Factors That Influence Home Value
Why are many prospective homebuyers willing to pay a considerable premium for homes with pre-installed solar panels? Theres no single explanation. Certainly as residential solar becomes more common, buyers increasingly view it as an upgradea home improvement likely to generate revenue in the long run.
Do Solar Panels Add Resale Value
The simple answer to this question is yes. A recent study done by the online real estate and rental marketplace Zillow revealed that homes with solar energy systems sold for an average of 4.1 percent more than similar homes without solar power. Musk echoed that sentiment in the following tweet:
Very likely that a home with clean power thats lower cost than utility, plus blackout protection via Powerwall, will have a positive effect on value
Elon Musk
Now, it does dependon a few variables. Location is one ofthe most important, since homes in metropolitan areas seem to have an increaseddemand for energy-efficient features such as solar panels. Other variables include things such as theage of the home, the size, and property square footage.
As far as Musks claim that a property containing a Powerwall will have increased resale value, it is really hard to tell. There have been no studies done that can reveal such data. It stands to reason, however, that it would certainly make an existing solar energy system on a property that much more tempting for potential buyers. Their potential to reduce the impact of power outages is also a nice feature.
Will Solar Panels Help Or Hurt The Resale Value Of My Home
Lower electricity bills and a smaller carbon footprint are the two primary reasons why people go solar. From the moment your photovoltaic system goes online, your monthly utility statements shrink as does your negative impact on the environment.
But the benefits of going solar dont stop there. Done correctly, installing PV panels can also dramatically boost your homes property value.
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Can I Make Money With Solar Panels
Estate agents feedback suggests that installing solar panels will not increase the value of your home when you come to sell it.
The professional estate agents body is NAEA Propertymark its chief executive, Mark Hayward, explained that solar panels are unlikely to feature in the valuation models of estate agents or mortgage providers: Theyre on very few peoples shopping lists at the moment.
People dont buy features, they buy benefits. So you need to articulate it in terms of savings.
But Mr Hayward added that the age of the solar panels, whether theyre owned by another company, and their effect on the appearance of the property could all have an impact. He advises getting a surveyor to check solar panels if youre buying a property with them installed.
But if youre not planning to move home and are interested in generating your own electricity, solar PV can be a viable option.
Panel and installation costs have dropped over the past few years, making it more likely that homeowners can use their savings to finance them. 86% of Which? members who own solar panels financed them from their savings.
Will Solar Panels Add Value To Your Home
The amount of value that solar panels will add to your home depends on several factors. An experienced, local solar contractor can help you determine if your home is right for solar, based on your roofs orientation, shingle material, and shape. Other determining factors about solar panels value include:
Your Homes LocationInstallations in active solar markets typically yield higher returns than those in less developed markets. An active solar market is an area of the country that receives ample sunlight, has high solar installation rates and has local government incentives like property tax exemptions or energy rebates. The most active solar markets are California, Arizona, North Carolina, New Jersey, Nevada, Massachusetts, New York, Hawaii, Colorado, and Texas.
If you dont live in one of the most active solar markets, dont worry. With solar technology improving daily, more and more homes all over the country are having solar panels installed. There are also solar panels that operate efficiently during snow and cloudy weather. For this reason, solar panels are attractive home additions to potential buyers all over the country.
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How Much Do Solar Panels Increase Home Value
Many homeowners, buyers, and appraisers know that the installation of solar panels and solar batteries can increase a property’s market value. In fact, one study confirmed that solar installations increase a home’s resale value by up to $5,911 for each kilowatt of solar panels installed, and another estimated an increase of 4.1% of the home’s value.
Where do these figures come from, exactly? To begin with, consider a Zillow study, which notes that homes with solar installations tend to sell for about 4.1% more than homes without. Of course, this is an average. Some locations show a higher value-add , and some show lower . An older study from Lawrence Berkeley National Laboratory reveals an increase in resale value of approximately $5,911 for each kilowatt of solar power that’s installed.
So, how much do solar panels increase home value? Let’s take a look at some averages:
| Home Solar System Size |
| $59,110 |
*Figures based on study by Lawrence Berkeley National Laboratory.
It’s worth noting that these amounts are roughly in line with the total cost of a solar panel system, which may be just the incentive you need to finally take the plunge into solar power. To get connected with a solar installer in your area and receive a free quote, you can fill out the form below.
Could Solar Panels Decrease The Value Of Your Home
Believe it or not, despite the significant investment you are making, its possible that solar panels are actually a bad thing when it comes to the value of your home.
How solar panels could reduce the value of your house:
- Eyesore. Not everyone likes the look of solar panels.
- Maintenance. From cleaning, through to repairs, some people dont want the perceived hassle.
- Feed in Tariff. If its not possible to pass this on to the new owner, they may not be able to get a mortgage as easily.
- Added complications. If the prospective owner wants to retile the roof or build an extension, the panels may make it more difficult and costly for them to do so.
- Rental properties. If the buyer isnt going to be living in the property themselves, solar panels may seem like a hassle they dont need.
A lot will come down to how old your panels are and the decisions you made when they were installed. Most panels have a lifespan of around 20-25, if yours are approaching that age the new owner will have to consider the costs of replacing or removing them.
Who receives the Feed in Tariff is also important. This is an incentive offered to solar panel owners to essentially sell their unused solar energy back to the grid. To reduce installation costs, many homeowners agreed to let this income go to the installers.
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Aesthetics And Property Value
When it comes down to Solar Panels, beauty is in the eye of the beholder. For some, solar panels may come across as awkward, odd or unappealing additions to a residential property. As a result, there are concerns that solar panels will devalue ones property. On the contrary to this belief, solar installations are rather enticing because of the many perks they bring, particularly savings on energy bills. Whats more, with new solar innovation such as integrated Solar Panels and Solar Roof Tiles, going solar has never looked better.
Can Solar Panels Devalue Yourhouse
Typically,adding solar panels to your house wont ever devalue it. However, some factorsmay make the increase in value to your house less than others.
Thesefactors include:
- The geographic position of your house
- The weather in the area you live in
- The type of neighborhood or area that your property is located in
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What Is The Solar Tax Credit For 2022
If you own a solar panel installation on your primary or secondary residence in the United States and are not leasing, you are eligible for a tax credit on your federal income taxes. The Solar Investment Tax Credit which was first enacted in 2006, was renewed again in 2020. The solar tax credit for 2022 is 26%. In 2023, the ITC is slated to drop to 22%3.
What Affects The Value Of Your House
House prices are area-specific so you should focus on prices in your neighbourhood, rather than national averages. Use our interactive map to find out about property prices in your area.
Beyond location, your propertys age, size, number of bedrooms, structural integrity, wear and tear and room layout will all affect its price. As will whether it has a garden, parking space, garage, and any extra features, such as a shed converted into an office.
Talk to local estate agents for the inside track on all the factors to consider.
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How Solar Leasing Affects Resale Values
However, these benefits weve mentioned mostly go to homeowners who buy their solar installations outright using cash or loans. If you finance your PV system using solar leases, calculating property values becomes a little trickier.
With a solar lease, you basically receive a brand-new PV installation for free. And you only pay for the clean electricity your leased panels generate. Because these monthly energy payments are less than what you used to send to the utility company, you enjoy instant savings.
Essentially, you are renting solar panels and saving money in the process. In addition, your carbon footprint shrinks substantially.
However, leases are 5, 10, or 20-year contracts, so in order to sell your home, the next buyer must take over your leasing agreement:
- Some prospective homeowners will be happy to pay a premium because theyll benefit from lower bills and less pollution.
- Other buyers may be unwilling or unable to assume responsibility. You may have to buy out the remaining portion of your solar lease contract or find someone who is prepared to pay top dollar for your home.
Leasing is still a great option for those who want to go solar without spending money upfront. But this financing approach is best suited for homeowners who plan on sticking around for a while.
Check out more home improvement tips at the Direct Energy Blog!
Do Solar Panels Ever Lower Property Values
Theres very little chance that solar panels will lower the value of your home, but even if solar systems add value to your home, this value can be undercut by a number of different factors. According to EERE, one of the reasons that solar-equipped homes tend to sell for so much more is that solar panels are considered upgrades to ones home. And just like a pool or finished basement, the inclusion of solar panels represents a significant investment on the part of the homeowner.
If those panels are leased by the solar company or third party, the seller might have to purchase or return the equipment. If they purchase the equipment, it could put a lien on the house, which would not improve the price point at all. Local electricity rates and solar electricity prices could also affect the overall value that solar panels add to a home, as can the relative understanding of those looking to purchase the home.
If home buyers dont understand the benefits of solar energy, they might see the panels as just another piece of furniture theyre going to have to replace or get rid of. According to Homelight, not every person sees solar as valuable, some see it as a hassle, and they dont want the added responsibility of worrying about solar panels. Thus, the added value incurred by solar panels can only really be determined on a case-by-case basis.
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Why Solar Panels Are A Bad Investment
The first and most obvious reason a solar power system can be a bad investment for some people is the initial set-up cost. These costs can range from a few hundred dollars for a small installation such as a pool heater, a motor home, or a hunting lodge to several thousand dollars for fully equipping a house.
Solar Power For The Home: Benefits
A significant benefit to PV installation is a lower energy bill, but the magnitude of this benefit depends on the amount of solar energy that can be produced given the available conditions and the way in which utilities charge for electricity.
The first consideration is the solar irradiation levels available in the home’s geographical location. When it comes to using solar panels, being closer to the equator is generally better, but other factors must be considered. The National Renewable Energy Laboratory produces maps for the U.S. showing solar irradiation levels the tools on its website provide detailed solar information for specific locations within the U.S.
Similar maps and data are available in other countries as well, often from government environmental agencies or renewable energy organizations. Equally important is the home’s orientation for rooftop arrays, a south-facing roof without trees or other objects obstructing sunlight maximizes the available solar energy. If this is not available, panels can be mounted on external supports and installed away from the house, incurring additional costs for the extra hardware and cables.
The final benefit is the potential effect on a home’s value due to the addition of a solar array. In general, it is reasonable to assume that solar panels would raise the value of most homes.
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Regional Markets And Electricity Costs
The largest price increases on solar properties are typically found in regions with high electricity rates and strong solar incentives. High energy costs make homes with solar installations more attractive to homebuyers. Plus, state governments are increasingly seeing the long-term community and infrastructure benefits of implementing solar incentives.12
For instance, Long Islands high electricity rates have been a boon for the local residential solar market. The area boasts nearly 40% of all solar systems in New York state. Increasingly across the U.S., higher energy costs can translate into higher appraisals for solar homes. Low cost solar power is simply a smart investment.12
In 2015, the Department of Energy said the average homeowner adding a solar energy system could net $15,000 more at the time of sale than a comparable home without solar power.14
A new study suggests that the increase is even more significant in the Northeasts emerging solar markets.14
Local Solar Installation Prices
This overlaps with our previous point, but depending on how much local installation prices are in the area, a property with pre-installed panels could be like gold dust.
If its a pricey area compared to other parts of the UK, buyers will be able to save roughly £5,000 by investing in a home with a system already installed.
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Studies Linking Solar Panels To Home Value Increases
The Appraisal Journal cited researchers Ruth Johnson and David Kaserman who report, Home value increases of about $20 for every dollar saved on annual energy costs.
So, in the case of the $200 monthly savings example above, you could expect the value of that solar home to be worth $48,000more than it was previously .
For a second example,a study by the Lawrence Berkeley National Laboratory yields a formula of a $5,000 resale value increase for every kilowatt of solar installed. To get that same $48,000 home value increase from the Appraisers Journal with this calculation, youd need a 9.6kW system .
With average installation costs around $3,500 per kW upfront, you could have this size system installed for $33,600. That difference in value gained relative to your investment potentially nets you an arbitrage opportunity of $1,500 per kW of installed solar.
That doesnt even include the federal investment tax credit, which allows you to recover 26% of the cost of your home solar installation. Additionally, in some states, your property value increase is even exempt from additional property taxes.
If youre looking to sell your home faster and at a premium, it might be worth having solar installed first! You can expect a quick return on investment for this type of clean energy home improvement.
While that estimate is simple, theres a lot of unaccounted for variables. For example, it doesnt take into account the size of the solar energy system.
A Win For Landlords And A Win For Renters
Renters have also indicated that they are willing to pay more for rentals with solar installed little surprise when you consider the direct savings on their energy bills. Therefore, landlords looking to increase the value of their investment property can benefit greatly from installing solar panels. Not only can they charge more in rent, but the appeal of solar for renters means your property is more likely to be rented out all the time. All landlords will recognise the value in that.
Some states currently offer rebates specifically for landlords. For example, Victorias Solar for Rentals program offers eligible rental providers a rebate of up to $1,400 for the installation of solar panels on their property. Eligible landlords can also apply for an interest-free loan of up to $1,400 to further reduce the upfront cost of the solar panel system.
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How Much Does Solar Add To Home Value
A common question from our SITF readers.
Disclosure: Some posts contain affiliate links, which earn us a commission if you make a purchase through them.
Youll be pleased to know that incorporating solar panels and solar energy into your residential or commercial property can significantly increase its value.
Several studies have been conducted to calculate the average increase in your propertys value if it has solar power. Its estimated that youll increase your homes value by three to four percent after you install a solar panel system.
Whilesolar panels typically add value to your home or residential business, thereare other factors at play that can significantly affect how much it willincrease.
