Solar 101

Introduction to Solar Energy: How It Works and Why It Matters.

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Everything You Need to Know About Solar Panels and Resale Value

Making the decision to go solar can seem overwhelming for homeowners considering the upfront investment required. A major question that arises is how much solar panels will impact resale value when it comes time to sell. Will upgrading to solar pay off in increased home valuation?

Introduction

For most homeowners, their house is their single biggest investment. Naturally, preserving and hopefully growing that investment over time is a major priority. So when considering major home upgrades like installing solar panels, valid questions arise around how these large investments can impact resale value down the road.

According to new research from the Lawrence Berkeley National Laboratory, solar energy systems actually increase resale value. Recent studies show definitively that homes with solar panels in the U.S. sell for significantly more than comparable properties without solar installations.

Solar Panels Increase Resale Value

Multiple studies, including a detailed analysis by the Lawrence Berkeley National Laboratory, demonstrate that houses with solar photovoltaic systems sell for more than homes without solar power across the U.S. Controlling for other value factors, data spanning over 85,000 home sales from 2002 to 2013 shows that buyer demand translates directly into premium pricing for properties with solar panels. The Berkeley study confirmed that homes with an average-sized solar array sold for around 4% more compared to similar non-solar homes.

In addition, data from Redfin analyzed over 47,000 home sales in California found that homes with solar panels installed sold 20% faster on average than other homes without photovoltaic systems. Research showed having energy-efficient solar boosted buyer demand resulting in 50% as many days spent on market compared to conventional homes.

Solar Adds Thousands in Value

“We have seen solar homes sell for $5,000 to $10,000 more than comparable homes without solar,” said Kevin Stone, a California realtor from Camas Real Estate

Specific real-world examples reflect the statistically significant price premium solar homes receive due to market demand from buyers. Data from Zillow and Redfin found in solar-friendly states like California and Florida up to a nearly $30,000 increase in sale price for newly built homes outfitted with solar power:

  • A new 4,140 square foot solar home in Paradise Valley, AZ sold for $3.135 million, over $100 per square foot higher than comparable new constructions without solar power.
  • A Sarasota, Florida 5-bedroom solar home purchased for $440,000 sold 4 years later for $625,000, over $180,000 more than average resale prices for similar sized non-solar homes.

Consider System Ownership

Leased vs Owned Solar

When installing solar panels, homeowners have two main options – leasing the solar array or owning the system outright. With leased solar panels, homeowners sign a long-term contract to make monthly payments to the solar company that technically retains ownership over the equipment. The panels are installed at little to no upfront cost outside potential deposits or fees.

With an owned solar system, the homeowner purchases the panels outright either with cash or via solar loans and financing plans. They claim the 30% federal solar tax credit and ownership over the solar energy system assets installed on their property.

Leased Solar

With leased solar panels, homeowners sign a long-term contract, typically 20-25 years, to make monthly payments to the solar company that retains ownership. Little to no money is paid upfront, as the solar provider covers system costs in exchange for those lease payments. Any solar power produced flows to the customer. While more affordable upfront, leased systems mean less long-term savings and typically deter buyers more when selling.

Owned Solar

Owned solar systems involve the homeowner purchasing the panels outright – whether via cash or financing like solar loans or PPAs. The customer claims full ownership and is entitled to state/federal incentives and greater electric bill savings. Though more expensive initially, owned systems increase home value significantly more and deliver greater lifetime financial return through decades of electricity offsets and premium valuations.

There are clear pros and cons to both leased and owned solar when it comes to home resale value. Owned systems deliver substantially higher valuation but require greater upfront investment. Consult with solar installers to determine what works best based on budget, timing, and owning intentions. The key is understanding how future buyers may perceive leased equipment versus assets directly owned.

Ownership Affects Resale Value

Research from Zillow shows homes with leased solar panels sold for 1.7% less on average than comparable properties without solar power. Meanwhile, houses with owned solar systems sold for 3.5% more on average than non-solar homes. A difference of over 5% in resale value between leased vs owned systems.

“Home buyers see owned solar panels as a selling feature that adds value,” said Liza Mendez, a Florida real estate agent at SolarHomeRealty. “But leased solar systems can deter some buyers.”

Transferring Solar Leases

When purchasing a home already outfitted with leased solar panels, buyers can often choose to assume the remainder of the lease from the sellers with no penalties or fees. Most solar lease providers also allow transferring the lease obligations directly to the new homeowners, letting them inherit the existing terms and payment structure if they wish to keep the current solar array. However, the lease obligations may deter some buyers leading to the lower resale value premium compared to owned systems.

Solar Improves Multiple Value Factors

Installing solar not only directly increases the objective value of a home through the system assets and infrastructure, but also enhances other qualitative factors that matter for resale. Updating your home’s aesthetics with a contemporary solar array adds curb appeal compared to outdated or mismatched roofs that can deter buyers.

Solar panels also provide ongoing energy bill savings through clean electricity generation, reducing monthly homeownership costs by $100 or more. Lower utility bills mean thousands in energy expense savings that appeal to buyers. projection of over $30,000 in reduced electrical costs.

Outfitting your house with solar shows an investment into the future. More buyers want sustainable, environmentally-friendly homes outfitted with the latest technology advances. Solar panels signal your dwelling as modern, forward-thinking and technologically advanced – drawing demand.

Short Term Ownership Difficulties

However, homeowners only planning to own their house 4-5 years may find it difficult to recoup solar installation costs in increased resale value during that short timeframe. With an expected system payback period around 5-7 years accounting for installation costs and available tax credits, selling earlier prevents fully capitalizing on solar’s resale value benefits. Those uncertain about timing should lean toward leased solar with lower upfront commitments.

Key Takeaways

The data clearly shows that installing solar translates to a real, measureable 4% resale value premium on average. Multiple studies validate solar homes sell for more with buyer demand focused on long-term ownership cost savings leading to premium pricing.

In addition, upgrades solar homes spend 20% less time on market before selling given desirability factors like reduced electrical expenses. Greater buyer competition results in faster sales.

While benefits are lower short term, long-term owners can expect solar systems to add value through price premiums and decades of energy cost reductions. As attached property assets, solar raises intrinsic home value itself based on market supply and demand dynamics.

In summary, key solar resale value benefits include: