Do solar panels increase home value?
Yes, thanks to the increasing demand for sustainable living
Beyond providing clean energy and helping you save money on your electricity bills, solar panels also appeal to many homebuyers, increasing your home’s value on the real estate market.
We’ll walk you through how solar panels can increase your home’s value, including tips for getting the most out of this investment and estimates for what kind of return you can expect from adding solar panels to your home.
- Solar panels are attractive to potential buyers and can add significant value to your home.
- While an investment in solar energy can pay for itself over time, it likely isn’t worth it for the increase in your home’s resale value alone.
- You can maximize the value of your solar panels by properly maintaining them and taking advantage of government tax credits or rebates.
Solar panels and home value
Solar panels have become an increasingly popular investment for homeowners looking to reduce their dependence on traditional energy sources, save energy and lower their carbon footprints. Basically, as the benefits of clean energy become more widely known, investing in solar panels may be good for both the planet and your pocketbook.
Sarah, a ConsumerAffairs reviewer from California, mentioned as much in a phone interview: “It’s going to be nice to not have to pay all this money for PG&E and actually be paying towards something that we can own and it’s going to benefit us in the property value.”
A study by Zillow reported that homes with solar panels sell for 4.1% more, on average, than those without, and the increase in resale value is higher in certain cities, like New York. A 4.1% increase may not seem like a lot until you consider the size of the numbers involved — if you’re selling a $500,000 home, that’s an extra $20,500.
Ericka, a ConsumerAffairs reviewer from California, spoke with us over the phone and said installing solar panels would increase the value of their home, even though California already requires solar panels on all new residential buildings: “I'm a real estate agent as well as an engineer. So, I know that it is a great benefit. And a lot of clients are attracted to them when the home has solar already.”
As more homebuyers become environmentally conscious, the demand for homes with solar panels is likely to increase — driving up the benefits of solar panels even further.
How much will solar panels increase my home’s value?
For homeowners, the thought of increasing property values is an exciting prospect. However, determining precisely how much value a solar system will add can be challenging. If you’re planning to go solar, here’s how to estimate how much solar panels can increase your home’s value.
Begin by assessing your property’s current value. (Try looking at similar homes without solar panels in your area to determine an average baseline price.) You probably don’t need a formal home appraisal, but if you’ve recently had one done on your property, that could be a good place to start.
On average, solar panels can increase the sale price of a home by about 4%, according to the Zillow survey we mentioned earlier. That means you should multiply the estimated value of your home by 1.04 to get a rough idea of your home’s value with solar panels. As an example, if comparable homes without solar panels are selling for around $250,000 in your area, you may be able to justify a list price closer to $260,000 once you install a solar energy system.
What determines how much value solar panels add?
External factors can influence the value of your solar installation, though, so don’t hold fast to the simple calculation above if your situation has unique circumstances.
Here are some of the main factors that influence how much solar panels can increase the value of your home:
- Home location: Due to different electricity rates and incentives, the benefit of solar panels varies based on where you’re located. Hawaii, for example, is the state where solar savings go the furthest.
- Panel location: How solar panels are installed on a roof can also affect how they impact your home’s value. The most desirable locations for solar panels are in areas with direct, unobstructed sunlight, like south-facing roofs with few trees. On the other hand, solar panels on a north-facing roof or a heavily wooded lot will not produce as much energy and may add less value to your home.
- Roof age and condition: If you install solar panels on an older roof, it may be necessary for a buyer to remove the panels and replace the roof later on, which is a hassle some people won’t want to deal with. Solar panels may also void the warranty on a roof.
- Quality and installation: The quality of solar panel equipment and its installation can affect energy production, impacting how much value the solar panels add to the home. Essentially, if you install low-quality solar panels or install them incorrectly, they may yield less energy and resale value.
- Size and efficiency: The size and rated efficiency of your solar panels may also determine how much value they add to your home. For example, larger, more efficient solar panels can generate more energy and yield more savings — possibly adding more value. However, some buyers may dislike the look of large solar panels, so don’t go overboard.
- Panel age and condition: Solar panels last 25 to 35 years on average, but older or damaged solar panels may add less value than newer ones with better performance capacity. Plus, outdated solar panels that make a home unattractive are more likely to deter buyers than increase resale value.
- Local energy costs: The cost of electricity in your area can also influence how much solar panels add to your home’s value. Based on U.S. Energy Information Administration data, residential utility bills averaged $121 per month in 2021. If energy costs are higher than that in your area, the increased savings from solar panels could be more appealing to potential buyers.
- Power outage frequency: The frequency of power outages in your area can also affect the value of solar panels. If the risk of a blackout is high, it could make solar panels more appealing and increase their value-add.
» MORE: Solar energy pros and cons
Is installing solar panels worth it just for the improved resale value?
Most homeowners install solar panels for environmental reasons or to reduce their monthly utility costs, but are they worth installing just to increase your home’s resale value? We asked Rob Giuffria, managing broker at Connecticut-based Tea Leaf Realty, and he did not recommend solar panels as a short-term real estate investment.
Even if the potential boost in value outweighs the cost of the solar panels, home solar installations can actually complicate or delay the sale of a home — especially if there is a lease, ongoing maintenance contract or other long-term agreement in place. “While most buyers see solar panels as something that’s directionally correct, it becomes a negative when they learn about contracts for maintenance or other costs and commitments,” Giuffria said.
However, if you plan to be in your house for five years or more and are interested in solar, Giuffria still recommends the upgrade.
Manuela Adami, a representative with Swiss solar company Volted, summarized the situation well: “In some cases, the increased resale value may not fully cover the cost of the solar installation. However, when considering other factors such as reduced energy bills, potential tax credits or rebates, and the environmental benefits, installing solar panels can be a wise investment.”
» MORE: Are solar panels worth it?
Do solar panels increase property taxes?
In some cases, solar panels can increase property taxes. Depending on your location and the laws in place there, installing solar panels may increase the value of your property, which could mean an increase in property taxes. Prospective solar panel owners should contact their local tax assessors to get more information about how this might affect them.
Do bigger solar installations increase home values more?
Generally, bigger solar installations can increase home values more than smaller arrays. Larger installations typically generate more energy, leading to greater utility bill savings for homeowners and possibly qualifying them for additional incentives or credits.
Still, not every buyer likes the look of solar panels, and larger installations may be considered an eyesore. With that in mind, you may want to avoid investing in an overly large home solar system if you do not plan to stay in your home long-term.
Do solar homes sell faster?
Homes powered by solar energy may sell faster than those without. A study by the National Renewable Energy Laboratory reported that, on average, homes in California with solar energy systems sold 20% faster than similar homes that didn’t have solar panels.
Solar panel systems are becoming increasingly commonplace across the country, so prospective buyers may even be expecting them when searching for their next homes. That said, all buyers may not view solar panel systems favorably, which could negatively impact offers. Make sure you understand your local real estate market before installing a solar energy system.
Can solar panels hurt the resale value of your home?
Solar panels can sometimes hurt a home’s resale value rather than help it. Large-scale arrays might not be viewed positively by some potential buyers because of how they look.
Giuffria, the Connecticut real estate broker we spoke with, told us that one of the main factors that can reduce a home’s resale value is having solar panels on the front of the house or otherwise visible from the road. A solar home’s resale value can also decrease depending on the age and condition of its roof under the solar panels and whether the buyer will be subject to a maintenance contract or other commitment.
Installing solar panels can make your home more environmentally friendly, energy-efficient and attractive to potential buyers. That means, with proper installation, maintenance and understanding of local regulations, you can realize a significant return on your solar energy investment. However, you may want to reconsider if resale value is your only reason for going solar, and be careful about how you finance your solar energy installation if you want to use it to attract buyers later on.
- Article sources
- ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Zillow, “Home With Solar Panels Sell for 4.1% More.” Accessed April 27, 2023.
- Solar Energy Industries Association, “Top 10 Solar States.” Accessed April 28, 2023.
- U.S. Energy Information Administration, “2021 Average Monthly Bill- Residential.” Accessed May 10, 2023.
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