Do Solar Panels Increase Home Value?

Many homeowners save thousands in utility costs over the course of their solar panels’ life span. Considering that solar panels increase home value by an average of 4%, it’s no wonder you may be interested in adding solar panels to your home. Here’s what you should know about solar panels’ potential savings and how they create value for your property.

How Much Value Will Solar Panels Add to My House?

Solar panels will increase your home's value by an average of 4%. Keep in mind that the full increase to get to that figure is calculated over 20 years. With solar panels lasting 25 to 30 years, you could expect to gain $20,000 to $50,000 in value in total. That amount is the net savings after the cost to install solar panels and includes benefits from the federal tax credit on solar panels.

Buyers are increasingly looking for ways to save on utilities when browsing listings. If you live in an area where being environmentally responsible is highly valued, your home may gain even more value than the average home after your solar panels are installed.

Factors Impacting the Added Value of Solar 

Here are the key factors to remember when calculating how much solar adds to your home value.

Location and Local Electrical Rates 

The value solar panels will add to your home is impacted by where you live. For example, in San Francisco, solar panel ROI is 4.4%, while in Los Angeles, the increase is 3.6%. The percentage is also higher in California than in other sunny states, like Arizona (where it’s 2% to 3%), because local electrical rates are higher there.

In states where solar isn’t as common, the home value increase tends to be higher, ranging from 4% to almost 10%. 

Since the actual numbers vary widely, research your area for the most accurate information. Here are some examples of added home value by state:

• New Jersey: 9.9%

• Pennsylvania: 4.9%

• Washington: 4.1%

• Hawaii: 4%

• New York: 3.6%

• South Carolina: 3.5%

Owning vs. Leasing Solar Panels 

The increase in home value presented so far assumes that you own your solar panels. If you buy a home with solar panels that are paid off, manufacturer’s or installation warranties might not transfer over to a new owner, which can lead to costly repair bills in the future.

When buying a home with solar panels with an outstanding balance on a loan, you’ll need to transfer the loan into your name. You should make sure that you’re able to take on the extra costs of the solar panel loans. Also, consult your mortgage company to see if they’re willing to finance a home with an existing solar panel loan.

Lastly, when you purchase a house with solar panels on a lease agreement, you’ll need to do your due diligence. Check with the lease company to see how to transfer the agreement into your name and educate yourself on all the details. You may never own the panels since the purchase option at the end of the agreement tends to cost more than the market value of the panels.

Solar System Condition

Solar panel systems last 20 to 25 years, so before buying a new home, consider how old the panels are. If they were purchased outright, this isn’t as big of a consideration, since you can simply buy replacement panels when the time comes.

However, if you’re dealing with solar panel loans or leases, purchasing a home with older panels can have some downfalls. Transferring agreements can be time-consuming and complex, and after all is said and done, you might be looking at starting a new loan or lease for replacement panels in the near future.

Will Adding Solar Panels Affect My Property Taxes?

Adding solar panels to your home may increase your property tax. This depends on your state and city’s tax laws, so call your local offices to find out. In some cases, installing solar panels will increase your home value according to the tax assessor, which in turn will increase your property taxes.

There are 15 states that exempt homeowners from paying additional property taxes due to solar panel installation, including Texas, California, and North Carolina. If you’re in one of these states, your home value can increase without the burden of extra taxes. You have to meet your state’s eligibility requirements, which often require you to own the panels rather than lease them.

How Much Money Will I Save in Energy Costs After Installing Solar Panels?

The average homeowner saves between $10,000 and $30,000 in energy costs in the first 20 years after installing solar panels. 

The specific amount you can save after installing solar panels varies based on your local climate, your energy usage, the size of your home, and other property-specific details.

Many people wonder if they will still have to deal with monthly electricity bills after having solar panels installed. You will still receive electric bills from your utility provider if your home stays connected to the grid after your panels are installed. However, you may not necessarily always be paying an electricity bill every month if your state allows for metering.

In most states, residents with solar panels are able to receive credits for their electric bills for any energy that they feed into the grid. You'll break even as long as you're contributing as much power into the grid as you're drawing out. However, you will be charged for any energy that you draw that isn't offset by your contributions.

Can Adding Solar Decrease My Home’s Value?

Your home value will not decrease if you install solar panels, regardless of whether you’re in a sunny state like California or a state with four distinct seasons like Washington. However, if the panels are old or poorly maintained, a future home buyer could see them as a liability and will need to consider the costs of replacing them when putting in an offer.

Ways to Get the Most Value From Your Solar Panels

Here are some tips to get the most out of your solar panels. 

• Choose the right types of solar panels for your property.

• Evaluate all solar panel warranties before signing on the dotted line, including coverage for installation, damage to the roof, and damage-related roof leaks.

• Ask your local solar panel installer if they will obtain a building permit that ensures the work is in compliance with the Federal Housing Administration (FHA) guidelines.

• Ensure that the company providing your homeowners insurance policy recognizes the solar system being installed.

• Discover if you can bank solar credits in your state.

• Opt in for net metering options whenever possible to save money on electric bills. Extra power you generate with the panels you don’t use gets credited to you. This helps you tap into the energy generated during the summer and use it via credits during the winter.

• Get the most out of your solar batteries by storing them in a dry and cool place, keeping them clean, and avoiding overcharging them.