Factors Influencing Solar’s Added Value
The added property value from a solar energy system constitutes many factors and varies by market. The value added to a home from solar panels can vary based on the following: 5,6,7
- Region of the country
- Local price of electricity
- Solar installation prices
- System replacement value
- Environmentally conscious community
- Frequency of power outages
- Age of solar system
- Amount of energy generation
- State incentives
- Local understanding of solar technology and benefits
Homeowner/Seller Incentives for Installing Solar Panels
In addition to increased property values over comparable non-solar homes in their community, homeowners purchasing solar systems are realizing many financial benefits including:
- State rebates and incentives (such as net metering)
- Federal solar investment tax credit (ITC)
- Replacing grid electricity with a sustainable, often cheaper option1
And, as the seller of a solar property, there are tremendous advantages in the real estate market such as:
- Higher asking price than comparable homes without solar
- Solar panels are viewed as an upgrade by potential buyers
- Homes with solar panels often sell faster than those without
- 100% return on solar investment upon home sale
Homeowners with a solar energy system who may want to sell should note that prospective buyers are interested in documentation showing that the installation was done properly from a reputable solar dealer, and proof that the system is reducing electric bills.
Homebuyer Incentives for Purchasing Solar
Home seller incentives for investing in solar panels are parlayed into homebuyer incentives because a property’s market value may increase as electricity prices rise.
With a home solar installation, the buyer could potentially receive a 200% return on the sale price premium. You’ll be hard pressed to find another investment matching these financial benefits:
- Monthly/annual financial gains throughout lifetime of solar energy system (25-30 years)
- Reduced carbon footprint
- Higher resale value of home
Do Bigger Installations Increase Home Value?
Home solar energy is yours to control while adding property value. Research shows, however, that the wattage generated by a solar installation does not proportionally raise the value of a home. So, installing a massive solar array on your rooftop won’t necessarily equate to a higher resale value. A solar installation that sufficiently meets your energy needs is enough for you to recoup the price of your installation.
Do Solar Homes Sell Faster?
The length of time that a solar powered home is on the market often varies by region of the country. While early analysis performed in six states by Lawrence Berkeley National Laboratory found that solar homes take an extra eight days to sell, new research shows the opposite. A solar energy installation will help sell your home 20% faster than residences without solar panels.
Today’s rapid expansion of solar across the country is increasing appraiser and homebuyer understanding of the reliable, long-term benefits of grid-tied solar. This has accelerated the speed of sale and raised sellers’ revenue for solar homes.
According to the Appraisal Journal, a home’s value increases roughly $20 for every $1 decrease in energy costs. If solar panels save a household $600 a year in electricity bills, that home’s value may increase by $12,000. Fannie Mae has implemented a guideline specifying that if a household owns a solar energy system, the appraiser should assess its added value.
Having an appraiser familiar with solar technology is important in getting an accurate figure for your real estate market. The three possible methodologies to value residential solar are the income approach, cost approach, and cost comparison approach. Overall, the income approach is recommended because it estimates the forward-looking value of the energy cost benefit.
The income approach bases added value on the projected income that a solar installation will generate for the homeowner over the system’s expected lifespan. Appraising a solar home on this basis most closely aligns the seller’s and home buyer’s perspective.