Does Installing Solar Panels Increase a Home's Value?

Aug 19

You can build long-term financial gains by using solar panels, but what does it do for the value of your home?

Those who opt to install solar panels may see an increase in their home's value in the real estate market. According to recent research, an average increase in the resale value of a home that has solar panels is typical. The precise numbers vary from property to property.

In addition to the reduction in energy costs, there are healthy tax incentives that can cover the system's costs several times over. Homebuyers are willing to pay $20,100 in additional value for a 5-kilowatt solar installation on a mid-size U.S. house or $18,324 on a Californian house of similar size, based on $4,020 per kilowatt for a 5-kilowatt installation or $18,324 for a 3.1-kilowatt installation, respectively. It's a sizeable amount of money. The typical selling price of solar homes is 3.74% higher than comparable homes without solar. Most of the time, the installation cost is easily recouped by the increased sale price of the home.

Solar Power is an Appealing Option to Home Buyers

Consumers look at their monthly electricity bills when deciding whether to buy because there are long-term financial benefits of a solar-ready home. The National Renewable Energy Laboratory indicates that homebuyers across the country are willing to pay a premium for a solar home's economic and environmental benefits. Installing solar panels is an upgrade, similar to a renovated kitchen.

Every day, more Americans turn to solar energy as an innovative, environmentally friendly solution. Homeowners can expect to make a significant profit on their solar energy system investment by paying lower electricity bills and taking advantage of tax incentives. You can expect to increase the value of your property by a significant amount if you buy a solar energy system.

Influencing Factors

Region of the country
The price of electricity in the local area
System replacement value
Solar installation prices
An environmentally friendly community
The number of duration the power goes out
Age of solar system
Level of energy production
State Incentives
The local understanding of solar technology and its benefits

There are many incentives for installing solar panels for homeowners.

Homeowners purchasing solar systems are also receiving several financial advantages, in addition to increased property values compared to non-solar homes in their community.

Advantages Homeowners Are Seeing

Switching to an environmentally friendly and often less expensive alternative to grid electricity. In some states, rebates and incentives (such as net metering) are available.
The Investment Tax Credit for solar projects (ITC) is available through the federal government.
Homes without solar are asking for higher prices than those with solar.
Homes that own solar panels sell faster than those that don't.
When you sell your home, you'll get back 100% of the money you invested in solar.

Prospective buyers should be aware that homeowners with solar energy systems want documentation showing that a reputable solar dealer's installation was done correctly and proof that the system is reducing electric bills.

Homebuyers can receive incentives for installing solar panels.

The home sellers' purchase of solar panels is the basis for homebuyer incentives because an increase in electricity prices may drive up the property's value. The buyer may receive a 200% return on the premium paid for the installation.

Facts to Consider

A solar energy system can expect lifetime financial gains (25-30 years).
A reduced carbon footprint is achieved.
A home with a higher resale value.

Does a home's value increase with bigger installations?

Solar energy generated at home can still be yours while also increasing the value of your property. Research suggests that installing a large solar array on your roof is unlikely to boost the value of your home. Therefore, you should be satisfied with your solar installation's energy, as long as it satisfies your demands.

Are Solar Homes More Likely to Sell?

New research demonstrates that solar energy installations will help sell your home 20% faster than houses without solar panels. Solar's rapid expansion across the country is bringing appraisers and homebuyers to understand the long-term benefits of grid-tied solar energy. As a result, sellers of solar properties are seeing faster sales and higher revenue.

Are new home solar systems better than older ones?

Even if you sell your home in the future, investing in solar installations is a sound alternative to other potential renovations. A new solar system with upgraded technology, a more extended warranty period, and reduced maintenance needs may significantly boost the value of a property. Solar installations on older homes may depreciate, resulting in a slightly lower premium when sold.

A recent report shows that the cost of a residential solar system has dropped by more than half since 2010. As solar technology becomes more efficient and less expensive to install, the property value premium should also decrease. However, having a new residential solar energy system should result in lower electricity bills and, therefore, faster returns as the installation price decreases.

Is It Better to Buy or Rent?

Financial objectives are likely to be a significant component in determining whether to buy or rent a solar installation, and they may affect whether you do so. If you purchase a new house solar system, future profits from a higher sale price will go directly to you. For an installation to be assessed, it must be owned by the homeowner and function as an asset that may be transferred without restriction. Usually, warranties and performance guarantees are transferred with the sale.

The most promising approach to buying a solar energy system for your home is to buy one. However, if you prefer a lease or Power Purchasing Agreement (PPA), you will not recoup as much from the property sale. Appraisers and financiers believe that if a residential solar system is installed through a lease or PPA, it is owned by a third party. Because of this, the third party must be involved in the property transfer.

What are the regional markets, and what are the electricity costs?

The highest solar home value increase is usually seen in areas with high electricity rates and generous solar incentives. Homebuyers find solar installations on homes more appealing when energy costs are high. Governments are using solar incentives to bolster their infrastructure and community well-being. For example, high electricity rates on Long Island have been advantageous to the local residential solar sector. The proportion of solar systems in New York state has risen to nearly 40%. Across the United States, higher energy costs may result in higher assessments for solar homes. Solar power is a cost-effective solution.

According to a new study, homeowners in the Northeast's emerging solar markets can reap an even more significant financial gain when they sell their homes if they have solar energy systems installed. The Department of Energy said in 2015 that such homeowners would gain $15,000.

Solar Value by State

California has been a pioneer in promoting residential solar in the United States. In contrast, other states have been solar-friendly for years or have recently launched significant initiatives to spur the development of home solar installations, battery storage, and increased property values.

Leading Solar States

1. California

2. Colorado

3. Massachusetts

4. New Jersey

5. New Mexico

6. New York

7. Oregon

Rising Appraisals

According to the Appraisal Journal, a home's value increases by $20 for every $1 reduction in energy expenses. If a household saves $600 a year on electricity bills, their home's value may rise by $12,000. Fannie Mae has established guidelines requiring appraisers to consider the added value of solar energy systems. When valuing a household's solar system, the appraiser should know about solar technology. There are three approaches to value residential solar technology: the cost approach, the cost comparison approach, and the income approach. The cost approach is not always the most straightforward approach to value solar technology, but it estimates the future value of the energy cost savings.

An added value based on the projected income a solar installation will generate for a homeowner over its lifetime is determined using the income approach. This approach is closest to the seller and buyer's perspective when appraising a solar home. Solar installations have become increasingly popular in California, where residential solar markets are relatively mature. Because appraisers, lenders, and real estate agents are all familiar with the economic advantages of solar installations, real estate professionals are better able to price their homes. In other areas, residential solar markets are still developing, so real estate professionals are still learning.

Installing solar panels can boost a house's value.

Residential solar panel installation is a wise investment. Whether upgrading your home to sell or keeping it forever, your property value will increase significantly. The increased value makes payback periods less critical. You may recoup your initial investment at a later sale and come out ahead.

Switching to Solar Energy is Easy. Click here!

Jeremy Ashburn