Do Solar Panels Increase Home Value?

The buzz around solar energy keeps growing. More homeowners are opting to go green and find energy savings through powering their homes with the sun. But one question crops up frequently when considering an investment in solar panels: Does it impact home values?

The quick answer is yes—solar panels can increase your property’s resale value. But, like any major investment, nuances mean not all bumps in value are the same. Learn how to maximize your solar panel installation to boost home value.

How Solar Panels Affect Home Value

Several studies have confirmed that solar panels do bump a home’s value upward. The research and surveys say:

• Lawrence Berkeley National Laboratory found that buyers were willing to pay $15,000 more for homes with solar installations in 2015.
• Another 2019 survey revealed that homes with solar panels sold for 4.1% more than comparable homes without solar.
• According to the U.S. Department of Energy, a home’s value increases by $20 for every $1 saved in annual utility expenses with solar panels.

However, this impact isn’t universally consistent. Regional differences play a role. For example, solar-powered homes in sunny states like California or Arizona may receive a bigger value boost than those in northern climates with less sunshine. Real estate markets with home buyers prioritizing eco-friendliness also see more value gains. 

What Factors Influence Added Home Value?

The degree to how much value solar panels add depends on a few factors. Here’s what makes the biggest difference:

1. System Ownership vs. Leasing

If you’ve outright purchased your solar panel system, congratulations! You’re in the prime position to add value to your property. Owned solar systems are considered assets and can directly boost a home’s resale value.

On the flip side, solar leased systems or Power Purchase Agreements (PPAs) don’t offer the same benefits because the homeowner doesn’t technically own the panels. While these leased panels can be transferred to new owners, they may introduce financing challenges during the sale process. They’re also not considered assets, so they can’t lift the market value. 

2. Energy Savings and ROI

The more your solar power system reduces electricity bills, the more attractive your home becomes to potential buyers. For example, if your panels save the new owner $1,200 annually, that savings translates into an additional ~$24,000 in home value based on national estimates. The average return on investment for solar panels is about 10% a year. It depends on how much energy your system generates and the local electricity rates.

3. Market Demand for Solar Homes

Eco-friendly homes are trending in today’s real estate market. With energy-conscious millennials and Gen Z entering the housing market, the demand for greener homes continues to rise. This shift enhances makes homes with solar panels appealing, especially as electric rates keep increasing. Some home buyers see an already installed system as a way to offset their energy costs.

4. Local Incentives and Policies

Solar-friendly states (like California and Nevada) offer incentives like tax credits, rebates, and net metering. The federal government also had a tax credit for a number of years. Government incentives reduce the cost of installing solar panel systems and amplify the return on investment, making solar homes more desirable in these regions. 

Incorporating a solar battery can further enhance these benefits. While they have a higher upfront cost, batteries store excess energy and provide a reliable power supply even during dark evening hours or electrical outages. They keep your home powered just like a gas-powered generator would.

Potential Drawbacks to Consider

While there’s plenty of good news, solar energy systems do come with a few drawbacks regarding home value. 

1. Installation Costs

The initial cost of a solar PV system can be a significant investment. The average system costs between $15,000 and $25,000 before incentives for the solar panels. That price tag doesn’t include items like the inverter, a battery backup, electrical design, or permits. Even if your state has some rebate or tax credit for residential solar panels, the initial upfront cost is still high. Property owners need to think about long-term investment when transitioning to solar energy. The savings happen over time, so weigh the upfront expense against long-term returns.

2. Aesthetic and Roof Condition

Solar panels may not be every buyer’s aesthetic dream. Some people don’t like the look of them on a home’s roof. That’s mainly if installed on older or less attractive roof designs. 

Additionally, some solar panels can last longer than some roofing materials. That’s why some installers recommend that some homeowners replace a roof before a solar installation. Doing a roof replacement and a solar installation bumps the total project costs. 

Poor roof conditions detract from a home’s overall value, regardless of the benefits of energy efficiency. So, the solar panels may add value, but a compromised roof takes it away.

3. Buyer Perception and Financing Challenges

Home sellers face additional hurdles if their solar panels are leased or PPAs. The new homeowner must take over the lease agreement when panels are leased. That might deter some buyers who are not interested in solar or an extra contract with another company or utility. Financing complications can arise, as many buyers view this arrangement as less advantageous than ownership.

How to Maximize Home Value with Solar

Want to ensure that your investment in solar panels provides the maximum return when it’s time to sell your house? Follow these tips:

1. Choose the Right System

Choosing the right solar system impacts your home’s resale value. Select high-quality panels and systems that meet your energy needs. Home solar panels are constantly improving; even three years from now, today’s latest model will not be as efficient as the newest models on the market. That’s why investing in what’s “top-of-the-line” today may be worth it–you’ll get the most efficient solar panels available and have high energy generation for longer. 

Additionally, all solar panels do lose some energy generation capabilities over time. This degradation occurs due to environmental factors such as dust, heat, cold, humidity, etc. Some home solar systems have a lower degradation rate than others. Most solar panels generate about 80% of their original power after 25 years. 

Research brands and options with long-term durability and warranty support.

2. Keep Maintenance Records

A well-maintained system will always fetch a higher value. Keep detailed records of maintenance, warranties, and repairs. This demonstrates to prospective buyers that the system is in excellent condition.

A well-designed solar system actually needs very little maintenance. Most homeowners can leave their systems alone, especially if tilted on the roof so water runs down them. However, a very light cleaning may be helpful to remove accumulated dust, especially if the weather has been dry lately or you live in a dry environment. This should be done early in the morning, before the sun’s rays start heating the panel. Use care when washing solar systems.

The biggest risk is actually from animals. Birds, squirrels, and other wildlife sometimes find spaces behind solar panels to be ideal nesting spots. They can chew through wires and wreak havoc on the system, which is why some solar companies suggest solar critter guards.

3. Market Solar Benefits

When selling your home, highlight the perks of your solar panels. Mention energy savings, eco-friendliness, and potential benefits like net metering. Buyers are more likely to bite when they see the complete picture of how much value the panels add to your home. It’s even better if you have data showing how the home solar system helped lower energy bills.

4. Work with Local Experts

Collaborate with local real estate agents who know how to position solar upgrades as assets. These agents can tailor the marketing strategy to appeal to buyers in your specific area. The average savings on your energy bills will be a significant selling point.

Do Solar Homes Sell Faster?

Yes, homes with solar panels installed tend to sell faster than homes without them. According to a National Renewable Energy Laboratory study, homes with solar panels sell 20% quicker and spend less time on the market than nearby comparable properties. 

Part of this is that some homebuyers find the panels desirable. They are attracted to the potential for long-term energy savings and the environmental benefits of renewable energy.

The Impact of Solar on Property Taxes

While solar panels can increase the value of your home, they may also impact your property taxes. However, some states have property tax exemptions for solar energy systems. These work to mitigate the impact of increased property taxes. In fact, over 36 states have some form of solar property tax exemption. 

Additionally, the increase in property taxes due to solar panels is typically relatively small, ranging from $160 to $630 per year. It depends on the location and the added property value to the home.

Other Benefits of Home Solar Panels

Environmental Sustainability

Installing solar panels on your home reduces your carbon footprint and contributes to a more sustainable future. Solar energy is a clean, renewable resource that does not produce greenhouse gas emissions or air pollution. By harnessing the sun’s power, you reduce your reliance on fossil fuels while lowering energy costs. 

Longevity

Not all home improvement projects have the same lifespan as solar panels. Solar panels can last up to 30 years before replacement and require very little maintenance in the meantime, making them a long-term solution for environmentally conscious homeowners.

The Future of Green Homebuying

Interest in renewable energy sources and solar-powered homes continues to grow. A study by the Appraisal Institute shows that homes with green features can sell for up to 2.19% more than comparable homes without these features. Pearl Certified homes, which are certified for their energy efficiency and sustainability, can see a sale price premium of up to 5% higher. 

With the increasing demand for eco-friendly homes, investing in solar panels and other green home upgrades can pay dividends for buyers and sellers.

The Bottom Line: Solar Panels Increase Home Value

The verdict is clear: home solar systems boost property values when installed and marketed effectively. They also save on utility costs and reduce your carbon footprint. Consider them a long-term investment with immediate short-term advantages that pay off when selling your home.

That said, it is crucial to evaluate factors such as system ownership, actual energy savings, and local market demand before installing solar power in your home.

Are you considering installing solar panels or optimizing existing systems? In most cases, the benefits make the effort worthwhile. Explore your solar options today, and move closer to a brighter, greener future with a solar home.