Switching to solar power can pay you back in more ways than a lower electric bill. You get environmental benefits, other solar incentives like SRECs, and, oh yeah solar panels increase home value.
Study after study after study comparing sales of solar and non-solar houses show clearly that homes—even near-identical homes in the same community—sell for more with solar. Even if you sell your home before you’ve had the opportunity to use solar power over a long period, the panels are still a good investment.
The most convincing study of all came in 2015, and surveyed solar homes in six states. The researchers concluded that the average solar home price premium was about $3.78 per watt, which ended up about equal to the cost of the systems after incentives.
How solar panels increase home value
Why do buyers pay more for homes with solar power? A home solar system is not just a shiny technological doodad on the roof. Solar panels generate energy and save money!
We at Solar Power Rocks used to apply an old rule that solar panels would increase home value by about the value of 20 times the first years’ electricity bill savings, but with the data from the 2015 study, it’s pretty clear that the better way is to simply use cost of the system minus tax incentives.
The great thing here is this is a dual benefit. or maybe even triple benefit! See, installing solar panels increases you home’s resale value, but it also saves you money every month on electricity bills. And on top of that, many states have other solar incentives that earn you even more savings. The final benefit is the federal solar tax credit, which can save you thousands of dollars on taxes this year.
If you’re considering solar for your home, get multiple quotes for solar and compare to see how much you can save!
How much could solar panels increase your home’s value?
The average American home needs about 21 320-watt solar panels to supply its power needs for one year (that’s a 6.72-kW solar system for the folks keeping score at home). To find out your own solar needs, use our solar panel calculator.
That average 6.72-kW system might cost about $22,000 before any incentives. Take the 30% tax credit off that price and you get $15,400. With a nationwide median home price (PDF) of around $315,000, the average homeowner can expect their home to increase in value by about 5% if they install a home solar system.
Of course, your needs may vary, so consult a licensed solar provider near you for more information.
When is it bad for home value to install solar panels?
There are all sorts of offers out there from solar companies. Some of them say “Free solar panels!” or “$0 down solar! Start saving from day 1!”
It’s important to be wary of these offers. Solar power is worth the cost in several states, and there are $0-down solar loans that can have you owning the system and paying off the loan in as little as 10 years. But more often, these offers are tied to special agreements called Solar PPAs, or Power-Purchase Agreements. Under a PPA, the solar company owns the panels and you pay them only for the electricity.
PPAs can be an okay way to get solar if you don’t have any equity or credit, but the PPA provider usually puts a lien on your home, and that can complicate things when it comes to sale time. A PPA might also turn off a potential buyer, because it’s not something they’ll own themselves, but instead an obligation (even if it makes financial sense and they will save money, it’s still a long-term contract.
Another special kind of solar loan called a PACE loan relies on special property-tax assessments that allow you to repay your loan on your tax bill. While the very existence of PACE loans confirms the fact that your home value increases when you install solar, in practice, PACE loans can be problematic, because they also usually come with a lien against your home, and make selling the home more difficult.
The best way to pay for solar is still good old cash or home equity, which allow to you own your home solar system outright and reap the full benefits when you sell.