Do Solar Panels Add Value?!?

Question

Do adding Solar Panels to a home impact the value? Is it a different answer between impact to “appraised value” vs “value buyers are willing to pay”?

You can very accurately calculate how many dollars solar panels save each month, use discount rate and come up with a total value added number. But my guess is it is a neutral impact to maybe slight increase. It also probably depends on the buyer. Some may think they look hideous and thus lose interest...other may love the fact that the house is “green” and be willing to pay more. Narrower set of interested buyers, but the ability to potential sell for a higher price.

Ultimately, it probably only makes sense as an investment if you expect to benefit from the cost savings in excess of the investment

Does anyone have experience with solar panels? What are your thoughts?

Steve K. · Answer

@Robby Hogle The Appraisal Institute and Lawrence Berkeley National Labs did a very impressive study on this in 2015 and found that solar undeniably adds value and decreases marketing time for homes. They determined for every $1,000 in energy savings, the home value is increased by $20,000: https://eta.lbl.gov/sites/all/files/publications/lbnl-1005058.pdf. They also determined that in every single case they looked at homes with solar sold faster than those without. This study is the most often-referenced and perhaps most comprehensive to date but many others have been conducted more recently for example Zillow reported this year that homes with solar sell for a 4.1% premium over comparable homes without solar according to their data. Here is a recent article that summarizes a few of those more recent findings including the Zillow one: https://www.energysage.com/solar/why-go-solar/increased-property-values/. The key for you to get more for your solar-powered  home will be in hiring an agent who understands the solar value proposition. In areas with a mature solar market basically all the RE agents understand how solar works and are able to sell solar-powered homes for a premium, but in areas where the solar market is still developing there remain some RE agents who don’t like it or have misconceptions about its value, mostly due to solar adding a layer of complexity that they haven’t figured out how to navigate yet. It makes perfect sense to most people: a house with free electricity is more desirable than one with a large electric bill. Reduced operating cost=increased value. As solar markets develop more and more agents are becoming adept at selling solar-powered homes just like they would homes with other major value-ad features. Hard data shows us solar absolutely is a major value-ad feature.

Dan Mumm · Answer

I can speak to this as a Realtor in Vegas who has dealt with this on numerous occasions.

It's almost always a no. You hit the nail on the head with the difference between "appraised value" and "perceived value". Although they do typically impact appraised value if they are OWNED (typically appraisers give 50 cents on the dollar cost to install), they are typically neutral or negative on the perceived value.

If you want to add value to something, you don't want to limit the buyer pool. That's what solar panels do. Whether its right or wrong, they scare off more than 50% of potential buyers. Even if they are owned, they tend to have this effect. I would highly recommend avoiding them, unless there is a big change in the public perception of them to the point where most people see value in them and aren't skeptical.

Steve K. · Answer

Not everyone will have the same experience across every market, and many regions (as well as many RE agents) are certainly lagging behind when it comes to the adoption of solar technology. However aggregate data allows us to see a bigger picture beyond just the experiences of individual agents, much in the way when we create CMA's all the comps aren't sales by the same brokerage.

At this point in time every study looking at hard data on a national scale supports the fact that houses with solar sell for more money at a quicker rate than those without. I suppose it could be that homeowners who have solar take better care of their homes in general or are more analytical as others here have mentioned (interesting theory), but I suspect the power plant producing hundreds of dollars worth of electricity each month is actually the biggest selling factor, which is why we now know that homes with solar consistently sell for a 4% premium. This has been well documented over many years by agencies that have no dog in the fight, such as the Appraisal Institute.

In my market many homes have solar and the general population is educated enough to place value on having an income-producing asset on the roof. Real estate agents here have become adept at buying and selling solar-powered homes and very few buyers or agents (if any) have a negative perception of solar.

Just use a reputable solar company that installs robust, aesthetically pleasing systems, and finance with a $0 down 2% interest loan that is cash positive day one instead of leasing. When it's time to sell, hire an agent that understands how solar works. Don't worry about limiting the buyer pool: there are way more people that prefer having no electric bill compared to those who enjoy paying an electric bill.

Jacob D Adamczak · Answer

You cant count on a system lasting 50 years, panels have a 20-25 year warranty.  Their production drops ~1% each year due to degradation, at that point after the warranty is up you'd be far better off replacing your system.  Inverters for sure will not last 50 years and often need maintenance or replacement before the 20yr mark.  Also, most home batteries these days are lithium ion unless it is an off grid application and those batteries only have a ~10 yr warranty.

Robby Hogle · Answer

@Myron Voorhis Thanks for the comments above! Definitely not looking into anything crazy or going off the grid. Looking at a low maintenance, net metering setup that is still tied to the grid. Hiring a professional installation company to make sure everything is up to code and approved by city / power company.

We're mostly doing it because we want to feel better about our environmental impact :)

Myron Voorhis · Answer

@Robby Hogle.  I have a degree in renewable energy, and work with solar systems every day at my day job. My profession opinion is that it depends on what is between the panel and your outlet. Panels have a ~50 year life span and hold their value pretty well. The batteries and perceived maintenance is what scares people, and for good reason. If it is a strictly grid tied system that it is low maintenance and reliable, and will scare less people. If you have a pile of lead acid batteries than need maintained and replaced regularly it will be a harder sell.

My advice is to have an electrician with PV experience look over the system. Make sure everything is up to code, there are many DIY solar setups out there. Have the electrician write up a statement saying it is all up to code and detailing maintenance schedules and cost. Educating appraisers and potential buyers will help the value if you have a good system. To be honest solar isn’t always a good thing. It can be a drain to throw time and money down, and it isn’t really as reliable as people think. I don’t think it will be much more “socially accepted” in the next 8 years, and wouldn’t count on it adding more value then than now. In some specific areas like Boulder, CO it will add tons of value because of the local political leanings. Other areas it may subtract value.

I think solar systems are more of a hobby than anything else. They make the homeowners feel better about their environmental impact. Not everyone pays attention to or cares about their environment impact, therefore it will always reduced buyer pool. I would guess in most areas, way less than 50% of potential buyers would consider buying a house with solar panels.

Dan Mumm · Answer

I'm concerned about some of the responses here being a little too idealistic.

Whether the negative perception comes from Realtors or actual buyers is insignificant to me as an investor.

As someone who speaks with buyers on a daily basis in the subject marketplace, I find a very different reality.

I'd be very cautious about studies using correlation as causation. Homes with solar panels installed selling faster probably has a lot of other factors than the solar panels. People who install solar panels probably take better care of their house, tend to be more analytical and price their home less emotionally, etc.

Nobody is saying it's not a value-add. The question is if it is as much of a value-add as investing the $20k in other improvements.

Seeing as the OP is using it for their primary residence though, this is all a moot point :)

Dan Mumm · Answer

I live in the OP's market. I sold 2 houses in the last 2 weeks with solar panels. Both appraisers added 50% of the installation cost to the value as their adjustment.

Go ahead and spend $20k on them, sell the house, and let me know how much you get back.

Robby Hogle · Answer

@Steve K. very interesting! Thanks for sharing the articles (and the insights from them)!

Dan Mumm · Answer

It's possible you could add a lot of value if you attracted one of the few potential buyers who are interested in it... but it's a very limited pool and your money would be better spent improving the property to the tastes of the majority of the buyer pool (repaint, curb appeal, kitchen remodel, bedroom conversion, etc). You'd get more value-add.

Do Solar Panels Add Value?!?

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