There’s been a lot of speculation and pontification on what value a solar array adds to your home’s resale value. So let’s start with a basic premise: the question is not whether a system will add value to your home – the question is how much value.
For the purposes of this discussion, we are just looking at fully-owned systems. Leased systems do not add value to the home because they are not the property of the homeowner. We explore this in much greater detail in our Buying and Selling a Solar Home webinar series and accompanying guide.
The Value Judgment of Solar
While not all realtors promote the value of a solar array correctly, most home buyers certainly pay attention. Much like pools or three-car garages, the value of solar is largely up to the appraiser's best judgment at the time of sale. The only clear regulatory guidance concerning solar relates to leased systems. Specifically, leased systems do not add any appraisal value to a home.
For this blog, we consulted Tara Rutkowski, one of Arizona’s top real estate agents specializing in solar-equipped homes. According to Tara, installing solar typically increases home value between $1,000 to $1,500 per kW installed, depending on the age of the system and its demonstrated savings. In addition, Ecowatch recently explored this subject, citing a Zillow study that showed an increase of around 4% for homes equipped with fully-owned (not leased) solar panels. Of course, this is a national average; expect values to be on the higher side in the Valley of the Sun.
Is Solar a Desired Home Addition?
Yes, and getting hotter as consumers become dramatically more concerned with environmental issues. Plus, with our 300+ annual days of sunshine and high energy usage in summer, solar power is particularly compelling here in the Phoenix area. But when assigning value, it is vital to market the solar addition accordingly. Showing before and after bills so that prospective buyers can understand the savings potential is the single most powerful marketing tool you can use when it comes to ensuring maximum return for your solar addition.
Factors at Play that Determine Value
There are myriad factors that come into play when estimating how much solar will add to a home’s value. Here are just a few things to consider:
Location – Real estate prices vary widely in the Valley, as do electrical costs in different areas.
Monthly Savings – A home’s geography and roof orientation will impact how much the solar array produces and consequently how much it reduces the utility bill. Showing before and after bills puts the actual savings front and center for a prospective buyer.
Cost – The amount paid out of pocket for a system figures directly into the profit calculation if and when you decide to sell your solar-equipped home. Current incentives can offset more than 26% of the initial solar investment. These incentives, however, are disappearing fast. So, if you’ve considered going solar in the past, do not wait. Contact a reputable installer for a free assessment and explore your options.
Home Size and Consumption – Not surprisingly, larger homes consume more energy, especially in summer. The larger the home, the more valuable any energy savings will be. Savings offset directly correlates to a home's resale value.
System Age – PV technology has evolved significantly over the years, with each generation delivering improved efficiency, increased power, and greater longevity. While even decades-old panels still do their job, an older system will increase the odds that a prospective buyer may need to do repairs or updates.
System Replacement Value – Along the same line of reasoning as system age, the cost of repair and replacement parts will also figure into the equation. While most PV systems are low maintenance overall, our desert sun eventually takes its toll on everything, and older systems are more prone to needing maintenance as time progresses. Like any technology, parts can become scarcer as systems age. Thankfully, solar is still a relatively young industry and, in most instances, replacement options are available.
Net Metering – Many older systems are grandfathered into retired rate plans that offered much higher returns than today's options. As such, some older systems can add greater value because they offer a prospective buyer a much higher savings potential. Depending on when the system was installed, it may be “grandfathered” into an older net metering plan, where the owner receives full retail value for any excess power sent back to the grid. These older net metering plans differ from more recent solar rate plans that offer fixed return rates that are much lower than the retail cost of electricity. A solar-savvy agent will know how to spot these systems for a potential buyer and will market these gems accordingly during a sale.
Solar System Size Matters Less than Performance
Do larger solar installations add more value to your home than smaller systems? The answer is typically yes, but it is not as cut and dry as you might think. In most cases, it's not so much about size, but production relative to power consumption. A smaller system using more efficient panels on a low-consumption house can be just as impactful as a larger system serving a family that uses a lot of energy. Again, the most important factor for demonstrating value is to show how much the power bill went down after installing the system.
Is Solar Worth the Investment?
This question depends on many factors. Not the least of which is how long you plan to be in the home and how big your energy bill currently is. Unlike a kitchen update or a new pool, adding solar is one of few home improvements that starts paying you back from the day that it's activated. After all, you are going to pay for energy either way. Wouldn’t you rather be more energy independent in the process? It is also important to remember that younger buyers are much more concerned with environmental issues. All indicators suggest that having a solar-equipped home and marketing it well at the time of sale will only be more compelling as time goes by.
If you'd like to learn more about buying and selling a home with solar, we invite you to download our free guide, Buying & Selling A Solar Home. If you're ready to speak to one of our solar integrators, simply click here to request a free quote.