Do Solar Panels Increase a Homes Value
Does having solar panels increase home value? 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, solar panels have apparent benefits.
But when buying or selling a home, solar panels can add some complexity to the transaction.
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 both over the short and long-term.
One question real estate agents often get is, do solar panels increase property 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 without question that solar panels do increase a home’s value. Not so fast! The answer to this question depends on some factors, including:
- Whether the solar panels are leased or owned.
- What part of the country you live in.
- The type of home you own.
- What the starting value of the home already happens to be. (Higher-priced homes tend to receive more value).
- How much energy you will be saving.
Understanding solar power when selling or buying a home is not difficult. Some of the nuances, however, may surprise you. Keep reading to learn what you need to know about solar-powered homes.
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 distributed where needed. This is what solar panels do in order to work at powering a home. If someone asks how solar panels work, now you know!
Obviously, solar panels will work best when sunshine is abundant.
The Benefits of Have Solar Panels on Your Home
There is no doubt that solar panels can be beneficial under a lot of circumstances. For instance:
- Solar panels can 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 speaking, a typical solar panel system can produce enough electricity to take care of at least half your home’s energy needs. When adding a solar panel 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 is going to produce based on annual statistics the company knows from some 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.
- Solar panels can help you 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 solar panel 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.
- Biggest benefits tied to how expensive energy costs range in your area. Not surprisingly, those homeowners who have the largest current electricity bills are going to reap the most significant benefits for adding solar power to their home.
Solar Panel Systems – 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 solar panel system that brings all the above benefits also tends to cost $15,000 – $20,000, an expense that not every homeowner has the money for.
Many solar panel companies have introduced a way for homeowners to get the solar panel system without needing to come up with the money up-front.
Instead of buying, you can lease a system. You sign an agreement that you will pay a regular fee for using your solar panels for the next 15 years or more.
The Trouble With Leasing Solar Panels 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 full 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 obviously do not want to continue to pay for the use of the solar panels. You also don’t want to be stuck with a $15,000 bill. The only option left is to see if you can transfer the lease to your home buyer.
As you can imagine, many consumers are hesitant to take over a 15-year lease. They may be worried about the solar panel company’s credit requirements, or they may not feel comfortable committing to such a long-term agreement on top of all the other stresses of purchasing a home.
There have been numerous deals that have fallen through over solar panel lease transfers, and there are likely to be much more. As an owner and a seller, you want to be aware of these issues before you lease a solar panel system or attempt to sell your home after you have signed such a contract.
One thing that must be emphasized is that a home appraiser will not add any value to a property with a leased solar panel system! Appraisers cannot increase the value of something that is not permanent to the structure.
How Solar Panels Affect The Market Value Of A Home
Will solar panels increase or decrease the value of my home?
As mentioned above, there are plenty of articles written by solar panel companies that talk about how their products increase the value of a home, but in the real world, the growth in value is not nearly as clear-cut.
Don’t automatically assume that solar panels will increase your home 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 how much value a solar panel system adds to your home. This includes:
What Kind of Market Exists For Solar Panels
Different housing markets react to solar panel systems differently. A home with a solar panel system in environmentally-friendly Portland, OR, will probably appeal to a wide range of 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.
Here in my area of Southborough, Massachusetts, I have seen a very negligible gain in market value for those who install a solar panel system to their home.
In fact, 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 actually 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 Others Are Saying About Solar Panels Increasing a Homes Value
To get other opinions on whether solar panels will increase the market value of a home, 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 solar 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 are certainly going to 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 for them to the home value – DOUBTFUL! As you will learn, solar panels could actually decrease a home’s value.
Whether You Lease or Own Solar Will Impact Home Values
As pointed out above, a home where a leased solar panel system is installed is not necessarily more desirable because of the system. In fact, 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 Solar Panels Affects Property Value
While you may be extremely proud of your commitment to the environment and your energy savings, not every buyer is going to share your values.
Solar panels installed on the front side of the house, in particular, can negatively impact the curb appeal of the home.
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 home ten times harder to sell.
Not only will it be harder to sell, but you’re also increasing the odds it will sell for less money.
When someone asks do solar panels increase home values, the answer can be no if they are an eyesore!
If you add solar panels to your home, make sure they can be put in the back!
One other thing to keep when thinking about installing solar panels is the age of your roof.
Considering a solar panel system will be fitted to an existing roof, you’ll want to have a younger roof. Otherwise, you will find yourself ripping out the solar panels when installing a new roof.
How Old Are The Installed Solar Panels
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, if it is older, buyers may not consider it as desirable as a newer system. 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 With Solar
Real estate prices are often tied to the vicinity and comparable homes, limiting the value that 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 panel systems.
Types of Solar Panel Systems
You will find two kinds of solar panels available for purchase. There are silicon panels that come two ways – either Polycrystalline or monocrystalline. Both of these panel types perform closely to one another. Monocrystalline panels have been around longer, but polycrystalline panels are far more common.
Silicon panels efficiency rate around 20 percent. They are the most efficient solar panels on the market. The other type of solar panel is what’s known as thin-film. Thin-film panels are used in products such as solar shingles or tiles. They are much less efficient, coming in with a rating between 11% to 13%. The reduced efficiency will affect how much electricity the panels can generate.
Solar Panel Options
When a solar power system is installed on your home, you will have a couple of options to choose from. The first option is to have your system attached 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 to use 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 popular in remote areas where hooking up to a utility grid would be very costly.
Which Solar Panels Are Best?
One of the more popular questions is which solar panels are the best for my home. Take a look at this excellent solar panel resource which explains some of the better solar panel technology out there at the moment.
Solar Panels Can Increase Price – Just Not As Much As You Think
The addition of solar panels to your home is not wasted money, but it is important 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 $5,000 to the sale. The price increase can vary considerably, as discussed above, but you can expect some increase.
Like so many improvements to a home, installing a solar panel system 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 – where 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 biggest benefit you will receive from having solar panels is the amount of 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.
Solar panels are worth having when you plan to stay in the home for an extended amount of time. The longer you are in the property, the more you will reap your solar panel investment benefits.
Get Clear Info Before You Go To Buy Or Sell With Solar Panels
What You Need to Know About Buying a Home With Solar Panels.
If you consider buying a home with solar panels, make sure 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 which company, how much power it produces, what percentage of the home’s power does it provide, maintenance history, and more.
When purchasing a home with solar panels, make sure you learn about the warranty.
Two kinds of solar system warranties are normally offered. The first one is the manufacturer’s warranty with covers 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 a warranty on the installation, which means ensuring they have made no holes in your roof that lead to leaks for a specified period – usually 2 to 5 years.
Keep in mind that neither of these warranties covers fire, theft, or other damage, so ensure you get the system added to your homeowner policy.
The technology with solar panels is getting better and better. Do your research and understand exactly what you are going to get.
As a seller, you want to have all this information at the ready for when a buyer or a Realtor asks for it. Accurate records and information will make everyone feel better about the transaction.
As far as leased solar panel systems go, there are still plenty of home sales with leased systems. Although it may be a bit more complicated, do not lose hope if you are selling a home with a leased system or if you 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, make sure you have all the information customers will need to make an informed decision about taking over the lease.
Other Benefits of Solar Power
While solar power will certainly save money and energy around your home, there are other advantages as well. A solar energy system will absorb clean, pure energy from the sun.
Installing solar panels on your home helps reduce greenhouse gas emissions that harm our environment. Adding solar will reduce the carbon footprint and help lessen our collective 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 solar panels should not just be about whether they increase home values. They help the environment and save energy – both excellent things.
Final Thoughts on Selling and Buying With Solar Power
If you are adding solar panels to your home for the sake of saving money, reducing your energy footprint, or going 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 they are not located in the 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 to be useful.
Additional Helpful Solar System 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 understand of both the cost and energy savings of adding solar in your area.
About the Author: The above Real Estate information on do solar panels increase home values when buying or selling was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at email@example.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 34+ years.
Thinking of selling your home? I have a passion for Real Estate and love to share 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, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.