Do solar panels increase home value? - Expert opinion on PV panels' cost-efficiency

Table of contents

1. What makes a solar-powered home a viable property investment?
2. What factors may affect the sale value of a home equipped with solar panels?
3. How much does solar increase home value?
4. How do solar panels affect property taxes?
5. Key takeaway

Let's start with the reasons that make homeowners switch to a green energy source. First and foremost, it is an economic gain. Homeowners are ready to make a large upfront payment in PV panels to save 76%-90% on monthly electric bills. Another reasonable cause is the value solar plants add to the property. The numbers say that buyers across the country are more willing to get homes with little-to-average solar plants on the roof. And last but not least, most people choose green power to reduce their carbon footprint, contributing to saving our planet.

In this article, though, we will pay a closer look at the financial, not environmental, advantages of solar rooftop panels. If you seek the answer to the question, "Do solar panels increase home value?" this short roundup is for you. It's aimed to help you evaluate the return on investment you can get by installing a home solar system. Keep reading to learn how PV panels can double your home's sale value and what states provide property tax exemptions to compensate for the solar cost. 

What makes a solar-powered home a viable property investment?

If you're thinking of reselling your residential property, you must probably look for opportunities to boost its sale value to close the deal with a sufficient profit. There are multiple ways you can enhance the value of your home in the eyes of your potential buyers. The real estate agents single out two groups of things that boost possible profit from a home sale - those that add value to a home and those that add expense. 

The tendency shows that some homeowners strive to push their property to a luxury segment, making costly upgrades like extensive landscaping, decking, or adding a swimming pool and spa. Sometimes, these additions serve as a "wow" factor, pushing a motivated buyer to make a purchase. However, in most cases, their value is negligible as subsequent owners are not ready for extra expense on upkeep. 

On the contrary, installing PV panels is always a win-win option that surely boosts the sum a prospective buyer is willing to pay. Today this addition is not a whim, but a necessity that helps current and future property owners benefit from electricity savings. The best part is that the UV panels' upkeep costs are also low. Estate agents confirm that homes equipped with energy-efficient PV panels from renowned brands like SunPower, LG, and Tesla are sold three times quicker while their sale value is 5.8% higher if compared to homes with no solar panels. In numbers, the average-sized home with a solar plant on its roof can bring an additional $8.275 - $10.275.

Here are the key aspects that make a residential property equipped with solar panels a valuable asset on the real estate market:

• Addressing the need of the vast majority of people

Nowadays, every second American family is looking to buy or rent a house with PV panels to switch to conscious energy consumption and save money on electricity. According to CNBC, the number of people hunting for homes equipped with energy-saving solutions is about 80%. Budget-conscious buyers and people in the market for more expensive housing are ruled by the need to manage their electricity costs and reduce carbon emissions. That means rooftop solar plants meet the demand of different segments of society.

• Providing an avid advantage for landlords and tenants

A house powered by green energy is a win-win for its owners and possible rentals. The first ones can increase the rental cost of their property and quickly find tenants for a long-time period. The second ones are willing to pay for homes with PV panels installed to save a pretty buck on electricity monthly. On top of that, some local governments provide specific incentives for eligible rental providers, encouraging them to switch to green power. 

• Saving a great deal of time and money

According to the NREL research, homes with solar rooftops are sold 20% faster than the same-sized residential buildings without this energy-saving feature. This means people who put their property on sale save money on storage, transportation, and the real estate agent's fees. Besides, homeowners reduce the possibility of selling their property below the asking price. 

And finally, it is worth mentioning that home solar systems possess a contributory value, augmenting the overall energy saving. That means all other solutions implemented to boost a house's energy efficiency will be doubled if powered by solar. An example is LED lighting which can be enhanced when solar panels catch the rays to power a home.  

What factors may affect the sale value of a home equipped with solar panels?

Below you will find the factors that we believe can affect the sale value of a house equipped with PV panels:

• Home solar system efficiency. The bigger the system, the more energy output it gives. A larger solar plant will bring more rewards for a potential buyer, so the total sale price of the home equipped with multiple PV panels will be higher.
• Home solar system age. Outdated solar panels have lower efficiency and cannot give the same economic advantage as modern ones. Please note that depreciation should be taken into account when it comes to selling PV panels that are 10+ years old. Outdated systems cannot fully compensate for electricity consumption, and their upkeep cost will be high. That is why they won't raise the sale value of your home that much. 
• Local climate. If you live in a sunny state like California, you can rest assured that solar panels will have maximum efficiency. On the contrary, energy savings will be lower in states with cloudy weather like Illinois. Thus, the location is one of the factors that affect the additional value PV panels may offer your home.
• Electricity consumption. Different households require a different amount of power for a comfortable living. For example, a two-story mansion with an extension averagely needs 1050 kWh per month, while a small townhouse for a family without children may go well with as little as 630 kWh per month. The more you pay for electricity, the greater value you and your subsequent home buyers will get. 
• State incentives. Solar rebates vary in different states and utility companies. If your local government supports solar incentives, you will get a higher return on investment in installing a home solar power system. With lower upfront costs and significant electricity savings, you will get a net gain in less than a few years. 
• Labor costs in the area. The truth is that the solar panels' installation price is flexible and depends on the state's average labor costs. For example, getting a new system in Rhode Island is 1.5 times cheaper than in NYC or its suburbs. However, from the added home sale value term, you win from high labor costs as people will more willingly buy a home with PV panels already installed.

How much does solar increase home value?

The majority of real estate agents and appraisers recommend their clients install at least a 6kW solar system to increase their property value. Let us dive deeper into the matter to understand the effect of solar plants on a home's sale value.

Recent studies have shown that each kilowatt produced by a solar plant equals a $6.000 increase in home resale value. However, this price is average and may vary from state to state and from property to property. In areas with specific climate features like extreme heat or cold, the demand for alternative power sources is extremely high. That means potential buyers are ready to overpay to get a house independent from the local electricity grid. And, of course, the higher the electricity costs in the area, the better home sale deal you may get. 

Please, look at the table below to learn how much solar panels would increase your home value:

The average cost of a solar panel system with installation services is $18.700. This price is actual for the average 1.500 square ft. home. So, considering how solar panels increase home value, you can easily calculate that these amounts are much higher than the total cost of a solar panel system.

How do solar panels affect property taxes?

When deciding on installing solar panels, one should do their initial research to reveal any possible hidden costs that may arise along the way. As we've already discussed, the property value goes up with solar, so your taxes will be higher. Nevertheless, most US states mitigate a tax burden for their citizens, offering property tax exemptions. These incentives help offset the cost of a home solar system and get a high return on investment when selling a property. The terms vary from state to state and can cover the whole property tax sum or half. Some exemptions are limited by 5-10-20 years. Refer to your local government authorities or neighborhood community members for accurate information on property tax exemption.

Key takeaway

Do solar panels make sense for your home? The answer is "yes." Whether you're about to resell your property right away or in 3-5 years, the investment in a home solar system does make sense and economic gain. Switching to solar power will make you less dependent on the local electricity grid right off the bat, helping to save thousands of bucks in the long run. And once you decide to sell your home, a solar plant on your roof will give you and your potential buyer an additional value.