facts. Our California seller disclosures guide covers the forms. For solar, be ready to disclose and provide:

Whether the system is owned, leased, on a PPA, loan-financed or PACE-financed, with copies of the agreement
Any recorded fixture filing or lien, and the payoff or transfer plan
Roof work around the panels, leaks, and any panel removal and reinstall
Production problems, inverter replacements, and whether monitoring works
Permit and final inspection status for panels and batteries

A pre-listing inspection that includes the roof under and around the array cuts down on surprises.

Questions people ask

Do solar panels increase home value in California?

Owned panels can add value, and an appraiser may give them contributory value. Leased or PPA panels can’t be included in appraised value under Fannie Mae guidelines because the seller doesn’t own them.

Can I sell my house if my solar is leased?

Yes. The CPUC guide lists three options: transfer the lease to the buyer, buy it out, or end it early. Contact the provider before you list so transfer approval fits your escrow timeline.

Do I have to pay off PACE to sell?

Not by law in every case, but usually in practice. FHA won’t insure a forward mortgage on a PACE-encumbered home, and Fannie Mae won’t buy a loan where the PACE lien has priority. Expect most buyers’ lenders to require payoff.

What is a UCC-1 filing on solar panels?

It’s a public notice of a lender’s or provider’s interest in the solar equipment. For a loan, it’s usually released after payoff. For a lease, Fannie Mae accepts a precautionary filing limited to the equipment.

Does the buyer keep my net metering plan?

The CPUC page doesn’t address transfers on sale. Get your utility’s written answer on what tariff and legacy period applies once the buyer takes over the account.

Who pays the lease transfer fee?

The contract sets the fee, and the purchase agreement can assign it to either side. Negotiate it with the rest of your terms.

Will the buyer’s property taxes include the solar system?

Generally yes. BOE guidance says the solar exclusion ends at a change in ownership, so a buyer doesn’t inherit it.

Should I buy out my lease before listing?

Sometimes. Compare the buyout quote with the likely effect on buyer demand and appraisal. Our home valuation team can help you weigh both.

Sources & notes

Notes: Lender rules shown are Fannie Mae and FHA. Freddie Mac, VA, USDA and portfolio lenders have their own guidelines. Ask the buyer’s lender. Utility tariff and legacy-period treatment after a sale is not stated on the CPUC page. Confirm it with your utility. Lease and PPA terms vary by provider and contract.

General information, not legal, tax or lending advice. Updated November 2026. Primary sources are linked in this guide.

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