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Do Solar Panels Increase Home Value? 5 Key Considerations

Would installing solar panels on your home raise its value when it sells? If so, would that premium offset the cost of installation? Here are five things you should think about before installing solar panels on your roof.

Would installing solar panels on your home raise its value when it sells? If so, would that premium offset the cost of installation? Here are five things you should think about before installing solar panels on your roof.

Solar panels have evolved from the clunky and obtrusive options that first came on the market. Some are flat tiles, even with the roof's surface, that blend in. Recent developments include solar windows and driveways, or solar panels shaped like traditional roof shingles. And, as they've grown in use, their aesthetic has become more accepted.

If you're a homeowner, you want to prioritize all repairs and improvements, so they'll return the most value to you in your final selling price. Will solar panels return their cost to you? Before paying the deposit to have them installed, here are five things you should take into consideration.

Will They Raise the Appraised Value?

Yes, studies have found that installing solar panels will increase your property's value by about 3-4%. But there are a lot of caveats around this percentage increase.

Solar panels will have more of an impact on your home's value if you live in an area with high energy costs. If you lease the system, rather than own, it can't be included in an assessment of the property's value. Otherwise, they need to have a positive impact on overall energy costs to outweigh the objections to their appearance.

Where do you Live?

The premium you'll realize from installing solar panels will depend a lot on where you live. Again, if there's a high cost of energy in your city than solar panels can be a good value.

Some states, such as Massachusetts, offer strong solar incentive programs which can save you money on installation. In other cities, you can sell solar power back to the grid and make money off your system. Net metering measures the difference between energy generated by your solar panels and your usage and allows you to sell the difference back to your utility company.

One study found that premiums realized from installing solar panels varied by part of the country. In New York, you could see a 5.4% or close to $24,000 premium. But homeowners living in Florida only saw a 4.6%, or roughly $11,000, premium.

Talk to your real estate agent about the value that home buyers in your city place on solar panels.

Is it a Good Investment?

The median home value for homes in your area will influence whether solar panels are a good investment. If you're unsure of values in your neighborhood, ask your real estate agent to prepare a comparative market analysis for you.

Let's say you live in California, where median home values are $548,000. The cost to install solar panels is an estimated $18,300. If it raised your home value by 4%, you'd see your home's value jump by $21,920. While a $3,620 premium is nice, it's not great.

In other parts of the country, with lower median home values, solar panels would become a net loss. In Alabama, for example, median home values are $130,600. A 4% premium would only be $5,200 and you'd lose up to $13,000 on the solar panels.

Differences like these are why it's so important to involve your agent in the decision-making process.

What will be Your Current Energy Savings?

The previous example assumed that you installed the solar panels and got no use out before selling your house. But, in reality, you're likely to look into installing panels a few years before you plan on selling.

When calculating the return on investment, don't forget to include the years of lower energy costs you'll enjoy while you have solar energy. If you own for another five years and it saves you $5,000 a year in energy costs and you see a premium in your home's selling price, the panels will have paid for themselves several times over.

What is your Budget?

If you only plan on buying solar panels for a potential home sale, and will not use them for a few years before selling, there are less expensive improvements you could make. While the overall cost of a solar panel installation will depend on your roof's size and the number of cells your home needs, an average cost of $18,300 isn't cheap.

Your agent can suggest cheaper, high-value repairs which would still increase your selling price but at less cost. A solar panel installation could be out of your budget, period, even after rebates and other state incentives. And many of the subsidy and tax-incentive programs available require that you occupy the home for several years after taking advantage.

A Clever Partner Agent understands local buyers and will help sellers decide if solar panels will fetch a better price for the house. To get in touch with a Clever Partner Agent, reach out to us today.

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Andrew Schmeerbauch

Andrew Schmeerbauch is the Director of Marketing at Clever Real Estate, the free online service that connects you top agents to save on commission. His focus is educating home buyers and sellers on navigating the complex world of real estate with confidence and ease. Andrew has worked on projects for the United Nations and USC and has a particular passion for investing and finance. Andrew's writing has been featured in Mashvisor, L&T, Ideal REI, and Rentometer.

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