Do solar panels increase home value?

Solar panels and home value

Solar panels have become an increasingly popular investment for homeowners looking to reduce their dependence on traditional energy sources, save energy and lower their carbon footprints. Basically, as the benefits of clean energy become more widely known, investing in solar panels may be good for both the planet and your pocketbook.

Sarah, a ConsumerAffairs reviewer from California, mentioned as much in a phone interview: “It’s going to be nice to not have to pay all this money for PG&E and actually be paying towards something that we can own and it’s going to benefit us in the property value.”

A study by Zillow reported that homes with solar panels sell for 4.1% more, on average, than those without, and the increase in resale value is higher in certain cities, like New York. A 4.1% increase may not seem like a lot until you consider the size of the numbers involved — if you’re selling a $500,000 home, that’s an extra $20,500.

Ericka, a ConsumerAffairs reviewer from California, spoke with us over the phone and said installing solar panels would increase the value of their home, even though California already requires solar panels on all new residential buildings: “I'm a real estate agent as well as an engineer. So, I know that it is a great benefit. And a lot of clients are attracted to them when the home has solar already.”

As more homebuyers become environmentally conscious, the demand for homes with solar panels is likely to increase — driving up the benefits of solar panels even further.

How much will solar panels increase my home’s value?

For homeowners, the thought of increasing property values is an exciting prospect. However, determining precisely how much value a solar system will add can be challenging. If you’re planning to go solar, here’s how to estimate how much solar panels can increase your home’s value.

Begin by assessing your property’s current value. (Try looking at similar homes without solar panels in your area to determine an average baseline price.) You probably don’t need a formal home appraisal, but if you’ve recently had one done on your property, that could be a good place to start.

On average, solar panels can increase the sale price of a home by about 4%, according to the Zillow survey we mentioned earlier. That means you should multiply the estimated value of your home by 1.04 to get a rough idea of your home’s value with solar panels. As an example, if comparable homes without solar panels are selling for around $250,000 in your area, you may be able to justify a list price closer to $260,000 once you install a solar energy system.

What determines how much value solar panels add?

External factors can influence the value of your solar installation, though, so don’t hold fast to the simple calculation above if your situation has unique circumstances.

Here are some of the main factors that influence how much solar panels can increase the value of your home:

• Home location: Due to different electricity rates and incentives, the benefit of solar panels varies based on where you’re located. Hawaii, for example, is the state where solar savings go the furthest.
• Panel location: How solar panels are installed on a roof can also affect how they impact your home’s value. The most desirable locations for solar panels are in areas with direct, unobstructed sunlight, like south-facing roofs with few trees. On the other hand, solar panels on a north-facing roof or a heavily wooded lot will not produce as much energy and may add less value to your home.
• Roof age and condition: If you install solar panels on an older roof, it may be necessary for a buyer to remove the panels and replace the roof later on, which is a hassle some people won’t want to deal with. Solar panels may also void the warranty on a roof.
• Quality and installation: The quality of solar panel equipment and its installation can affect energy production, impacting how much value the solar panels add to the home. Essentially, if you install low-quality solar panels or install them incorrectly, they may yield less energy and resale value.
• Size and efficiency: The size and rated efficiency of your solar panels may also determine how much value they add to your home. For example, larger, more efficient solar panels can generate more energy and yield more savings — possibly adding more value. However, some buyers may dislike the look of large solar panels, so don’t go overboard.
• Panel age and condition: Solar panels last 25 to 35 years on average, but older or damaged solar panels may add less value than newer ones with better performance capacity. Plus, outdated solar panels that make a home unattractive are more likely to deter buyers than increase resale value.
• Local energy costs: The cost of electricity in your area can also influence how much solar panels add to your home’s value. Based on U.S. Energy Information Administration data, residential utility bills averaged $121 per month in 2021. If energy costs are higher than that in your area, the increased savings from solar panels could be more appealing to potential buyers.
• Power outage frequency: The frequency of power outages in your area can also affect the value of solar panels. If the risk of a blackout is high, it could make solar panels more appealing and increase their value-add.

» MORE: Solar energy pros and cons

Is installing solar panels worth it just for the improved resale value?

Most homeowners install solar panels for environmental reasons or to reduce their monthly utility costs, but are they worth installing just to increase your home’s resale value? We asked Rob Giuffria, managing broker at Connecticut-based Tea Leaf Realty, and he did not recommend solar panels as a short-term real estate investment.

Even if the potential boost in value outweighs the cost of the solar panels, home solar installations can actually complicate or delay the sale of a home — especially if there is a lease, ongoing maintenance contract or other long-term agreement in place. “While most buyers see solar panels as something that’s directionally correct, it becomes a negative when they learn about contracts for maintenance or other costs and commitments,” Giuffria said.

However, if you plan to be in your house for five years or more and are interested in solar, Giuffria still recommends the upgrade.

Manuela Adami, a representative with Swiss solar company Volted, summarized the situation well: “In some cases, the increased resale value may not fully cover the cost of the solar installation. However, when considering other factors such as reduced energy bills, potential tax credits or rebates, and the environmental benefits, installing solar panels can be a wise investment.”

» MORE: Are solar panels worth it?

Bottom line

Installing solar panels can make your home more environmentally friendly, energy-efficient and attractive to potential buyers. That means, with proper installation, maintenance and understanding of local regulations, you can realize a significant return on your solar energy investment. However, you may want to reconsider if resale value is your only reason for going solar, and be careful about how you finance your solar energy installation if you want to use it to attract buyers later on.