Do Solar Panels Increase Home Value?

The Lawrence Berkeley National Laboratory at UC Berkeley conducted a study in 2021, revealing that solar panels owned by homeowners are correlated with higher selling prices.

Potential buyers may be willing to pay extra for homes with owned solar systems. However, homes with leased panels may fetch lower prices.

How Do Solar Panels Increase Your Home Value?

A study by Zillow indicates that homes with solar installations can sell for about 4.1% more than those without, with variations depending on location. For instance, New York City homes show a higher increase (5.4%), while Riverside, California homes show a lower increase (2.7%).

Another study from the Lawrence Berkeley National Laboratory suggests an increase in resale value of approximately $5,911 for each kilowatt of solar power installed.

Additionally, the National Renewable Energy Laboratory suggests that every $1 saved on electricity bills due to solar power can lead to around a $20 increase in home value.

These findings collectively indicate that installing solar panels can significantly enhance the value of your home as an investment.

What Influences the Property Value of a Solar Home?

Various factors, such as your property's location, local electricity rates, and the value of your solar panel system, can influence whether installing solar panels will raise your home's value.

Let's delve deeper into these variables to understand how they can impact your property value.

Local Electricity Rates

In regions with high electricity rates like California, Colorado, Florida, New Jersey, and New York, solar power can have a substantial impact.

For instance, if your monthly electricity bill is notably higher than the national average of $117.46, transitioning to solar energy could lead to significant savings.

Homes equipped with solar power systems in areas such as San Francisco, Orlando, or Florida may command higher selling prices compared to properties in cities with lower electricity costs like Chicago.

Local Solar Market

Tax incentives provided by many states aim to incentivize homeowners to adopt solar energy, making the transition more economically viable while also fostering the growth of solar energy within the state.

Properties equipped with solar power systems in states with robust solar-friendly policies and incentives tend to fetch higher market values compared to those in regions with limited solar power development.

The Solar Energy Industries Association (SEIA) highlights the following as states with the most favorable solar markets:

  • North Carolina
  • Texas
  • New York
  • Virginia
  • New Jersey
  • California
  • Georgia
  • Arizona
  • Nevada
  • Florida

The legal ownership of your solar panel system significantly impacts the value of your home. If you've purchased your solar panels outright or paid off your loan, you can include them in the sale of your home, which is the simplest and most profitable option for the seller.

For leased systems, the situation is more complex since you don't own the system outright. In this case, buyers must decide whether and how they want to take over ownership.

One option is a buyout, where you pay off the remaining lease balance, and the buyer can start a new lease under their name. However, this requires paying the remaining balance upfront, which can be substantial depending on the terms of your lease.

The second option is to transfer the lease to the buyer, which is a more cost-effective choice for selling a home with a leased system. However, the buyer must meet the qualifications for the lease, including undergoing a credit check.

Solar System Condition

Homes equipped with updated solar systems command higher prices compared to those with aging systems. Since solar systems typically last between 25 to 35 years, a home with a 15-year-old system may only offer an additional 10 to 20 years of service.

When selling a home with a solar system over 10 years old, it's crucial to consider its age and potential impact on the property value. Homeowners should prioritize regular servicing and maintenance to optimize the system's performance and appeal to potential buyers.

Quality solar panels often come with extended warranties, providing coverage for defects and installation errors. Leveraging these warranties enables homeowners to address any issues promptly and ensure the system's longevity.

Additionally, consider investing in additional coverage like a power production guarantee, which safeguards the system's output and performance throughout the warranty period.

Prospective buyers should thoroughly review all documentation related to the solar system, including maintenance records and warranty details. Being informed about any replacements or upgrades done during the ownership period is essential for making informed decisions.

For homeowners planning to sell their solar-powered homes, maintaining the system in excellent condition is paramount to maximizing its resale value and appeal to potential buyers.

Owned vs. Leased Solar System

To streamline the sale of your home after installing solar panels, selecting the appropriate financing option is crucial. Ownership of the solar panel system is essential for its inclusion in the home sale and for accessing available solar incentives to mitigate panel costs. Sole ownership is granted to homeowners who either purchase their systems outright or secure a loan for their acquisition.

Alternative financing arrangements complicate solar home sales. Opting for a solar lease results in the solar provider retaining legal ownership of the system. To sell your home, you must either buy out the lease or transfer it to the new owner. Depending on the remaining lease duration, this may necessitate a substantial payment. Subsequently, the buyer can initiate a new lease with the solar company.

Alternatively, you may transfer the lease to the new owner, enabling them to assume the remainder of your contract. While this option doesn't entail significant payments, the prospective homeowner must meet the criteria to assume the lease, including a credit assessment. Failure to find a buyer meeting the solar company's lease criteria could prolong the selling process.

How Do Solar Panels Influence My Property Tax?

Installing a solar system increases your property value, potentially leading to higher property taxes. However, 36 states have enacted laws that exempt solar owners from paying increased property taxes.

These exemption laws vary across states, with some offering a 100% exemption, while others limit it to a specific number of years.

To understand the specifics of property tax exemption laws in your area, it's essential to check with your local state legislature.

Our Verdict: Do Solar Panels Increase Home Value?

Solar panels enhance home value by delivering long-term energy savings, attracting heightened interest from potential homebuyers. Real estate agents frequently assign a higher value to homes equipped with solar panels compared to similar properties without them.

Prior to purchasing a solar-powered home, it's crucial to obtain comprehensive information about the solar system, including its condition and maintenance history. For homeowners contemplating a switch to solar power, obtaining quotes from at least three reputable solar companies