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Will Solar Panels Increase Home Equity?

January 10, 2023

Solar power plants are an excellent sustainable energy source and a cost-effective solution to reduce your annual electricity expenses. However, they require an initial investment. Suppose you’re considering acquiring a solar panel. In that case, you should know that they are worth the hundreds, if not tens of thousands, they frequently cost because of the several benefits of going solar.

Most people know solar panels cut energy expenses and carbon emissions. Therefore, they believe investment in solar power plants increases your house’s value and look for a home to purchase, particularly with solar panels. 

Solgen Power had just installed this panel for the resident living there.

Solgen Power had just installed this panel for the resident living there.

Moreover, they are willing to pay for improved value in buying a property with an excellent solar power plant.

Besides, householders, purchasers, and appraisers also know that rooftop solar plants and solar battery setups may boost the market value of a property. According to one research, solar systems enhance the resale value of a property by up to $5,910 for each kilowatt of solar cells added.

According to the National Renewable Energy Laboratory (NREL), every $1 saved on electricity bills raises the home equity by $20. For instance, if you save $800 per year using photovoltaic cells, your property’s worth rises by $14,000.

According to Zillow, sellers might get more money for their houses when they sell ones that use less energy. Potential buyers will pay 4.1% extra, or $9,274, for a solar-powered home. In particular home markets, these increased resale prices are considerably higher. For instance,  In New York, an energy-efficient house with solar panels will cost an extra $23,989 compared to other properties. The study found that home prices in California have a per watt of $4.21 increase in home price due to solar energy production, while the rest of the country had a return of $3.11 per watt. Hence, solar panels reduce electricity bills and increase your home equity

How Does the Process Work:

Installing solar panels will not necessarily directly boost your property’s resale value. There are external considerations such as location, local power costs, and the value of the solar panel system that can all have an impact on property value. Here’s a deeper look at the factors that affect the value of your home.

The selling price of a home with pre-installed PV systems varies depending on where the residence is located. Only some states have clear legislation. Solar installers or municipal backing is required to make a solar project financially viable for a household. Hence, energy-efficient homes may cost more in California than in Chicago because of higher electricity prices and clear solar laws.

Another factor to consider is your solar panels’ electricity cost and efficiency. Residents can store any extra power generated by their solar panels during the day in batteries. Hence, homeowners can use this stored energy to power their houses at night or during breakdowns. They may even utilize the electricity when power costs are at their maximum to save additional bucks.

These savings are especially beneficial in high-energy states like Colorado, Florida and New York. As a result, residents in Orlando, California, may be able to sell their solar-powered property for a higher cost than owners in Chicago since inhabitants in these locations will gain far more significant benefits from using solar electricity.

Another aspect to think about is the solar system’s age. Solar systems typically last 30 to 35 years, four decades if maintained properly. As a result, houses with modern solar systems will have more periods of future usage than those with designs that are ten years or older. Therefore, a newer solar panel will cost more than houses with older ones.

Who Can Qualify for Solar:

All residential homeowners can qualify to install solar panels and increase home equity. House owners with rooftop solar panels who own the residential solar power plant have the best chance of seamless benefits.

However, the help you get after installing a solar panel differs according to the situation. There are two options for having a sustainable energy efficient home. Either you can pay an upfront cost and install a solar power plant at your home, or you can become a part of a green energy system and get a solar power system on lease.

If you’re the proud owner of solar panels, you can choose to include them when you sell your home. It is a reasonably straightforward process, as the panels are a permanent fixture on the property.

When you have solar panels in your home sale, you are marketing your home as green and energy-efficient. It can be a significant selling point for interested buyers, as they know they won’t have to worry about their energy bills skyrocketing after moving in.

It’s important to remember that if you purchased your solar panels outright, you’re still responsible for the cost of installation. However, this cost will likely be recouped by the increased value of your home. However, if your system is leased, the situation becomes more complicated. When renting a solar panel system, the leasing company holds legal ownership of your panels. Thus, deciding what option works best for you will depend on your situation—financial stability or energy savings—but one thing’s for sure: investing in solar panels can help raise your property value!

How Much Equity:

Solar panels being a sustainable energy resource, not only help homeowners save money on their current monthly utility bills.

According to recent solar studies, installing solar panels can potentially increase a home’s value by up to 4% more compared to homes without solar panels,

In the United States, they add more than $9,000 average worth in a median-valued home.

People sell their homes at a profit after adding solar panels or because of solar panels. Installation of Solar panels has become a plus point for homeowners who are willing to sell their houses. So, let’s tour some states of America and learn how much equity they can increase.

Regional Home Equity Increase:

In New Jersey, solar panels appreciate the home value by 9.8%, around $32,000 profit for a middle-valued home.

Solar premiums in each state vary. For instance, it is 4% in Florida, and its numbers increase the home equity by $9454 of an average house. Furthermore, there are significant variations among metro regions in California: while the solar premium is 3% across the state, it is 4.4% in San Francisco, 3.6% in Los Angeles, and 2.7% in Riverside. Whereas in New York City, the solar premium is approximately 1%, which equals a $23,900 rise in the median-valued home’s worth.

This reason is widening the demand for solar panels, and more and more homeowners prefer solar panels.

How Much Value Each Kilowatt Creates:

Knowing that every kilowatt increases your home’s equity is fascinating. According to some old studies, Each kilowatt of solar power installed increases the resale value by approximately $5,911. So, how much do solar panels add to the value of a home? Let’s focus on some estimates.

  • The 4 KW increase home value by $23,644.
  • 6 KW adds to the home equity by $35,466.
  • 8 KW appreciates the home worth $47,288.
  • And 10 KW increases house worth by $59,110.

These figures correspond to the total cost of a solar panel system, which may be what you need to make the switch to solar power finally.

What Happens When You Want to Sell your Home with Solar Panels:

The most straightforward case for selling your property is if you own your solar panels without financing. Purchased and paid-for solar panels do not necessitate multi-party methods to transfer solar panel ownership. Furthermore, buyers are frequently ready to pay more for a property with owned solar panels than one with leased solar panels. Here are a few situations with different selling processes if you are trying to sell a property with installed solar panels. Let’s have a look.

Solar Loans:

When you sell a property with a solar loan, the bank can assist you in transferring the solar loan to the buyer. However, your selling possibilities are determined by how you funded the mortgage, namely, if it was secured or unsecured. If you financed the solar panels with a secured loan, you must pay off the debt before selling your property.

If you purchased the solar system with an unsecured loan, the debt isn’t attached to your home, enabling you to sell it before paying off the loan.

Solar Lease:

In contrast to a solar loan, selling your home with a solar lease may be a burden. It is because you do not own the solar panels; the photovoltaic firm does. Consequently, selling a property with a solar lease entails selling the home with or without releasing the solar lease in the name of the new owner. Hence, there are two potential options:

First, you can do a lease buyout where the seller pays off the remaining leases and receives all benefits from their system. However, this will come at a cost as the seller is expected to pay any remaining lease payments in one lump sum or over a predetermined period.

The other option is for the seller to transfer their lease to the buyer and have them assume ownership of their solar panel system. It relieves the seller of additional costs and eliminates any future savings and incentives they may have gained from having their solar panel system.

While selling a property with a rented renewable energy solar plant is more challenging, it is possible. To prevent liability difficulties, the seller, buyer, real estate agent, and solar provider should negotiate the solar panel lease in addition to the property itself.

Solar PPA:

In certain areas, homeowners can rent or fund solar panels using power purchase agreements (PPAs). In this agreement, a  third party possesses and maintains the solar power plant on your rooftop, and you receive a bill from that company for your electricity each month. Though it’s the same as your casual private electricity owner, it’s a greener option with at least 20 to 30% savings. Some PPAs may bind you in for a fixed rate, but others will have a payment plan that increases yearly.

Solar leases and PPAs have significant downsides. You are paying for something you do not own, similar to a vehicle lease. As a result, you are ineligible for any tax breaks or other advantages you gain by holding a solar system.

Although a solar-powered system may increase the market worth of your property, leasing differs. A Power Purchase Agreement, or PPA, is comparable to solar leasing. To sell your property with a solar PPA, you must sell the property and hand over the solar PPA to the new purchaser. However, the seller, buyer, realtor, and solar business should negotiate the solar panel PPA.  It is because PPA doesn’t allow you to transfer ownership simply. Besides, the prospective investor may prefer something other than solar panels. If this is the case, you may be subject to a substantial lease termination cost.

Final Words:

Solar panels are an excellent investment. One of the most significant benefits for homeowners is an improvement in property resale value. You will create the groundwork for a great future investment return on your house value by making wise selections and learning how to explain the system’s worth to your realtor and prospective purchasers.

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Solgen Power is a solar energy equipment company that sells and installs solar for homeowners. Solgen Power has been recognized by INC. 5000 as one of the fastest growing companies in the nation. Solgen Power has grown nationwide and continues to provide excellent customer service to homeowners.

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