Solar panels are an investment that has been getting cheaper a cheaper throughout the years. It cuts down your electric bill or, in some cases even eliminates it, by supplying the entire house energy on demand, while giving the excess to the grid and returning some extra cash to the owner.
But as with any house investment, you could wonder in the long run how it would affect your home value. The truth is that solar systems do increase the price of your home. Actually, according to a 2019 study run by Zillow (an American online real estate marketplace company), homes with solar systems sell for 4.1% more than those who don’t.
Do solar panels add value to my house pricing?
However, this increase from the previous research only applies to homes or owners that fully own the solar panels (check out solar panel options) of the system. If the system is subject to a lease or PPA contract, it can cause some problems at the negotiation table.
What are the payment options to buy a solar system?
While buying a solar system is certainly an investment, there are several payment options to make the purchase of such a system way easier for the buyer. We dive into some of the differences between leasing and buying solar panels and other solar financing options below.
The simplest option is fully buying the solar panels with upfront cash, logically, this way you are the full owner of the system and you can do anything you want with it.
But solar companies offer different contracts for people who cannot pay with upfront cash, such as:
- Solar Loans: where you still are the full owner of the solar system, but it is financed through a loan, paid over a period of time with an established APR.
- Solar Lease: a plan payment where the solar provider remains as the owner of the solar panels, and you lease them to enjoy the benefits, such as Net Metering (explore the benefits of net metering), if applicable locally.
- Solar Power Purchase Agreement (PPA): where you directly buy the energy from the solar provider by a fixed rate of kWh consumed.
While these payment options are great for acquiring a solar system when buying or selling a house, the clauses of the contract may be a discussion point at the negotiation table. This may be a scary factor for the buyers that are not familiar with solar systems.
Read also: What Solar Shingles Entails
So having a Solar System can affect how fast I sell my home?
As the matter of fact, no, according to the US Department of energy and the National Renewable Energy Laboratory (NREL), “Solar homes sell 20% faster than equivalent Non-solar homes”.
When the solar panels are fully owned by the house landlord, a house could sell up to three times faster than those which do not have a solar system, according to the SunPower market research survey.
While for those homes with a loan, lease, or a PPA contract, the discussion at the table can also reach a negotiation point.
Most of these contracts are transferable to the home’s new owners, with the direct consent of all the parts involved, the seller, the buyer, and the solar provider. According to the Lawrence Berkeley National Laboratory, in a study conducted in California, 77% of solar leases were transferred successfully to new owners without a problem.
But as mentioned, this can be a scary factor for new buyers. Some people consider fully paying the lease or loan before selling the property to reduce the new owner’s responsibility.
Is solar worth it, just to increase my home value?
A house with solar panels sells on average in the U.S.A. for 4.1% more than an equivalent home without them, or about $9,274, according to Zillow.
This study was conducted by comparing similar home attributes, with the same size, age, rooms, and bathrooms, but with and without a solar system.
For all metropolitan areas analyzed in the study, there was no house value pricing decrease. And the greatest gain for homeowners was found on New York City Metro where solar-powered homes sell on average for an extra of 5.4%, or $23,000.
According to EnergySage, one of the biggest online marketplaces for solar system consumers in the U.S.A, as of July 2021, an average 10 kilowatts (kW) system and installation can range from $17,000 to $23,000 after the federal tax credit.
This means that the home’s increase value cannot directly pay for the costs of the initial investment for a solar system. But considering that the average “break-even” period of solar is 7 to 8 years, based on the utility bill, any pricing increase of a home after this period is full profit for the landlord.
How to compare homes with similar solar systems?
The most common way to sell or buy a house is through a direct sale with or without a real estate agent. In such a way that all parts have to meet each other, buyer and seller, and know all details of the property.
Nowadays, most real estate agents or even real estate enthusiasts use multiple listing services (MLS) to look into homes available at certain locations and their prices. The MLS is basically a big database where agents can provide and retrieve data from specific properties.
Currently, the sustainability trend reached the MLS sites, “Greening the MLS’s” by defining and demanding new house information categories that offer energy efficiency fields and details that help anyone to value the property.
Solar system information can be retrieved on the Current financing (For lease contract information) and electric, categories of Green MLS, helping any interested person to evaluate the property.
What factors of a solar system can affect my house pricing?
System Design Layout and Specs
Correct system design is a great feature to increase its value. Full system specifications, like size (of panels and inverter), orientation, tilt angles, or shading, are a selling point for people that knows about solar.
Roof size, shape, and orientation (check out the recommended facing for solar panels) determine the performance of a system. These will also affect how solar panels will be distributed on the roof and will determine whether or not modules will be placed in the front or backside, which can affect the look of a house.
Check out our solar panel angle calculator guide.
Aesthetics
New designs have met neighborhood standards, and even make a property more appealing for the average consumer.
Before, the standard blue and shiny panels that everyone is used to (polycrystalline panels) were the only ones available. Nowadays, panel technology has evolved into more elegant colors, such as black monocrystalline cells, or even textures that make the panel appear as another color.
New designs can even blend with the surface of the roof, such as the popular Tesla’s solar roof, which employs solar shingles at the fundamental construction level.
Moreover, energy efficiency has grown over the years on solar panels and inverters (explore premium pure sine wave inverter recommendations). Meaning that the newest solar systems will perform better in time.
Read also: Can Solar Cells Become More Efficient?
Age of the system
A solar panel has a normal life span of around 20 to 25 years, after this period its power production will decay below 80% of its capacity. This translates on an annual degradation factor of nearly 0.5%. Newer solar panels are better to appraise as they will have a longer lifespan and better energy efficiencies. Check out our article to learn everything about the lifespan of solar panels.
Warranties
Warranties of the final installations are of course desirable to complete the buyer’s expectations. Usual installation warranties offer roof surety for around 2 to 5 years. Meanwhile product warranties for solar panels and inverters, generally oscillate between 10-15 years long.
Read also: Is Direct Sunshine Required for Solar Panels
Utility Rates
Finally, and undeniably, depending on where you live utility rates can make a solar system more appealing when buying a home. In states where the utility rates are higher than average, such as Hawaii, solar panels are more cost-effective by reducing the electricity bill or even eliminate it. Read our article to discover the latest information on solar panel pricing.
Frequently Asked Questions
What is the solar panel payment option that leads to more savings?
Cash is the payment option that leads to more savings and is also the easiest to process for a house sale. However, depending on budget and size of system this is not always feasible, then the following option would be a solar loan. Finally, the last one is lease or PPA.
Is there a way that I can estimate the energy savings as well as the impact the solar system can have in my home value?
Yes, there is. PV Value is an online tool developed with this purpose. It is free access and easy to use. PV Value will provide you with a low, mid and high estimated remaining value of the solar system as well as the estimated savings over a 25-yr period based on input data. Despite it is not a solar proposal software, it is a very good starting point for those homeowners who don’t have experience with solar.
What is the average premium percentage I can expect on a house sale with solar?
A study named Appraising the Sun was carried out for six different states throughout the country including: California, Florida, Pennsylvania, North Carolina, Maryland and Oregon with the purpose of evaluating the impact of sales in homes with solar systems on these states.
The study points out the fact that on average, the premium percentage increase of a house sold with solar is 3.7%. However, some houses experienced lower or higher premium percentage, it all depends on the factors affecting solar house pricing as mentioned before.
Final Thoughts
If you are still considering whether converting to solar is worth the investment or not, keep in mind that adding solar panels to your home adds value to it, saves you money, reduces your energy footprint, and helps the environment.
Solar systems bring many benefits to a house but they will not pay themselves by increasing your home value. They are a long-term investment, and as such, if the system has a good return on investment ratio (the break-even period), it will definitely increase in full profit the house pricing.
Having a good valuation or a real estate agent that has worked with properties with solar systems can help with the process, this is why the Green REsource Council, educates realtors and the general public on the green real estate industry.
