Do Solar Panels Increase Home Value?

In many cases, the answer is yes — solar panels do increase home value. The degree of increase will fluctuate depending on a number of factors:

  • cost savings from solar system 

  • solar system age

  • buyers’ perspective 

  • solar system ownership model 

Going solar is an investment in your home’s energy generation — as such, it’s an investment in your home itself. Investing in solar has many benefits, one of which is the potential to increase home value. While many solar homes boast premium selling prices, there is no set appraisal formula for solar, so the impact solar has on home value fluctuates on a case-by-case basis. 

Solar Adds Value To Homes

Homebuyer behavior shows that people are willing to pay premium prices for homes with solar. While the mere existence of an asset shouldn’t justify value, the proven reliability of solar has given people confidence that solar panels do increase home value. 

A solar system will cut electric costs and create predictable savings, making it a valuable asset that brings a solid return on investment — whether or not you decide to sell your home down the road. If you do decide to sell, there is potential for a full recovery of solar installation costs from the added resale value the system provides. 

A study by the National Renewable Energy Laboratory (NREL) reflects that a dollar saved on annual utility savings results in a $20 increase in property value. So a solar system that saves $400 a year could raise home value by $8,000. This is not a concrete rule, however, and it’s likely that appraisal methods will look at similar, nearby properties in conducting accurate valuations of solar homes. 

A comprehensive study conducted by Berkeley Lab reviewed the increased value of solar homes across California — which has a relatively mature solar market — and 7 other states from 2002-2013. Although it doesn’t encompass the entire nation, the study does make some significant findings: 

  • Home buyers across multiple states show willingness to pay a higher amount for homes with solar 

  • A certain price premium will be paid for any size solar system — the premium often increases incrementally with system size

  • Solar system depreciation is a factor impacting value — older solar systems demand a lower premium than newer ones

Although this Berkeley Lab study does not include Texas, it provides confidence that solar is a valuable asset that increases home value across a number of regions and electricity markets. 

It’s important to note that this study only examined owned solar systems — leased solar systems complicate the home value proposition, which is something that should be considered when deciding whether to own or lease a solar system. 

Beyond the added home value, there are other significant factors to consider when looking at investing in solar.  

Solar Offers Tax Benefits 

Average estimates suggest that solar panels increase home value by 4.25% in Texas. Despite this value increase, solar systems are exempt from an increase in property tax. On top of boosting home value, solar systems allow for additional savings in the form of avoided taxes. 

This property tax advantage is an additional benefit on top of the 26% federal solar tax credit which is available through 2022.   

Solar Can Help Your Home Sell Faster

Solar is gaining popularity and its advantages are becoming more clearly understood. As that trend continues, prospective homebuyers are increasingly seeking out homes with solar panels installed. This can reduce the amount of time that your home is on the market. 

Naturally, this will differ from neighborhood to neighborhood, as some areas more heavily prioritize solar energy and other sustainability initiatives in their lifestyles. 

Solar System Ownership Matters In The Sale

When selling a home with solar, the question of solar system ownership lies at the center of the conversation. The closer the current homeowner is to system ownership, the easier the transition process typically is. 

Purchased Solar System

The most straight-forward sales process occurs when the solar system is bought, owned, and paid for by the current homeowner. Benefits are obvious and ownership is straight-forward. Like any other home efficiency perk, a paid-off and fully operational solar system lowers utility costs without any third-party involvement. It brings monthly savings to the new homeowner without any headache from payment obligations or contractual limitations.    

Solar Loan 

If the solar system is being financed through a secured loan, then there is likely a lien on the property or on the solar equipment itself. In either case, a new homeowner will have to either qualify for the loan, or the loan will have to be paid off before completing the sale. 

The increase in property value from the solar system can potentially cover the remaining loan balance, providing the opportunity for the loan to be paid off in escrow. 

Solar Lease

Many prospective homeowners will not want to take on a solar lease agreement, making solar leases the most difficult situation to navigate in the home selling process. This leaves the current homeowner with the option of paying off the lease to complete the sale. 

Paying off a solar lease is not based off the present value of the solar system, but rather it’s based on the value of the lease itself. With price escalators embedded in the lease, it can be very costly to pay off an existing lease agreement, making it a difficult roadblock for the home sale process. 

Solar Home Value in Conclusion

Solar is proven technology. When installed professionally, solar reliably reduces utility costs and locks in energy rates. The cost savings from solar adds significant value to homes in the form of: 

  • resale value

  • earning potential 

  • tax incentives  

While homes with solar can be sold at a premium price, selling a home with solar is not always a walk in the park. The question of solar financing and system ownership will be just as significant in the sales process as how much savings the system creates. 

Until there’s a more established solar appraisal method, it is worth considering a real estate professional with experience and knowledge on the value of solar. Realtors with the Green Designation certificate from the National Association of Realtors have a demonstrated interest and competency in buying and selling homes with solar, so they may be a worthwhile resource when exploring ways to sell your solar home — should you ever want to do so. 

Sources Used

Spencer Grimes