As concern for climate change continues to grow among the American public opinion, there has also been increased interest in the installation of solar panels for residential properties. A survey by Pew Research found that nearly one half of homeowners “have given serious thought to installing” solar panels. Yet, only 6 percent of those surveyed have actually done so. Perhaps with a greater understanding of not only the environmental impact, but also the financial benefits to solar panels, more Americans would commit to making the switch.
Studies have found that there are several financial benefits to the installation of solar panels for residential properties. People commonly cite saving money on utility bills and solar investment tax credits as two reasons why they’re interested in solar installation. However, there is a lesser known benefit that may actually be even more beneficial to homeowners: an increase in home value. There are several factors that vary the degree of impact, but on average, the installation of solar panels typically increases a home’s value by thousands of dollars. These are the different ways that solar energy may do just that:
The increase in resale value attributed to solar panels is dependent on various factors, such as the type of solar panels installed, the state you live in, the cost of electricity in that area, and several others. Some variables may lead to higher increases than others. However, regardless of the specificity of these factors, the simple inclusion of solar panels can make a significant difference.
State by State
A study compared the sale of homes, with and without solar panels in the listing descriptions, while controlling for other values like location, age and square footage. By simply listing solar panels as a feature in the home’s description, there was a 3.5 percent or higher increase in sale value amongst homes in 10 U.S. states. The most valuable state to install solar panels is New Jersey, which saw a 9.9 percent increase in home value.
Of course, the overall dollar amount of resale value is determined by two factors, the percentage increase of resale value and the overall value of the home. While states like North Carolina and Pennsylvania may experience a higher percentage increase in value, the actual dollar value is much higher in Hawaii due to a higher median home value.
In order to determine the effect of installing solar panels on your own home value, you can do a rough estimate by determining your current home value and then calculating the resale value based on the average percentage increase for the state in which you live.
Value Based on Kilowatts
Another way of looking at the increase of the resale value of your home is by factoring in the type of solar system that is installed. On average, the resale value of a home with solar panels may increase by more than $4,000 for every 1kW of panels installed. Therefore, the more solar panels you install, you will likely see a larger increase in resale value from a dollar amount perspective.
The amount of money that you’re actually able to recoup through the resale of your home, however, also depends on the cost of installation. The installation cost of solar panels can vary based on factors such as manufacturer, kilowatts per system, and cost per watt by state. Regardless, the average increase in home value outpaces the installation cost for nearly all of these factors.
Based on this average increase in resale value, a 10kW system would increase your home value by over $40,000. In almost every state, for every manufacturer, a 10kW system costs somewhere in the range of $25,000 to $35,000 with a few exceptions for systems that are cheaper or more expensive. These costs don’t factor in solar tax credits either, which means that costs could be reduced even further. By doing the proper research and weighing variable costs, it’s possible to recoup all of your costs of solar panel installation and profit thousands of dollars through the sale of your home.
Selling Your Home Quicker
Solar panels may have an indirect impact on home value via time spent on the market. When selling a home, days on market is one of the most important factors for selling price. In most cases, the longer your home spends on the market, the more difficult it will be to negotiate a deal similar to your listing price. Buyers will try to negotiate a lower price as they view the seller to be acting out of desperation. Therefore, it’s better to sell your home quickly, if possible.
Luckily, some research has shown that solar panels can help a home sell quicker. A study on California homes found that those with photovoltaic panels (PV) sell faster than homes that consumed more energy. Another study by the National Renewable Energy Laboratory found that solar homes in California sold 20 percent faster than non-solar homes. While there is currently only limited data available, it does suggest a positive correlation.
Ultimately, using solar energy as a selling point is up to the homeowner and real estate agent. The potential savings on utility bills through the use of solar panels is a valid selling point when presented in the right way. However, an important factor to consider is whether you own or rent the solar panels. Transferring a rental lease to new homeowners can be difficult, so if you plan to sell your home, it’s better to own the solar panels outright.
Recent studies have shown that the installation of solar panels has a positive impact on the resale value of residential homes. By factoring in the financial benefits of decreased costs for utility bills and potential tax credits, it’s possible to recoup the costs of installation before even selling a home, allowing you to make an even larger profit. The usage of solar panels is not only beneficial to the environment, but may benefit your wallet as well.