How Solar Panels Can Increase Home Value
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Home value has a tendency to fluctuate. This has quite a bit to do with the economy in the area. However, this isn’t the only determining factor.
The supply and demand for homes is a teeter-totter — always going up or down. Some of the influences on this swing in home value are location, amenities, and updates.
Often amenities and updates increase the space and quality of the home. However, another factor has recently impacted the price people are willing to pay. Updates that increase the efficiency of the home have recently pulled weight in the housing market.
How Solar Adds to Property Value
When it comes to efficiency, people are willing to pay a little more so they can save later. Some of these updates include LED lights, smart thermostats, and energy-efficient windows.
None of these updates, however, compare with the price increase of a photovoltaic system. Solar panels increase home value because it does more than increasing the efficiency of the home — it changes the source of the home’s power.
Electric companies often use fossil fuels to power our lives. However, making the switch from fossil fuels to solar changes this.
Studies have shown that people are increasingly becoming aware of their impact on the environment. As a result, they are willing to pay more for a solar-powered home.
Solar Home Value Studies
The most well-known studies were published by Berkeley Lab in 2015. These studies showed that homebuyers across six states were willing to pay an extra $15,000 for a home with solar.
These results were further confirmed by other studies. Zillow, a commonly used reality company, did a study between March of 2018 and February of 2019.
This study found that US homes with solar sold, on average, for 4.1 percent more. This figure averaged to just over $9,000. Although this doesn’t cover the cost of purchasing a solar array, it is a significant portion.
The sale of a solar home will not cover the cost of the photovoltaic array. It does, however, cover most of it. If a home is lived in for a couple of years before being sold, solar arrays pay for themselves. This is due to electricity bill savings and the sale of the home.
Fair Market Value Solar System
How much value a solar array will add to a home depends on a couple of different factors. These factors are taken into account in an appraisal.
When a home gets appraised the fair market value (FMV) is normally used. This value estimation system determines at what price a home in that area would sell for. The size of the house, amenities, updates and the selling price for similar homes in the area all play a role.
This evaluation system, however, doesn’t take into account the motive behind the purchase. Although the other factors play a role, homes are worth more because of what the buyer values. If there are only a few buyers in the area that value solar power and its ROI, the value solar adds to a home goes down.
Another factor that plays a role in the value of a solar home is the type of solar array. This includes the quality and age of the components as well as whether the system is being leased or owned.
Leased Solar Panels and Home Value
Although solar is a great investment, not every solar home is the same. It is wise to pay close attention to whether the homeowner is leasing or owns the system.
Solar is a great product with studies that have proved it is an addition worth investing in. However, these studies all focused on owned solar arrays. There are many individuals with leased solar arrays.
Leased solar and purchased solar are two different animals, which makes these studies irrelevant for this type of financing. It’s important to know what it means for the buyer when a homeowner has a leased solar array.
Sellers With a Solar Lease
The concept behind a leased solar array is similar to any other leased product. The individual pays to use the equipment for a set amount of time. The person then returns or owns the equipment at the end of the lease.
There are some benefits that come with installing a leased system. Often it is less per month for a leased system and the leasing company has full responsibility for them. However, because the homeowner doesn’t own the array they can’t sell it with the home.
This presents a problem for the homeowner that want or need to move before their lease is up. In this situation, there are two options — either the lease can be moved over to the buyer or they can pay to terminate their contract early.
Removing Leased Solar Panels
New buyers often have no desire, and rightly so, to take on the previous homeowner’s solar lease. This is due to the bad rap that solar leasing contracts have.
This means that the owner needs to find a way to get rid of the lease. Often canceling a solar lease is nearly impossible to do.
However, there is often a buy-out option available. Although not the ideal solution, it may be the only way to sell a home with leased panels.
Buying a House With Owned Solar Panels
Owned solar panels are quite a bit easier to transfer over to the new owner. This is part of the reason why this financing option has become popular recently.
The average American moves about 11.7 times in their lifetime. Since moving is already a hassle, there is no reason to add solar to the list of discomfort that comes with the process.
When it comes to leasing versus owned solar arrays, homes with owned solar panels are entirely different. In fact, there are several reasons why owned panels are a better option.
Benefits That Come With Purchased Solar Panels
One of the benefits that come with owning a solar array is the tax credit. There is a dollar-for-dollar federal solar tax credit called the ITC that goes to the first owner of the array. The 2020 tax credit equals 26 percent of the solar array.
Another benefit is the electric bill savings over the life of the system. Solar arrays have long warranties with even longer lifespans. When an individual purchases a solar array, they are paying less for more.
The last reason why purchased solar is such a great option is that it adds to the value of the home.
Why Owned Solar Panels Add Value to Homes
When solar panels are owned they get included in home appraisals. This is because the homeowner can legally sell the panels with the house.
Part of the reason why solar has become so popular is the universal push for a cleaner earth. However, the main drive for most Americans is the savings associated with it.
Electric bills can get expensive, but if your home is generating its own power you don’t need to worry about it. If you want to not worry about relying on the utility at all, you can install home backup batteries.