I wanted to touch upon a topic which I am sometimes asked about …. Whether installing a solar energy system (or, more precisely, a photovoltaic system) will increase the value of a home. I guess I’m thinking about sunshine on this rainy day.
If you ask solar panel companies, they will of course answer yes, universally across the board, solar energy systems will increase your home’s value. In my experience, the real answer to that question is that it depends on a number of variables and factors. But, I will say that the desire for and acceptance of solar energy systems is growing.
Here are some of the factors to take into consideration if you are thinking about adding solar to your home:
• Owned vs. Leased. The impact on value to your home depends greatly on whether the system is owned outright or subject to a long-term leasing agreement. A system owned outright conveys to the new owner and can be taken into consideration by an appraiser in appraising the value of a home, but a leased system cannot be (according to the Fannie Mae appraisal guidelines). According to a 2015 study conducted by U.S. Department of Energy’s Lawrence Berkeley Laboratory, homes with OWNED solar energy systems did garner a higher sales price than those without. However, this may not be true of leased systems. When selling a home with a leased system, the seller either must pay out the remainder of the lease or request the buyer to assume the lease, which may or may not be something buyer will want to do. And if the buyer is willing to assume the lease, they may need to be credit approved by the leasing company to do so. Without question, a leased solar energy system installed on a home for sale does add some complexity to the transaction. Sellers must be sure to disclose the existence of a leased system and the terms and process under which a buyer may assume the lease. Still not sure which is right for you? Check out Consumer Reports’ evaluation on buying vs. leasing solar energy systems. (Spoiler alert! They come out in favor of owning).
• Curb Appeal. Does the installation detract from the curb appeal of the home? Solar panels are best installed where they will have optimal exposure to sunlight. In the Northern Hemisphere, that usually means South-facing (though some say West is optimal also). If your home faces South (or West), then your panels could be on the front of your home’s roof and highly visible from the street. That may be a look that not many buyers will admire and the negative impact to the appearance might translate into a slower sale at a lower price.
• Geographic Location. The appeal of a home with a solar energy system may be higher or lower depending on the particular climate where your home is located. Homes with solar are probably going to be more appealing and sought after in areas with a good number of sunny days versus a location that is gets more rain than sun. They may also be more appealing depending on the particular “culture” of your location. Some parts of the country tend to be more embracing of renewable energy options than others, and so a home with a solar energy system may be more desired in such areas. As you might have guessed, the state with the highest number of homes with solar is California, followed by North Carolina and Arizona.
• Opportunity Costs. Every homeowner with limited resources has to consider what other investments could be made with their improvement budget, including deciding which are most pressing and/or most likely to improve the enjoyment and value of the home. So the same analysis will apply when considering solar. Generally, there aren’t many home improvements that will return, dollar for dollar, what you invested in them, and solar is no different in that regard. But we know certain improvements almost always have a positive impact on the appeal and value of a home and do return a sizeable portion of the investment made in them, such as renovated kitchens and baths, finished basements, upgraded interiors (windows, floors, etc.), and improvements to the exterior/curb appeal. Check out Remodeling Magazines annual assessment of a variety of home improvements and what they add to the value of your home. In assessing where to invest your home improvement budget, don’t forget to check for available tax incentives and other rebates that may help off-set the initial investment for a solar energy system. For instance, the Federal Investment Tax Credit has been renewed through 2020, which gives a 30% tax credit to homeowners who invest in solar energy systems on their homes. Be sure to check with your tax advisor to confirm your eligibility for any local, state, or federal tax incentives, credits or rebates.
Ultimately, a decision to invest in a solar energy system for your home may come down to your personal commitment to clean energy. Ultimately, if it makes sense for you, for whatever reasons are important to you, then you should do it. And I’ll be here to help you work through the decision.