Solar Panels- Yay or Nay?

Solar Panels Increase Home Equity - By $14,329 On Average

A 2015 study published by Hoen et al. on behalf of the Lawrence Berkeley National Laboratory shows that over a period of 12 years, buyers were willing to pay premiums for solar-equipped homes, which on average equated to $4 per watt or about $15,000 more overall than a comparable non-solar-equipped home. The authors took into account over 22,000 home sales across eight states between 2002 and 2013, and their findings were consistent across the multiple states, various home types, and varying housing and solar energy markets.

Is the Data Outdated?

Even though the data might be considered old, that is actually a plus. Since then solar panels have decreased considerably in costs, incentives are up, and recent global events have put energy independence more in the spotlight.

In this article, we’ll take a look at some of the math and contributing factors behind this boost in home equity and analyze what that means for you as a homeowner who is considering installing a solar energy system or as someone looking to buy or sell a solar-equipped home.

How Solar Adds Value To Your Home

Most solar systems for homes are between three and five kilowatts, which, at the average premium of $4 per watt we mentioned above, equates to a $12,000-$20,000 increase in value for a solar-equipped home. That means that if you decide to sell your home after installing a solar energy system, you can recoup most if not all of your initial investment, after already benefiting from greatly reduced energy costs for the duration of time that you lived in the home after installing your system.

On top of that, there are many federal, state, and local incentives to install solar energy systems, which help offset the initial costs. These incentives are often in the form of tax credits and rebates, which we’ll cover more in-depth later in the article.

So, let’s look at some specific numbers and factors pertaining to solar premiums for home equity.

Selling Prices Are 3.74% Higher

In terms of percentage, you can expect to bring in a 3.74% higher selling price for a solar-equipped home when compared to similar homes that do not have a solar energy system. This makes sense, especially when you think about the fact that the new homeowners will pay significantly less in energy costs and they don’t have to do any of the hard work like applying for permits, designing a system, and hiring reputable installers.

As far as selling power, a solar energy system is viewed as a status upgrade, similar to a recently renovated kitchen or the addition of an in-ground pool. In fact, even the smallest solar energy system conveys the message that this homeowner cares about the environment and has invested in going green, which leads straight into the next point...

A Green, Eco-Friendly Home

For those who are passionate about green energy, conservation, and the environment, a home with a solar energy system will align with their values and feel like a smart and responsible investment, not only for their own benefit but also for the greater good of the planet.

According to Jordan Weisman, founder of Sunbridge Solar - of a local solar Oregon and Washington, “Environmentally-conscious buyers will in all likelihood be more motivated than the average buyer to make an agreeable offer on a solar-equipped home. Some buyers may be in the market specifically for a solar-equipped home, which can set your property apart from others in your area market.”

Factors That Impact The Home Valuation Increase Amount

Local Factors

Factors like which region you live in can make a big difference in the added value brought to your home by a solar energy system. For example, your region dictates the local price of electricity, the level of acceptance for solar technology, the understanding of the benefits of green energy, the level of concern for the environment, the frequency of power outages in your area, and which state and local solar incentives apply.

In sunny states where solar energy has been popular for longer and is more heavily incentivized by the local government, homebuyers are often more familiar with the technology and have a more favorable opinion of it. However, in states where solar energy isn’t so common, people may not fully understand the benefits or even how the technology works. They may have doubts about the reliability of solar energy and possibly be under the impression that all solar-equipped homes are totally off the grid and solely reliant on the sun for power, although this is certainly not the case.

Finally, if electricity is cheap where you live and solar isn’t highly incentivized, many people may not be able to justify the initial expense of installing solar energy or of paying a premium price for a solar-equipped home.

The Age of the Solar Energy System

Naturally, newer solar energy systems add more resale value. This is for two main reasons, the first of which is that newer solar panels are made from more efficient materials, so a physically smaller array can generate more power than a larger, older one, which means you can install more panels overall or just have a less intrusively sized array. Second, the solar panel and other component warranties will have more years left on them, so buyers will be assured that they won’t have to replace any expensive pieces of equipment for several years after buying the home. That can be a major reassurance for someone who has just shelled out a downpayment for a home.

The Size of the Solar Energy System

Unfortunately, larger solar energy systems do not add proportionally more value than smaller systems. They bring in only marginally more than smaller systems, indicating that buyers in the market for a solar-equipped home are mainly willing to pay a premium for the distinction of having solar energy, no matter the actual output amount of energy.

However, factors like an existing home battery backup system, such as a Tesla Powerwall, can add more equity, since they provide the major selling point of supplying power during inconvenient grid outages.

If you are planning to install a solar energy system in your home but you are considering selling it within the next 10 years, it may be smart to choose a moderately sized grid-tied system with a battery backup. This will keep the installation costs relatively low, allow you to benefit handsomely from the energy production and reduction in bills, and still bring in a significant premium when you go to sell the house.

New Solar Energy System Usually Means Relatively New Roof

It’s usually advised to replace your roof before installing solar panels if your roof is more than 10 years old, since solar panels are often installed for somewhere around 20 years, which is also about the lifespan of a roof. Although you will have to pay for the roof replacement at the time, it can be another great selling point to help bring in a premium price for your home. Buyers will know that the roof is new, sound, and has been inspected by the solar panel installers as well as the roofers, which will bring them peace of mind in knowing they won’t have to remove the solar panels to replace the roof anytime soon.

Solar-Equipped Homes May Take Longer To Sell

The national average selling time for solar-equipped homes is eight days longer than the selling time for comparable homes that do not have solar energy systems. Of course, this average varies state to state, and not all states have enough data to form a solid average. But, based on the local factors explained above, there are certainly regions where solar-equipped homes are snapped up just as quickly if not faster than non-solar homes.

Incentives

There are incentives for installing home solar energy systems from the federal government as well as from some state governments and local utility companies. Currently, the federal government offers a tax credit for installing a new system, where you can deduct 26% of the total cost of the project from your federal tax liability, and even roll over unused credit to the next year. However, this percentage will drop to 22% in 2021 and there will be no tax credit offered in 2022 and beyond.

Many states also have their own incentives, such as tax breaks and rebates. Some utility companies also offer rebates for installing a solar energy system, where they will pay you a certain amount per watt of solar that you install. Certain grants may also be available as well, which can cover a percentage of the total cost to install a residential solar energy system. All of these can be hugely helpful in offsetting the upfront costs of installation, and you will still benefit from the slashed energy costs and home equity increase down the road.

Finally, some states even offer property tax breaks that apply every year that your solar energy system is in use on your home. This can be a major selling point to a homebuyer, since they too will benefit from this incentive for years by paying reduced property taxes. Check the incentives that your state offers to see if there are any enticing benefits that you can offer a homebuyer.

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