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A Guide to Understanding Solar’s Effect on Home Values


By mtvSolar | March 22, 2018 | Category mtvSolar

How much solar affects a home’s value can be a tricky conversation thanks to an assortment of factors, including the general youth of the solar industry. But as solar becomes more and more prominent, buyers and sellers are getting a much clearer view of the effects of solar power, minimizing complications that used to make real estate transactions more difficult than necessary. With multiple ways to add value to your home, here’s everything you need to know to maximize the short and long-term benefits of going solar.

Leasing versus buying.

Arguably the most important thing to know about solar power is the eternal question of whether to lease or buy. Although not an exact comparison with auto financing, the general principle holds up: it’s almost always better to buy than lease. In the case of solar, sellers can expect smoother transactions with bought panels for the simple reason that it makes a buyer’s life much simpler. While fully purchased panels are clearly best-case scenario, solar payments can also very easily be rolled directly into the mortgage without additional credit verification that can come with a lease. Considering the hoop-jumping that is typically required for the average real estate sale, owned solar panels – whether outright purchased or financed – can give a seller a significant advantage.

But the biggest positive comes in when raw financials are considered, as the energy brought in will easily outweigh the cost of the payments over the lifetime of the panels. With panels that are designed to significantly outlast the payment plan, the benefits also only get stronger over the long haul and a buyer understands that there will be a significant benefit once the panels are paid off. Even before the panels are owned outright, however, the solar payments tacked onto the mortgage should actually be less than the value of the electricity savings from the day a house is purchased. The leverage for an owner gets even better if a sizable portion of the solar loan is paid off, as the buyer will be walking into smaller monthly payments and a shorter timespan until the big pay-off at the end of the loan.

When panels are leased and the home is sold, the leasing contract must also be transferred to the new owner.  Some leasing companies even attach a lien to the home which can further complicate the sales process.  In general, if a homeowner has leased panels, they’re better off buying out the lease before selling the home.  In the long term from a financial standpoint, it would’ve been better to buy the system originally.

How much does it directly increase the value?

It took a little while to get an idea of exactly how much value a solar system can add to your home, but studies now paint a pretty rosy picture about the fundamentals. Although there are some regional variances, most solar panels add about $3 to a home’s value for every watt the system generates, which works out to be roughly $15,000 for the average 5KW system. This also gives direct financial incentive to go for larger systems that can produce more energy, as long as it fits your energy needs. Factor in the Federal tax credit if you purchase your solar equipment and you can easily get a system worth considerably more to your home’s value than you’ll pay for it.

Will the favorable trends continue?

For many, owning a home is a path to long-term financial stability, which is why it’s so critical to make sound investment decisions for any improvements. The last thing a homeowner wants to do is add something to the home that a future buyer isn’t going to want, providing incentive to make alterations and renovations that fit with not only the present but with the future. Although solar power wasn’t beloved by everyone right off the bat, especially in areas with strong coal mining traditions, the attitudes about solar have been getting steadily more positive in recent years as the solar industry has grown into maturity.

And the polling numbers about support for solar are shockingly positive, which gives you a really good idea of why more and more home-buyers view solar panels as a significant perk. A recent Pew study found that 83% of the most conservative participants were in support of expanding solar, with moderate and liberal support for solar being even higher. Although there are very few topics of today that get that level of support, backing of solar cuts across every demographic and political ideology to create a very clear short and long-term trend of support.

With that type of support behind an industry that is very clearly on the rise, the case for solar panels being a drawback to a home sale has completely crumbled. After all, a home is really only worth as much as a buyer is willing to pay for it and the best way to ensure the highest value is to have features attractive to the largest number of prospective buyers. Even your beloved kitchen or master bathroom renovation might not be liked by eight out of 10 of the buyers who take a look at your home. Given the current favorability of solar and the way younger generations are embracing the technology, it’s possible that no other feature in your home will have more long-term appeal than your solar panels – especially if you own them.

Bottom line.

While there was a time not that long ago when having solar panels could muddy the waters of a real estate transaction, the stigma has largely evaporated as the positive data makes the rounds. Even if you’re unsure of how long you’ll be in a particularly home, the chances that you’ll end up with a great investment have significantly improved as homebuyers increasingly see solar panels as a feature instead of a problem. With a quality solar system installed by a qualified contractor, homeowners should expect to see monthly energy savings, raised home values, and confidence that their solar panels will be an advantage if it’s ever time to sell.

For additional information about how solar panels affect home values, contact our solar pros for answers to all your questions.

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