Do solar panels increase the value of your home?

man in white dress shirt and blue denim jeans sitting on white and black solar panel

What homeowners should know before they install solar panels

Homes without solar energy sell for approximately 4% lower on average than homes with solar energy, according to Zillow. But experienced homeowners know that adding value to your home isn’t as straightforward as you think. Whether or not a home renovation is a smart move depends on a variety of factors. The same is true if you want to add solar power. 

While it is true that solar panels save homeowners money in the long-run, not all homeowners see solar as an undeniable advantage to a new home. Many times, home sellers must take the time to explain the true value of a solar powered system prior to making the home sale. 

Without a proper understanding of how solar panels work, a seller may end up sinking a pretty penny into a home that won’t reflect the true value it provides. That’s why it’s important to adequately explain why and how the buyer would benefit from a solar array system on their new home.

How much do solar panels increase the value of a home?

Installing solar panels onto your home is a sizable home renovation. Any responsible homeowner would want to know how much of a return on investment they would receive from a solar panel installation.

Solar paneled homes also tend to sell at a faster rate than those without solar panels. The National Renewable Energy Laboratory (NREL) discovered that homes with solar panels sell 20% faster than similar-sized houses that depend on an energy grid. 

NREL research also suggests that solar panels translate into overall better value for your home. The Lab found that every dollar that a solar system saved on energy costs increased home value by $20. This means that an energy system that saves the average homeowner $400 per year, would add a value of $8,000 to your home. 

It’s important to note that the added value to a solar-powered home is not as cut-and-dried as most homeowners might hope. This is because buyers have differing opinions on whether solar energy is indeed a valuable addition to the home, or if it’s just an additional cost. The final sale price of a solar-paneled home depends on a variety of factors explored in the following section. 

brown brick house with solar panels on roof
Solar panels can increase home values if a seller can quantify the energy savings

What factors influence the value of solar panels?

Although solar panels are becoming much more popular among homeowners, the benefits of solar technology are still being explored. Whether or not a solar panel installation will increase your home value will depend on:

  • what region of the country your home is located 
  • local price of electricity
  • state incentives and rebates
  • frequency of power outages in your area
  • local understanding of solar technology & benefits

Taking all this into consideration, it’s important to do your research before moving forward with long-term solar installations. This is especially true for sellers looking to install solar panels with the primary goal of increasing property value.

What do buyers look for in solar paneled homes?

CNBC recently reported that 80% of buyers look for energy-efficient upgrades when house hunting. So solar panels are generally well-received among buyers. 

A solar panel system increases overall energy savings throughout the home, working together with other efficiency upgrades the home may have already undergone. This can lead to:

  • Enhanced home insulation and reduced heating/cooling costs
  • Increased LED lighting efficiency
  • Longer life expectancy of ENERGY STAR-certified appliances

In today’s market, there’s a growing number of new homebuyers who are both budget and environmentally-conscious. This consumer behavior works in the favor of home sellers with solar paneled homes.

Substantial energy savings

When purchasing a home with solar panels, a buyer’s main concern will be the energy bill. The seller has a better chance of selling the property at a higher price point if they can prove the buyer will benefit from a considerable amount of energy savings through the home’s solar powered system. 

Reviewing your monthly energy bills with an interested buyer is helpful. This allows the buyer to see how exactly they’d be able to save money on energy costs. You may also want to transfer over the ownership of solar incentives to the new owner. This translates to higher energy savings on their end. 

Owned, not leased

Another aspect of solar paneled systems that informed buyers will definitely ask you about is whether your solar panels are owned or leased. The value of owned solar panels is easier to understand, whereas the value of leased solar panels is a bit more complex to assess.

Buyers are more likely to pay a premium on a solar panel system that belongs to the current homeowner, as opposed to one that still needs to be paid off. This is because it’s a bit harder to evaluate the value of a home with an amenity that is still under contract and varies in desirability depending on location. 

Reputable Contractor

Last, but not least, you also want to consider the buyer’s need to service the home’s solar panels with a reputable solar company. The contractor responsible for the solar panel installation is most likely the same company responsible for its maintenance and warranty. 

That being said, a buyer will be curious to know what the warranty covers, how long it lasts, and how often system maintenance is conducted. When installing a new set of solar panels, it’s important to choose a trustworthy solar contractor. 

white and black wooden house under white sky during daytime
Green energy is becoming a popular selling point for most homes but some buyers are still skeptical of the benefits of solar panels

Are there any tax credits for having solar panels?

The federal solar tax credit, also known as ITC, is one of the most effective federal incentives for increasing the popularity of solar energy in the US. It offsets the initial cost of installing solar panels by allowing homeowners to claim 30% of the total cost of their solar project on their federal taxes.

Homeowners with solar-panels can either deduct the tax credit directly from their annual tax bill, or deduct the amount from their taxable income.

In December of 2020, the tax credit was reduced to 26%. In 2023, this percentage will go down to 22% for newly installed systems. 

Keep these numbers in mind when planning and prioritizing upcoming home renovations. 

Wrapping Up

Determining how much solar panels add to property value isn’t a simple formula. However, it’s worth taking the time to calculate how much more you could get for your home if you decide to install a solar energy system. 

Electricity bills are a major concern for homebuyers—especially first-time homeowners who are transitioning from paying utility bills at an apartment complex, to paying monthly for gas and electricity at a property of their own. 

FAQs 

Do solar panels hurt the resale value of your home?

Typically, no. By investing in solar, you’re making your home more energy-efficient, helping future homeowners save money on energy expenses. However, not everyone fully understands or even agrees with the benefits of solar paneled homes. 

As a result, the market value of a home with solar panels is not yet defined. Many homeowners consider solar panels an asset to their property, however, a few caveats apply. Solar panels that are leased and not handled by a qualified listing agent may be considered less desirable among buyers. 

Is it harder to sell a home with solar panels?

Yes, and no. There are a few things to consider when installing solar panels into your home. First, you want to make sure your solar panels are owned and not leased. Leased solar panels lock the new homeowner into the previous homeowner’s contract. Owned solar panels are much easier to transfer. 

Second, you want to hire a qualified listing agent to handle the sale of the home. This ensures that your home’s value is accurately determined and that the cost-benefit of a solar paneled system is accounted for. Qualified agents will have taken the course, “Selling the Sun: Establishing Value for Solar Homes,” through the National Association of Realtors.

Do solar panels void a roof’s warranty?

Installing solar arrays onto your home will require some drilling into the roof deck to attach bolts that will secure the solar panels. This could potentially void your roofing warranty if your roof has asphalt shingles or tiles. It’d be smart to check in with your roofing company before moving forward with a solar panel installation. 

How much do solar panels cost?

According to the NREL, installing a 2-kilowatt solar panel system into the average-sized home will run you about $8-10 per square foot. This amounts to $16,000 to $20,000 in total costs before state and federal rebates are factored in. 

It’s important to keep in mind, however, that the cost of your solar system will vary depending on the size of your home, the kind of system you install, and where your home is located. 

Although federal rebates apply to homes all throughout the country, state rebates differ and will impact the final price of your solar panel installation. It’s also worth noting that as solar panels are becoming more commonplace, prices are dropping and making installation more affordable and accessible.

How are property taxes affected by solar panels?

As of now, property taxes are not affected by solar panel installations. Although the perceived value of your home among buyers may go up as a result of a solar panel installation, your home’s assessed value does not go up. States and municipalities that have a solar energy property tax exemption make sure to incentivize and not dissuade property owners from installing a solar paneled system into their homes.

About the author: Vivian Tejada is a freelance writer and small business strategist based out of Providence, RI. She specializes in writing SEO blogs, property descriptions and website content for real estate companies. She’s also an avid traveler, location-independent and enjoys trying out new restaurants. 

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