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.
Saves You Money On Your Electric Bill
Running on solar is essentially free electricity for the panels 25-year lifespan once you save enough on your energy bill to gain back your initial investment.
The initial upfront price could save you from increasing utility prices over the next couple of decades since utility rates have increased by about 2.9% annually for the past 15 years. There are also federal, state, and local incentives, such as the federal tax credit that allows you to deduct 26% of the total installation cost, making them even more affordable for the average homeowner.
Buyers Appreciate Solars Added Value
Buyers consider monthly electric bills when purchasing a home. So when assessing the long-term financial value, theyre increasingly open to the premium of a solar-ready home.
The National Renewable Energy Laboratory notes that installing solar panels is viewed as an upgrade, just like a renovated kitchen, and homebuyers across the country are willing to pay a premium for the economic and environmental benefits of a solar home.4
With lower monthly electricity bills and tax incentives for new installations, homeowners can realistically anticipate not only recovering their initial investment but also gaining a handsome return on their investment. If you purchase a solar energy system, you can expect to add a sizable percentage to your property value. Its the smart, sustainable energy solution and is encouraging more Americans to go solar every day.
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Buying A House With Solar Panels Financed Through A Solar Loan
Unlike a lease, if a homeowner installs solar equipment with a solar loan, the loan will always be their liability, even if the property is sold. So, if youre looking to buy a home with solar panels financed through a solar loan, you dont need to worry about making additional monthly payments. Instead, the asking price for the home might be higher to factor in the cost of the solar equipment.
Potential Problems Selling A House With Solar Panels
While its likely that solar panels will be an asset to your homes sale, its also possible that youll run into some complications, specifically with leased solar panels. Here are some things to be aware of:
You might need to buy out the lease, first. If youre worried about would-be homeowners feeling nervous about your solar contract, the smart path might be to pay off the rest of the lease before you sell the property. This reduces the new owners responsibility and allows you to transfer your panels outright.
You can transfer solar leases. If youre not willing to pay off the lease and you find a buyer who is ready to take it over, the next step is to transfer it into their name. This is a simple process, although it requires the cooperation of both the buyer and the seller.
Your new buyer will need to meet some credit requirements. If youre planning to transfer your solar lease to a new buyer, theyll need to meet specific credit requirements set by your third-party solar installer. While this isnt usually an issue, it can be a problem for buyers with low credit scores.
Youll want to maintain your panels before you sell. If your panels need any routine maintenance, carry this out before you sell your property. This makes them more attractive and accessible to new homeowners.
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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 homes value.
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 dont 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 homes value.
Factors That Influence The Value
While these simple calculations can give you a ballpark, there are a number of factors that influence the value-add of solar panels. Some of the most prominent include:
- Geographic location: Different communities experience different electrical costs . Additionally, geography can influence the amount of sun exposure you get, as well as the social benefits of installing solar power.
- Local solar installation prices: Another geographic factor is the cost of getting a new system in your area. If a buyer would save money by purchasing a home with a system already installed, it will make your home that much more valuable.
- System output: As you can see from the chart above, a larger system with more energy generation will provide more added value.
- System age: If you have an older solar system, you’ll need to account for depreciation. Older systems won’t add that much value to your home when you sell it, as there’s a higher chance the buyer will need to do repairs or replace parts sooner.
- System replacement value: Along the same lines as system age, how expensive or difficult parts of your system would be to replace affects the added value of the system overall.
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What Is Solar Power For The Home
Homeowners who install photovoltaic power systems receive numerous benefits: lower electric bills, lower carbon footprints, and potentially higher home values. But these benefits typically come with significant installation and maintenance costs, and the magnitude of the gains can vary widely from one house to another. This article will help homeowners make the financial calculations required to determine the viability of solar power in their homes.
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.
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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.
Solar Panel Home Value What The Research Shows
There is considerable evidence of solar panel home value increase figures. This is backed up by ongoing research data collected globally for more than a decade. The data also indicates that specific U.S. states have higher solar premiums than others, which impacts directly on just how much solar adds value to your home.
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How To Get More Home Value From Solar
Although solar panels start saving you money right away, additional investments can help you maximize the value of your home energy system. Installing a solar battery, for example, can help you further reduce your dependence on the power grid . When you sell your home, a solar panel system with a storage battery will provide additional value to a buyer who prioritizes energy savings and independence.
Read More: Managing Home Energy with a Solar Battery
Electric vehicles are another growing trend among those looking to save money and reduce their carbon footprint. Homeowners are getting the most from their solar panels and electric vehicles with smart EV charging stations that take energy generated from solar to power their cars. For new home buyers with electric vehicles, a smart charging station that runs on solar is a major selling point.
But Will It Be Enough To Cover Installation Cost
If youre purchasing homes to flip them, you wont be able to realize the long-term benefits of solar. However, this could be offset by the faster sale time of the home youre trying to flip, which could still make it a worthwhile investment,
Solar panels can pay for themselves over time, but it will take many years for homeowners to realize a full monetary return on their investment. However, even if homeowners dont intend to stay in their home for more than several years, solar panels could still be a good investment given how easy they make it to sell a home. Before you make a decision on whether or not to install solar panels, carefully weigh your options to decide if its the right move for you. Be sure to work with licensed professionals who have years of experience installing solar panels should you decide to buy some for your home.
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Will Adding Solar Panels Increase My Property Value
When you are buying or selling a property, the value of that property is a big deal. Not only do you need to know what to ask for a selling price, or what price to offer, but you also need to know the value so you can secure financing. And the lender also wants to know the value. So what happens when that property happens to have a solar system on its roof or on the ground? How does that impact the property value? The seller, the buyer and the financier all need an answer to this question.
Solar energy continues to grow in popularity all over the US. In November 2017, there were 1.4 million residential systems installed in the US, and as seen in the chart below from GTM Research, the growth is projected to at least double over the next 5 years. In addition to the growth of the residential market, businesses also continue to invest in solar. This rise in popularity will continue to make assessing the value of solar a hot topic.
Chart from GTM Research – www.greentechmedia.com
Typically the companies selling and installing solar may not be the best to assess the value of an installed system. It would seem property appraisers are more suited to address market values. However many of them are just beginning to or still learning about the value of renewable energy like solar. It’s important for installers like us to help accelerate that education process. So, let’s jump into it!
How Much Does It Boost Value
The National Renewable Energy Laboratory cites a study in the Appraisal Journal, which shows that home value increases $20 for every $1 reduction in annual utility bills. In other words, a solar energy system that saves $400 per year would add a value of $8,000 to your home.
Miller points out, however, that added value is not so cut-and-dried. Because some buyers think of solar as a major plus while others view it as a downfall, he says its hard to say for sure how solar systems impact housing prices.
Its not like a swimming pool, says Miller. With a swimming pool, if you give me your ZIP code in my area, I can tell you if the pool is worth almost nothing or as much as $10,000 or $20,000. Thats easy, because everyone understands that the pool is fully paid for.
That said, Miller thinks we will probably see the use of solar increasing and, as it does, theres a good chance a standard will develop. Eventually I think we will be better able to quantify the value of a solar system, where we can say: The home has solar, so add $10,000 to $15,000 to the value.
At the end of the day, theres a good chance that a solar electricity system will add value to your home as long as you can find the right buyer. Regardless, solar panels will save you money on your electric bill, and theyre good for the environment, too. If youre not sure how a solar system could boost your homes value, talk to your real estate agent for guidance.
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Selling Your Home With Solar Panels Can Be Easy
If youre planning to sell a home with solar panels, youll likely be pleasantly surprised by how easy it is. In addition to the fact that buyers love solar panels, a residential solar system may also boost your homes value and make it more attractive to new buyers.
To learn more about selling a home with solar panels, contact Sandbar Solar today. As the largest residential and commercial solar installer in Santa Cruz County, Sandbar Solar & Electric has been locally owned for 13 years. You can count on our professional commitment to quality work, ethical solutions, community sponsorship and environmental stewardship.
Were proud of our reputation for designing and installing the most efficient solar panels available across the Central Coast. We invite you to look through our online portfolio of Recent Projects. Our work areas include Santa Cruz and Monterey counties as well as San Jose and the Bay Area.
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About the Author
Scott is the founder of Sandbar Solar & Electric. With a Bachelors Degree in Economics from UC San Diego, Scott has an NABCEP certification, and has lectured on and taught many high-tech construction practices and solar PV technical concepts to education institutions, including Stanford University and state-recognized electrician apprenticeship programs. Scott enjoys sharing his knowledge of the evolving renewable energy space and making a difference in his community.
The Starting Point: Do Solar Panels Increase Your Home’s Value
Let’s start with the question that is on every homeowner’s mind when planning to install solar panels: are these going to boost my property’s worth? The short answer is: yes!
According to the Lawrence Berkeley National Lab report, each watt of solar power adds around $3 to your home’s value. And, in California specifically, each watt could add about $4 to your home’s worth.
A simple calculation shows that your home outside of California could appreciate up to $15,000 after setting up solar panels. That’s because a 5-kilowatt solar system generates 5,000 watts of power .
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