Does having solar panels increase home value?
Whether or not solar panels increase property values and how much depends on several factors.
Understanding solar power when buying or selling a home is essential.
An increasing number of homeowners are installing solar panels to save money.
Better for the environment and capable of generating around half the electricity needed to run an average home, they have apparent benefits.
However, solar panels can complicate the transaction when buying or selling a home.
As a buyer or a seller, you should be aware of both the benefits and problems related to solar panels as you enter the market to buy or sell.
The more informed you are, the easier it will be to make sound decisions over the short and long term. From many years of experience as a Realtor, many variables can influence whether homebuyers will pay a premium for a property.
Let’s take a look at what should be taken into consideration with a home sale.
Does Solar Increase The Value of a Home?
One question real estate agents often get is, do solar panels increase home value?
As much as solar companies would like you to believe otherwise, this is not a yes or no answer.
If you ask any solar power company, they will tell you that the systems increase a home’s value.
Not so fast! The answer to this question depends on some factors, including:
- Whether the panels are leased or owned.
- Where the panels are installed – front or back of the home.
- What part of the country do you live in?
- The type of home you own.
- What the starting value of the house already happens to be. (Higher-priced homes tend to receive more weight).
- How much energy will you be saving?
Understanding solar power when selling or buying a home is not difficult. Some of the nuances, however, may surprise you.
Noteworthy Facts Buyers and Sellers Should Know
1. Solar panels can increase the resale value of a home under the right circumstances.
2. Potential buyers often see houses with them as more desirable.
3. The increase in property value from them varies depending on factors such as location, market conditions, and the solar installation size.
4. On average, homes with them can see an increase in value ranging from 4% to 10%.
5. It can help attract environmentally conscious buyers who prioritize sustainable living.
6. Installing them can also save energy bills, which can appeal to potential buyers.
7. The aesthetic appeal has improved, making them more attractive to buyers.
8. Homeowners may be eligible for various incentives and tax credits when installing solar panels, adding further value to their property.
9. Studies have shown that properties equipped with solar power systems sell faster than those without.
10. Overall, investing in solar energy can be a worthwhile investment that benefits the environment and increases a home’s value.
How Do Solar Panels Work?
Solar panel technology works by absorbing light from the sun with photovoltaic cells. These photovoltaic cells help generate direct current (DC) energy and then convert it to alternating current (AC) energy via the help of an inverter.
AC energy will then flow through a home’s electrical panel, and then it’s distributed where needed. This is what solar panels do to work at powering a home.
Solar panels will work best when sunshine is abundant.
The Benefits of Sustainable Renewable Energy
There is no doubt that they can be beneficial under many circumstances. For instance:
They Produce a Surprising Amount of Electricity
The amount of electricity generated can vary depending on several factors, including the type of solar panel, the number of panels in the system, and the amount of sunlight available.
Generally, a typical solar panel system can produce enough electricity to cover at least half your home’s energy needs.
When adding a system to your home, you get bids from multiple companies and compare the results.
The solar company you interview should estimate how much power their system will produce based on annual statistics the company knows from different factors: the weather in your area, the angle of your roof, and its orientation to the sun.
These factors will determine your system’s size and how much electricity, on average, it will produce each year.
They Can Help Save on Energy Costs
Electricity is not getting any cheaper. A solar panel system that takes care of half your home’s energy needs will mean you pay around half your average electricity bill – for as long as the system is functional, which can be decades.
The more energy you save, the quicker the system pays for itself. Believe it or not, it is possible you will not have an electricity bill at all when you have solar panels.
Read here for more energy-saving tips around the home.
Their Benefits Are Tied to Local Energy Expenses
Not surprisingly, those homeowners with enormous current electricity bills will reap the most significant benefits from adding solar power to their homes.
The savings will be significantly better when local electricity rates are higher than in other areas. The incentives increase for a solar system when you know your utility bills will decrease.
Home buyers will potentially pay a premium when you can show solar homes will lower their bills.
What to Know About Buying vs. Leasing
As exciting as it can be to imagine cutting your electricity costs in half and reducing your carbon footprint, the costs associated with installing a solar panel system can be sobering.
The same average system that brings all the above benefits also tends to cost $15,000 – $30,000, an expense not every homeowner has the money for.
Many solar panel companies have introduced a way for homeowners to get the system without needing to come up with the money up-front.
Instead of buying, you can lease a system. You sign an agreement to pay a regular fee for using your solar panels for 15 years or more.
The Trouble With Leasing For Sellers
While leasing a system can seem like a perfect arrangement, doing so can create an awkward situation when you decide to sell the home.
Breaking your lease with the solar panel company will usually result in you being charged the entire bill for the 15 years of usage you agreed to, which can come out to $15,000 or more.
You are selling the home, so you do not want to continue to pay for solar panels. You also don’t want to be stuck with a $15,000 bill. The only option is to see if you can transfer the lease to your home buyer.
As you can imagine, many consumers hesitate to take over a 15-year lease. They may be worried about the solar panel company’s credit requirements or feel uncomfortable committing to such a long-term agreement on top of all the other stresses of purchasing a home.
Numerous deals have fallen apart over solar panel lease transfers, and there will likely be many more.
As an owner and a seller, you want to be aware of these issues before you lease a system or attempt to sell your home after signing such a contract.
One thing that must be emphasized is that a home appraiser will not add value to a property with a leased solar panel system! Appraisers cannot increase the value of something that is not permanent to the structure.
Do They Increase The Market Value Of A House
The million-dollar question is whether or not adding solar panels will increase your property value. Let’s cover all the factors that will influence your value with solar.
Will There Be an Increase or Decrease in Property Value?
As mentioned above, plenty of articles were written by solar panel companies and others talking about how their products increase the value of a home. Still, in the real world, the increase in value is not nearly as clear-cut.
Don’t automatically assume that solar panels will increase your housing value.
A solar panel system may add value to your home, or it may be an addition that fails to increase your home price enough to make it worth the initial investment.
Several factors will impact the value a solar panel system adds to your home.
These factors include:
What Kind of Market Exists
Different housing markets react to the systems differently. A home with solar power in environmentally-friendly Portland, OR, will probably appeal to many buyers. Buyers in the Portland area tend to desire eco-additions like solar.
In contrast, a home in Odessa, TX, with a solar panel system may be far less appealing to the average local buyer. Odessa is an oil town not known for its attachment to environmental issues.
In Southborough, Massachusetts, I have seen a negligible gain in market value for those who install solar power in their home.
I have run into a few homeowners who believe that the 30,000 – $40,000 they spent on their solar panel system can be added to the asking price of their home. Sorry, fat chance! By doing so, your home will be overpriced, which is the kiss of death in real estate sales.
The problem that’s occurring is far too many sellers believe these solar companies’ slick advertising.
They also go online and see a myriad of articles written by solar companies expounding on how solar panels will increase the value of your home. This is akin to going online and thinking a Zillow home value is what your home is worth. Don’t make me giggle.
Of course, some sellers also mistakenly believe that every improvement made to their home brings back at least as much as they have spent. Folks, people that think this way learn the hard way.
What Real Estate Industry Experts Are Saying
To get other opinions on whether solar panels will increase the market value of a house, I reached out to some top real estate agents across the country, along with a well-respected appraiser.
Below, you will see statements from those in the real estate industry about whether or not the panels will increase home values.
In speaking with Tom Horn, a well know Birmingham Alabama appraiser, he mentioned that in his experience appraisers to do not place anywhere near the cost of a solar panel system onto a homes value. “The biggest problem for appraisers is finding other similar sales in order to compare to non-solar sales. Given this problem appraisers often have to rely on the income approach to value and analyze the money that is saved over the life of the system and then come up with a present value of that amount. In my area, there are not enough sales with solar panels that you could ever draw a conclusion that they are adding tens of thousands of dollars to a home’s value”.
I also reached out to Kyle Hiscock, a Rochester NY Realtor. Kyle has been helping people move in, around, and out of Rochester since 2011. Here are Kyle’s thoughts on solar panels in his area:
“Thank you Bill for reaching out to get some insight into the impact that solar panel systems have on real estate values in the Greater Rochester NY area. Solar panel systems in my are pretty rare. There are a couple of reasons for this. The average number of days with sunshine in Rochester is significantly less than many southern and even west coast states. The cost of solar panel systems is also prohibitively expensive for many homeowners as well.
As for the impact solar panel systems have on Rochester home values, they definitely have a positive impact. A buyer will pay more for a home that has a solar panel system, however, if the system costs $40,000 to install they will not pay $40,000 more for the home. Installing a solar panel system does not yield a dollar-for-dollar return on investment, similar to other remodeling projects.
There are home improvement projects that increase a homes value more than adding a solar panel system would. For example, adding additional living space in a home is a great way to increase a homes value due in some cases, will cost significantly less than a solar panel system.”
I also spoke to Warner Robins real estate professional, Anita Clark, to see if solar panels add market value to homes in her market down south. Here is what she had to say:
“You would think with plenty of sunshine and a mild climate, Georgia would be a great place for homeowners to install solar panels and reap the benefits of reduced electricity costs and higher resale values. While monthly electric bill savings are certainly a plus, in my middle GA market, homeowners have little chance of recouping their install costs if they decide to sell.
With so few using this technology, there are few comparable homes available to aid sellers. For instance, there is currently one property, of the nearly 1,300 available in my area, that has solar panels installed. In fact, only 9 properties have sold in the past 5 years with this capability. While I applaud anyone who looks to protect our environment and cut their monthly expenses, the cost to install solar panels will not be recouped during resale in middle GA at the moment.”
As you can see, the consensus is pretty high right now that having solar panels does not affect the market value of homes as much as some people may think.
You will save money but don’t expect to tack on thousands of dollars to your asking price.
Do solar panels add value to a home – YES. Do solar panels add what you paid them to the properties sale price – DOUBTFUL! As you will learn, solar panels could decrease a home’s value.
Whether You Lease or Own Solar Will Impact a Home Value Increase
As pointed out above, a home with a leased system is not necessarily more desirable because of the system. It may be less desirable.
A leased system cannot be included in the appraisal of a home and may not be something that buyers want to be saddled with.
The Location of The System Matters
While you may be incredibly proud of your commitment to the environment and energy savings, not all home buyers will share your values.
Solar panels installed on the front side of the house, in particular, can negatively impact the home’s curb appeal.
Depending on how concerned potential buyers are with the property’s aesthetics – such as if you are in a highly desirable neighborhood – you may find that they steer clear based on looks alone.
If you are thinking of adding solar panels and can only add them to the front of your home, I would forget about doing so unless you don’t mind making your property ten times harder to sell.
It will be harder to sell, and the odds are it will fetch a lower sales price than if they were not there.
When someone asks whether solar panels increase market value, the answer can be no if they are an eyesore!
Of course, this is not what many articles that have been written tell you, but they are dead wrong!
If you add them to your home, ensure they can be installed in the back!
Another thing to remember when considering installing the panels is the age of your roof.
Considering they will be fitted to existing roofing, you’ll want to have a younger roof. Otherwise, you will find yourself ripping out the solar panels when installing a new roof.
So don’t install solar if you will need a roof replacement soon.
The Age Can Impact The Value Added
Solar panel technology continues to advance, producing more efficient systems that are naturally more desirable than older systems.
Even if your system is still fully functional, buyers may not consider it as desirable as a newer system if it is older. The less desirable it is, the less value you can expect it to add to your home.
How Surrounding Homes in Your Area Impact Property Value
Real estate prices are often tied to the vicinity and real estate comps, limiting the value renovations and additions add to the property.
Much like adding an expensive addition or a swimming pool to an average home in a middle-class neighborhood, adding solar panels in certain areas may be so unusual or out-of-place that they do not increase value as you would expect.
Few buyers looking in the same middle-class neighborhood will be willing to pay extra for an addition out of place in the neighborhood, and you may run into the same issue with solar power.
Types of Systems Can Make a Difference
You will find two kinds of solar panels available for purchase. Silicon panels come in two ways – either Polycrystalline or monocrystalline. Both of these panel types perform closely to one another.
Monocrystalline panels have existed longer, but polycrystalline panels are far more common.
Silicon panel’s efficiency rate is around 20 percent. They are the most efficient solar panels on the market. The other type of solar panel is what’s known as a thin film.
Thin-film panels are used in products such as solar shingles or tiles. They are much less efficient, with a rating between 11% to 13%. The reduced efficiency will affect how much electricity the panels can generate.
Options Can Impact Market Values
You will have a few options when a system is installed in your home. The first option is to attach your system to the local utility grid and sell the excess energy you create back to the utility company.
The second option is installing an off-grid system with a series of batteries and a backup generator that will store power when it is cloudy or overnight when there is no sunshine.
A grid-connected system is the least expensive as it requires less expensive equipment and maintenance than an off-grid system. Grid-connected systems will power your house when the sun is shining. Any excess electricity produced will be fed back to the grid.
The off-grid system format stands unconnected to any grid energy system. Off-grid systems will have batteries, power-conditioning equipment, a charge controller, meters, and other instrumentation.
Off-grid systems are more prevalent in remote areas where hooking up to a utility grid would be very costly.
Which Systems Are Best For Raising a Home’s Worth?
One of the more popular questions is which solar panels are the best for my home. Look at this excellent solar panel resource, which explains some better solar panel technology.
They Can Increase Price – Just Not As Much As You Think
Adding solar panels to your home is not wasted money, but it is essential to be realistic about how much value you can expect.
Where you may spend $30,000 on a system when you sell your home, the system may only add $10,000 to the sale. As discussed above, the price increase can vary considerably, but you can expect some increase.
Like so many improvements to a home, installing a solar panels is not a decision that should be based purely on how much more valuable it will make your home.
Few improvements offer a 1:1 ratio – you get to increase the price by the same amount you spent on the modification.
Getting solar panels installed is a personal choice that should be based on how it will improve your home’s enjoyment, not only because you believe it will increase your sale price.
The most significant benefit you will receive from the panels is the money you save on your monthly energy bills. Here are additional ways to save energy, especially with an older home. Some of these could be better long-term investments.
They are worth having when you plan to stay put for an extended time. The longer you are in the property, the more you will reap your solar panel investment benefits.
Under Ideal Conditions Here is How Much Your Market Value Increases
In the ideal world, with everything perfect, you can expect solar panels to increase a home’s value. Solar panels reduce energy costs, so your property value will increase. Many experts suggest you can expect that your value will increase by $20 for each dollar you save on your energy bills.
So if your energy bill is decreased by $800 per year, you can expect your value to rise by around $16,000.
Remember, these are in ideal conditions with a solar panel system not being on the front of a house in an area that values solar power.
Get Clear Info Before You Go To Buy Or Sell Real Estate
There are several essential things to know when buying or selling a house with solar panels.
What You Need to Know About Buying a House With Increased Energy Efficiency.
If you consider buying a home with solar panels, ensure you get clear, accurate information on the system involved.
As a buyer, you want to know all the relevant facts about the system you are considering – including when it was installed. By this company, how much power does it produce, what percentage of the home’s power does it provide, maintenance history, and more?
Understand The Warranty
It is also essential to learn about the warranty. Warranty coverage can make a difference.
Two kinds of warranties are usually offered. The first is the manufacturer’s warranty covering the panel and inverter. The panels’ warranty is typically 20-25 years and 5-10 years for the inverters.
Whoever is installing the system should also offer an installation warranty, ensuring they have made no holes in your roof that lead to leaks for a specified period – usually 2 to 5 years.
Remember that neither of these warranties covers fire, theft, or other damage, so ensure you add the system to your homeowner policy.
Technology Continues to Improve
The technology with solar panels is getting better and better. Do your research and understand precisely what you are going to get.
As a seller, you want to have all this information ready when a buyer or a Realtor asks for it. Accurate records and information will make everyone feel better about the transaction.
Regarding leased solar panel systems, there are still plenty of home sales with leased systems. Although it may be a bit more complicated, do not lose hope if you sell a home with a leased system or want to buy one with such a system.
Again, accurate and precise information is essential to facilitate the sales process. Buyers, be certain of what you are getting into before you buy.
Sellers, ensure you have all the information customers need to decide about taking over the lease.
Other Benefits Buyers and Sellers Should Know
While solar power will save money and energy around your home, other advantages exist. A solar energy system will absorb clean, pure energy from the sun.
Installing them on your home helps reduce greenhouse gas emissions that harm our environment. Adding solar will reduce the carbon footprint and help lessen our dependence on fossil fuels.
When fossil fuels are burned to produce energy, they create toxic gasses that are the primary cause of pollution and potential global warming.
According to The Union of Concerned Scientists, coal and natural gas plants’ air and water pollution are linked to breathing problems, neurological damage, heart attacks, and cancer.
So, installing them should not just be about whether they increase housing values. They help the environment and save energy – both excellent things.
Check Out Tesla as a Solar System Provider
If you consider adding solar to your home, Tesla solar panels could be a wise choice. They are one of the industry leaders in installation.
They offer a price match guarantee, which is reason enough to have them in to review your home. Their prices are ultra-competitive within the industry.
Their installation system is also a significant plus, with the panels sitting low on the roof, making them blend better. They also offer an excellent warranty.
Pros and Cons
Pros
Renewable Energy Source: They harness the sun’s power, an abundant and renewable energy source. This means homeowners can reduce their reliance on fossil fuels and contribute to a greener, more sustainable future.
Energy Savings: Homeowners with solar panels can significantly reduce their monthly energy bills by generating electricity. This is especially beneficial in the long run, as the costs of electricity from traditional sources tend to rise over time.
Financial Incentives: Many governments and local authorities offer financial incentives, such as tax credits or rebates, to encourage the installation of solar panels. These incentives can help offset the initial cost of purchasing and installing the panels.
Increased Property Value: They can increase the value of a home. Studies have shown that homes with solar panels sell faster and at higher prices than those without.
Energy Independence: Solar panels offer homeowners a sense of energy independence, as they are not reliant on the power grid for their electricity needs. This can be particularly useful during power outages or in remote areas with limited access to electricity.
Cons
High Initial Cost: The initial investment required to purchase and install solar panels can be high. Although financial incentives are available, it may take several years to recoup the upfront costs through energy savings.
Weather Dependence: The panels rely on sunlight to generate electricity, so weather conditions can affect efficiency. Cloudy or rainy days may decrease electricity production, impacting the overall energy savings.
Space Requirements: The systems require ample roof space or dedicated land area to be installed. If a home has limited roof space or is surrounded by shade, it may not be suitable for installation.
Maintenance and Repair: Solar panels are generally low-maintenance but require occasional cleaning and inspection to ensure optimal performance. In the event of damage or malfunction, repairs can be costly and may require professional assistance.
Aesthetics: Some homeowners may find the panels visually unappealing or worry that they may negatively impact the appearance of their home. However, advancements in panel design have made them more aesthetically pleasing in recent years.
Statistics Worth Knowing
1. Under ideal conditions, homes with solar panels have been found to sell for up to 4.2% higher than houses without them.
2. On average, solar panels increase a home’s value by $15,500.
3. A study showed that 85% of homebuyers consider a property with solar panels more attractive than one without.
4. Solar-powered homes are estimated to sell 20% faster than comparable non-solar homes.
5. An analysis indicated that installing solar panels can give homeowners an average return on investment of 20%.
6. Properties with them are perceived as more energy-efficient by 91% of potential buyers.
7. Solar panel installations can increase property value, equivalent to having an additional bedroom or bathroom.
8. Homeowners who invested in the panels reported an average monthly savings of $100 in utility bills.
9. Solar-powered homes have shown a decrease of up to 30% in time spent on the market compared to non-solar properties.
10. A survey found that 79% of homeowners believe that having solar panels positively impacts the resale value of a property.
FAQs
How Can Installations Be Financed to Maximize House Values?
Installations can be financed in various ways to maximize property value. One popular option is through a solar lease agreement, where homeowners can lease the panels from solar installers and pay a fixed monthly fee for the use of the system. This allows homeowners to enjoy the benefits of solar energy without the upfront costs of purchasing and installing the panels themselves.
Another option is a power purchase agreement (PPA), where homeowners agree with a solar provider to purchase the electricity the panels generate at a predetermined rate. This helps offset electricity costs and adds value to the property by showcasing its commitment to sustainable energy practices.
How Does The Location of a Property Impact Installations on Its Value?
The area of a home plays a significant role in determining the impact of solar panels on its value. They can significantly enhance a property’s value in areas with abundant sunlight and high demand for renewable energy, such as sunny coastal regions or progressive urban centers.
This is due to the increasing popularity and awareness of sustainable living practices and potential cost savings on electricity bills. Additionally, homes located in regions with higher electricity prices may experience a more substantial increase in value when equipped with solar panels, as they provide an attractive alternative to traditional energy sources.
Conversely, the impact on home value may be less pronounced in areas with limited sunlight or a lower demand for renewable energy.
What Are Some Potential Drawbacks or Considerations For Raising Property Value?
When considering the impact on house value, it is essential to consider a few potential drawbacks or considerations. The initial cost of installing solar panels can be quite significant, which may deter some potential buyers who are not willing to make such an investment.
In addition, the aesthetic appeal might not be universally appreciated, and some individuals may find them visually unappealing. Furthermore, the effectiveness can be influenced by factors such as the location and orientation of the property, as well as weather conditions.
Finally, it is worth noting that while they can significantly reduce or even eliminate electricity bills, the savings might not always outweigh the initial investment in terms of increasing home value.
Final Thoughts
If you are adding solar panels to your home to save money, reduce your energy footprint, or go green by all means, do so. If you’re expecting to be moving anytime shortly, you may want to hold off as it’s doubtful you’ll recoup the cost of the system.
Homes with solar panel systems tend to sell faster when not in front of a house.
Above all else, do your homework when selecting a solar power company! Hopefully, you have found this guide to buying and selling a house with solar panels a valuable resource.
Additional Helpful Articles
- How much does it cost to install solar systems – do you know the cost of adding solar panels to your home? Get some detailed pricing information for solar panel installation via Solar Power Authority.
- How much energy is saved with solar panels – would you like to get an idea of how much energy is saved by having solar panels installed at your house? Take a look at the helpful solar panel information via Solar Nation.
- Solar panels could shake up the utility industry – see how solar panel installations are changing the utility industry via Grist.
Use the additional solar system resources to understand better some of the nuances associated with adding solar technology to your home. Get a better understanding of both the cost and energy savings of adding solar in your area.
About the Author: Bill Gassett, a nationally recognized leader in his field, provided the above real estate information on whether solar panels increase home value. He is an expert in mortgages, financing, moving, home improvement, and general real estate.
Learn more about Bill Gassett and the publications he has been featured in. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of Metrowest towns for the last 38+ years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
