The Systems Replacement Value
Since solar panels are considered an improvement to your home , youll typically need to increase your homeowners insurance. Your insurance company will determine if youll need to increase your dwelling policy or have a separate policy for your panels. Many insurers will consider the solar panels as part of your home when they are mounted to your roof. The cost of the policy will depend on what it covers, such as repairs or replacement.
Will Going Solar Raise My Property Taxes
So if solar increases your home value, the obviously follow up question is if that will lead to higher property taxes. After all, your property taxes are based on your home value and tend to increase as your home appreciates.
The good news is that, as of October 2022, there is some form of property tax exemption for solar panels in 34 states plus the District of Columbia.
Solar property tax exemptions vary from state to state. Many apply to 100% of the system cost for the lifetime of the system while others are limited to 5, 10, or 20 years.
Look up your state or local tax code to get a better understanding of how solar panels will affect your property taxes.
This article does not constitute tax advice. Consult a tax professional for advice regarding solar property tax exemptions.
How Much Does Solar Increase Your Propertys Value
The National Renewable Energy Laboratory offers a useful guide when determining how much your propertys value will go up. According to its research, each additional $1 in energy bill savings adds $20 to your homes total value.
This rule of thumb varies depending on a number of factors, including:
The location of your home. Installations in active solar markets like New Jersey typically yield higher returns than comparable installations in less developed markets.
The size of your installation. Property value increases are directly proportional to the number of solar PV panels installed.
The value of your home. Larger houses usually receive higher nominal boosts in property value. However, this increase often represents a smaller percentage of the total home value.
The exact numbers vary from property to property and installation to installation, but recent research shows an average increase in resale value being $5,911 for each 1 kilowatt of solar installed. In a state like California, for example, a small 3.1-kilowatt system can add an average of $18,324 to the value of a medium-sized home.
The property value advantages of solar energy only increase as you scale up. Installing 5kW of solar panels adds an average of $29,555 to the retail value of a medium-sized home.
Its important to note that these statistics only apply to todays housing prices and utility rates. As electricity prices go up , the advantages of solar energy rise proportionally as well.
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Public Opinion On Solar Panels
Youve probably heard the long-standing debate over whether panels actually look nice on a property and you might even have your own opinion on the matter.
To get a better understanding of how people feel about solar panels appearance, weve carried out a survey, asking 112 people how attractive they think solar panels look on a home.
Interestingly, there was a clear correlation in our survey between the age of the respondents and how attractive they found solar panels.
To get a better idea of this relationship, check out the results in the chart below. Respondents were given the option to rate the attractiveness of solar panels on a scale of 1-5 with one being the least attractive, and five being the most which we have grouped together into three categories below.
As you can see, theres a dramatic difference between the oldest and the youngest age groups.
Half of respondents aged 13-40 think solar panels are attractive, which drops to just 11% amongst 57-72 year olds. As for 73-88 year olds? Zero respondents in this bracket find solar panels attractive.
Whats more, a massive 85.7% of respondents in the oldest category rated solar panels as unattractive, rather than just acceptable, compared to just 12.5% of respondents aged 13-24.
Despite the mixed responses, 86.8% of respondents said they would buy a house if it had solar panels on the roof.
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Ways To Increase Your Property Value With Solar Panels
There are many reasons to add solar panels to your home, from developing an environmentally friendly footprint to lowering energy costs. One of the most important aspects to consider financially may be the increase in your homes property value.
According to research from Zillow, homes with solar panels sell for 4.1% more than the national average, adding approximately $9,274 to the cost of a median-priced home. The returns can be even higher in markets with premium home prices. In New York City, for example, solar panels added 5.4% to the sales price or $23,989 to the average home.
Below are steps you can take as a homeowner to increase your homes property value with solar panels.
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Buying A Home With Solar Panels
As we established above, homes with solar panels tend to be listed higher than comparable homes without them.
But heres the important thing to remember: Youre buying a house without an electricity bill.
Based on the average household electricity consumption and the average grid electricity price , the average household spends $1,775 on electricity per year.
With a properly sized solar system, you pay zero.
And thats just the first year. Grid electricity prices tend to rise over time, and have at an average rate of 3.51% per year since 2017. Based on typical utility rate increases, your annual savings would increase to:
- $1,837 in Year 2
| 20 | $50,248.05 |
If youre in the housing market, youre probably already looking for a long-term investment. A house with solar panels is that in spades.
Plus, you can bypass the 3-5 month process of going solar and start generating clean electricity the day you get your keys!
How Can I Value My Solar System
Increasingly, homeowners and realtors have been pondering how to value a solar system when selling a property. Thus, the SEIA created a guide on valuing residential solar systems. They present three different methods.
- The income approach involves calculating the value based on the estimated income the system will generate for the new owners throughout the remaining lifespan of the equipment.
- The cost approach estimates the value based on the cost of reproducing the same solar system currently installed, but it doesnt consider equipment depreciation.
- The comparable sales approach method examines similar properties with and without solar energy systems . This requires finding at least two pairs of homes, both with and without solar.
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Type Of Solar System Installed
The type of solar system installed is one of the key factors influencing the value of a solar home. Solar photovoltaic systems that are connected to the grid and provide power for the home during daylight hours are typically valued higher than those that are not connected to the grid. The capacity of the PV system is another key factor, as a larger system will typically result in lower electricity bills and therefore a higher value for the home.
Solar Panel Home Value Increase In California
An early 2011 study, an Analysis of the Effects of Residential Photovoltaic Energy Systems on Home Sales Prices in California, provided strong evidence that homes with solar PV systems sell for more than homes without solar.
Researchers had set out to see if certain incentive claims could be substantiated. For instance, at least some of the initial investment into solar PV systems would be recouped if the house was sold. Their positive findings were based on a dataset of 72,000 homes, about 2,000 of which had PV systems.
They found that the sales premium buyers were willing to pay $17,000 more if the house had a relatively new 3,100 watt PV system. This equated to about $3.90-$6.40/watt. At the time, it was comparable to the average investment homeowners would have had to make between 2001 and 2009.
They noted that house values decreased as PV systems got older.
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What Homeowners Should Know Before They Install Solar Panels
Homes without solar energy sell for approximately 4% lower on average than homes with solar energy, according to Zillow. But experienced homeowners know that adding value to your home isnt as straightforward as you think. Whether or not a home renovation is a smart move depends on a variety of factors. The same is true if you want to add solar power.
While it is true that solar panels save homeowners money in the long-run, not all homeowners see solar as an undeniable advantage to a new home. Many times, home sellers must take the time to explain the true value of a solar powered system prior to making the home sale.
Without a proper understanding of how solar panels work, a seller may end up sinking a pretty penny into a home that wont reflect the true value it provides. Thats why its important to adequately explain why and how the buyer would benefit from a solar array system on their new home.
In this article
Solar Systems: Increase Your Home Value
The average homeowner in United State spends about $72,000 on their electricity each year. Solar panels can help offset this cost by providing free power from the sun. In addition to saving money, solar panels also increase the value of your home.
As more and more homeowners are looking for ways to increase the value of their homes, solar panels are becoming an increasingly popular option. In addition, solar panels can help to protect the environment by reducing your carbon footprint. In the upcoming paragraph, we will explore how solar panels can increase your homes value and make it more attractive to potential buyers.
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Should You Buy Or Lease
Your financial goals are likely a primary factor in going solar and may impact whether you buy or lease an installation. If you purchase a new home solar system, future proceeds from an increased sale price will go directly to you.
A solar installation can only be included in a property assessment if it is owned by the homeowner and is an asset that can be transferred without obligation. The systems warranties and performance guarantees generally transfer with the sale.12,13
To secure a higher sale price, its most advantageous to buy a solar energy system for your home.11 However, if you decide that a lease or Power Purchasing Agreement is more appropriate, there will be less recouped from the home sale.
Appraisers and lenders consider that if a homeowner installs a residential solar system through a lease or PPA, it is essentially the asset of a third-party owner. This requires the third-party to be involved in the property transfer.12 Sunruns experienced Service Transfer Specialists make it easy to transfer your solar lease agreement to the new owners. Learn more.
Things That Affect The Value Solar Adds To Your Home
Of course, the Zillow and Berkeley Lab figures are averages based on hundreds of thousands of home sales. The exact value that solar panels add to your home depends on a variety of factors, including:
- Location of your home
- Size of your solar energy system
- Age of your solar panels and inverter
- Efficiency conversion rate of your solar energy system
- Existing market value of your home
In general, the value added is roughly in line with the cost of the solar system and it changes over time.
But heres the kicker: If you claim the full 30% federal tax credit, then you essentially pay for 70% of the solar system and still receive 100% of the value it adds to your home.
For example, say you purchase a 6 kW solar system for $24,000 and it adds $24,000 in value to your home. Your solar tax credit would be worth $7,200 bringing your net cost down to $16,800.
So you ended up paying $16,800 for something that added $24,000 in value to your home.
And, remember, added home value is just the secondary means of solar savings. The primary means is energy bill reduction, which can add up to hundreds of thousands of dollars over the life of a solar system.
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Does Solar Increase Home Value In Nevada
Lets say you live in Nevada, where the sun shines brightly more than 300 days per year. If you installed solar today and lived in your home for the estimated 25-year lifespan of your PV system, while also taking into account constantly increasing utility rates, you will continue to accrue savings over those years . Over time the savings will not only cover your installation cost, but also continue putting more money back into your pocket once that cost is covered.
In terms of resale value, with an installation that takes full advantage of the suns power, your investment could pay more than a 200% return on investment. Try getting that from a remodeled bathroom!
Value In Solar Energy Is Not Just Money
While solar energy can save a lot of money, added value doesnt only apply to dollars.
These are the most commonly acknowledged benefits of installing solar energy in our homes. All add value in one way or another.
- Solar power reduces current utility bills and saves money
- Solar improves comfort levels in the home for example by making heated floors accessible
- Solar is seen as an investment for future energy savings
- Solar is identified by many buyers as an upgrade
- It enables a greener lifestyle, which many people recognize as increased home value
- Some people consider solar panels to improve social status
- Solar increases the financial value of our home, increasing both the potential resale and rental values
- Installation of solar PV systems improves energy efficiency
- Solar systems help to reduce greenhouse gas emissions and ensure cleaner air
- Solar panels may provide power to the grid during peak demand hours, lightening the load on power plants
But the million-dollar question is, how much value will solar add to your home?
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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.
Use These Tools To Help Determine The Value
The reality is much has been written and debated about the impact of solar on the value of a property. There are many underlying determinants like age, energy production or output, quality of the hardware and install, warranties, production guarantees, and so on. This can seem a bit overwhelming, but fortunately, there are tools that can help, such as:
- PVValue – This website gives an excellent in-depth analysis that is accepted by most property appraiser organizations.
- Savenia Home – This is a solar valuation calculator developed in cooperation with the US Dept of Energys SunShot Initiative and requires fewer inputs than PV Value to calculate the value.
Both are very good online calculators for determining a solar systems value. Solar professionals like Paradise Energy Solutions can also provide you with a value assessment on a system, including system testing to verify functionality and performance. And keep in mind that when calculating the value you must also consider projected maintenance and insurance costs. Our company always projects these in our proposal cash flows, but not everyone does.
Ill wrap this blog up with a quote from Marjorie Youngren’s article Ask the Realtor: How do solar panels affect a homes resale value? There is so much detailed information on this topic I could go on forever, but the more that I investigate, the more I am convinced solar can save you money on energy, look sleek, and even boost the resale value.
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Does Leasing A Solar System Impact The Home Sales Process
Selling a house with a leased PV system can be a bit more difficult for the homeowner. The Zillow and Lawrence Berkeley National Laboratory studies examine properties where the solar system is owned, not leased. Although owning a solar array is a home improvement, solar leasing arrangements are different because homeowners actually rent equipment. This means that the new homeowner may be asked to take over the solar lease payments.
The terms of solar leases vary by the installer, but some homeowners may need to buy themselves out of the contract if they cannot find a home buyer that will take over the lease contract. In this case, this expense could eat into the potential profits of selling the home. To take over the solar lease, the new homeowner may need to meet credit requirements, and not all home shoppers will qualify.
