When it comes to purchasing a residential solar system, potential solar buyers want to make sure the numbers make sense. We get questions that range from every angle:
- How much will solar cost?
- How much will it reduce my electricity bill?
- How many years will it take for the solar savings to be greater than the overall cost?
- How large is the solar tax credit?
- How long will my panels last?
And the list of questions goes on. At Blue Raven Solar, we encourage our prospective customers to ask questions so that they know exactly what solar will do for their month-to-month and long-term savings.
One question that customers often overlook or even forget to ask is the long-term effect of solar on the value of their home and property—and the truth is it can have both a positive and negative effect. Before you go trusting online sources that claim your home’s value will immediately increase by 13% if you buy a solar system, give this post a read to understand all of the causes and effects of solar on property value.
When can solar increase my property value?
Solar becomes valuable when it is paid off and owned by the homeowners. Whether a homeowner has finished their loan payments or bought the panels with cash, homeowners who are debt free can expect to increase the value of their home for several reasons.
- Firstly, they control their power and aren’t at the mercy of unfair, monopolized utility companies.
- Secondly, they have ownership of an asset that has a large fiscal value.
- Thirdly, they can store power through battery backups during power outages and at night.
So, the best way to increase your property value with solar is by having your panels paid off. A solar system can help add a futuristic touch and the added incentive to a potential buyer of avoiding one more utility.
How much will the value of my property increase?
There are several factors that can contribute to the overall increase in value to a property because of a solar install:
The first and most important aspect is the size of a system. When it comes to solar, bigger really is better for a couple reasons. A bigger system not only signifies that a home doesn’t rely on utility providers, but in some cases, it can also generate excess power that can be sold back to utilities companies for a fixed price. In other words, some states allow residential homeowners to make money from their solar panels.
The second factor that contributes to the value increase is the age of the panels. Solar panel tech is a rather new industry and sees lots of new developments and improvements on a year-to-year basis. Thus, the older the panels are the less electricity they are likely to produce and the less value they hold. That’s not to say that a 20-year-old solar system is useless. Some of the first solar panels that started using contemporary technology over 60 years ago are still producing electricity. Many solar panels installed 20 years ago still produce 70%-80% their original output at peak efficiency.
The third factor that determines a system’s value is where they are installed. In states that have higher electricity costs, the overall value of residential solar significantly increases. This is also true in states where ideal conditions are more reliable. A sunnier, milder state can contribute to a more consistent output from a solar system.
The fourth factor that adds a boost in value to a home’s panels is the Federal Investment Tax Credit (ITC). In previous years, the ITC allowed all homeowners to use 30% (26% in 2020 and 22% in 2021) of the cost of their system as a tax credit for the current or following year. Thus, a homeowner who bought a $30,000 solar system would receive $6,600 in tax incentives the following year.
These incentives are not removed from the overall value of the system, meaning that the now $23,400 system after taxes is still worth $30,000 on a homeowner’s property.
Because every solar owners’ system is different, it is hard to give an approximate estimation of how much a solar system will increase the value of a home or property, but as a general rule of thumb it should at the least retain its original value and help a home sell quicker if the system is paid off. Depending on the price of power when a homeowner sells, it may help boost a house’s sale value even more.
Is there ever a situation in which solar panels won’t affect the value of my property?
Many homeowners are tempted to go solar with larger solar companies who only offer power purchase agreements (PPAs) and leasing deals. In these solar offers, homeowners get solar installed on their roof and avoid paying any upfront or long-term costs.
Although these deals can draw a lot of initial attention, homeowners who sign PPA or leasing deals do not own their panels. This means that they do not receive any local or federal solar incentives, and they do not control the price of their electricity.
Rather than purchasing electricity from the local utility provider, homeowners with leased solar will pay the solar company at a fixed price for the power that the panels on their roof are generating. Thus, these deals can be lucrative for big solar companies, but hardly make a difference for the homeowner.
Without ownership, homeowners who finance their solar panels through PPA or leasing will not increase the overall value of their property. The home buyer will also have to assume the payments for the PPA/lease, or the seller will have to buy out the contract.
Can solar decrease the value of my property?
Technically speaking, no—solar will rarely, if ever, decrease the value of a home. One of the few situations where solar could cause a decrease in property value would be if they were improperly installed, causing damage to a customer’s roof or electrical wiring. However, in most cases solar companies offer warranties that cover any extra costs from damage or faulty installs. Here at Blue Raven Solar we offer a 10-year workmanship warranty and a 25-year equipment warranty, so decreasing the value of your home is a highly unlikely scenario.
Another rare situation where solar might make things harder for a homeowner is when selling a home. Not because the property itself is worth less—solar systems provide ample savings to anyone that owns one. But when someone tries to sell a house with a solar system they’re still paying off, they’re now trying to sell two things at once: the house AND the solar system loan.
Most solar buyers don’t have enough disposable income to pay for a solar system out of pocket and so they leverage financing plans that may take 10, 15, or even 25 years to pay off depending on the details of the loan.
Homebuyers try to avoid taking on any loan payments that are outside of their new mortgage. Depending how far along the homeowner is in their solar loan contract, there are several options available to address this issue:
Option 1: The best option would be to convince the prospective homebuyer to contractually take on the solar loan payments. If the buyer really loves the home, they may be willing to pay these bills to lock in ownership of the property.
Option 2: If there isn’t a buyer willing to take on the solar loan, the homeowner may have to lower their desired sale price for their home in order to compensate for solar loan payments.
Option 3: The last option would be to use the money received from the sale of the home to pay off the outstanding balance of the solar loan.
This gets more complicated when involving a leasing agreement or a PPA with another company since the homeowner has to not only sell the house, but also sell a separate agreement with the company in question.
If you’re selling your home but still have a solar loan, you may want to avoid potential buyers who will only purchase if the solar panels are removed from your home. This is the worst-case scenario, in which the homeowner will have to pay for the removal of the panels as well as continue to pay them off through their solar loan payments.
So, what can we learn about solar causing a decrease in the value of a property? Homeowners should have a plan before they decide to go solar:
- Know how long they’re going to live in their home
- Know how long they’re going to take to pay off their solar loan
- Know how they’re able to save more to own their system faster
Homeowners can avoid the majority of situations that would cause them to lose value on their home by going solar by making smart moves at the top of their installation with the right solar partner.
Does it make sense to buy solar to increase the value of my home?
The answer is yes. Solar power provides a green alternative and gives homeowners control over their power options instead of paying out a fluctuating rate to utility companies.
In most cases, solar probably shouldn’t be treated like a short-term investment. Most solar system buyers take on loans in the tens of thousands over a decade or two. However, there are dozens of other reasons that prove that solar is a great long-term investment in 2020. And aside from the generic list of federal tax credits, low prices because of high competition, local incentives, and more, Blue Raven Solar makes it so homeowners can start saving from day one of their solar journey!
Contact us today to get a free solar quote to see what kind of savings you can access. Our experts and contractors will take a look at your location, your home, and your average electricity bill to see just what kind of solar system would save you the most money. We want you to trust our transparency, and so we won’t try to sell you on a system that doesn’t make sense.
With our BluePower Plus+ financing package, homeowners can get solar for no cost out of pocket and not pay a single penny until 18 months into their solar journey. After that, we try to make sure your monthly payments are under the average of what you were paying before.
Combine that with your other options of savings, and you could theoretically put it all toward spending down your solar system payments ahead of time:
- Extra savings from the difference between your loan payment and old electric bill
- Extra tax incentives from federal and state programs
- Extra earnings from potentially selling your power back to the grid (depending on your state)
- Extra savings as the average cost of power goes up and your monthly payment stays the same.
If you want to make sure your solar system increases the value of your property, it’s in your best interest to pay to own. Paying to lease hands over most of the benefits to another company and paying with a PPA just means you’re buying power from a different company who could choose to raise their prices right along with the local utility company.
And the faster you pay down the solar system loan, the faster you start seeing months with no electric bill or payment at all. It’s all just efficient equity installed on your rooftop.
If you’re curious to see how much solar can increase the value of your home or save you on a month-to-month basis, click the link below and fill out your basic information in order to get on the phone with one of our solar specialists. They’ll be able to answer any of your questions about going solar and design and create a custom solar quote for your house at no charge!