Solar panels can make a home more attractive to a particular set of buyers and help get an offer sooner and perhaps at a higher percentage of the list price.
According to a Zillow 2019 study
- More than 80% of homebuyers say energy-efficient features are important
- Sell for 4.1 % more than similar homes
However, it is important that you don’t assume that solar panels automatically add to your resale value or that sell price will offset the cost of the entire panels. In some situation, such as very old systems or leased systems, solar panels may be a determinate.
There are several factors that will determine the additional value of solar panels such as:
- LOCATION, LOCATION, LOCATION
- Who owns the solar system
- Local Incentives
- System Size, Production, Age, and Savings
- Installer and Maintenance Plan
- Current condition of the house
Homeowners in 10 states reap greater resale benefits for solar installations
#1: New Jersey $32,281 for homes at the median value, or 9.9%
#2: Louisiana at $7,037 for homes at the median value, or 4.9%
#3: Pennsylvania $8,589 for homes at the median value, or 4.9%
#4: NORTH CAROLINA $8,996 FOR HOMES AT THE MEDIAN VALUE, OR 4.8%
#5: WASHINGTON $15,916 FOR HOMES AT THE MEDIAN VALUE, OR 4.1%
#6: FLORIDA $9,454 FOR HOMES AT THE MEDIAN VALUE, OR 4%
#7: HAWAII $24,526 FOR HOMES AT THE MEDIAN VALUE, OR 4%
#8: MARYLAND $10,976 FOR HOMES AT THE MEDIAN VALUE, OR 3.8%
#9: NEW YORK $10,981 FOR HOMES AT THE MEDIAN VALUE, OR 3.6%
#10: SOUTH CAROLINA $5,866 FOR HOMES AT THE MEDIAN VALUE, OR 3.5%
Areas where there are already homes with solar panels tend to bring a higher prices because the demand is there. This also helps with appraisal value. The more similar homes to compare the more likely an appraiser will add value for solar panels. The cost to add solar panels on an exciting home, usually isn’t considered by an appraiser. Location is also important in micro areas. There are more homes with solar panels in West Asheville, than Oakley so the apple to apple comparison is different.
OWNERSHIP OF SOLAR SYSTEM
Solar ownership is when the property owner buys the solar system using either cash or financing. Once paid for, they own the solar system. This usually occurs when the solar system was part of the build in the total cost of new construction. It is also possible that a personal loan that does not have a lien on the property was used. When the solar system is owned by the homeowner, the system is part of the house and can be included in an appraisal.
Power Purchase Agreements (PPAs) and Long Term Leases
A third party pays for and owns the solar system, and in turn, sells the electricity to the property owner at a pre-determined rate. They usually have an attractive introductory rate equal to, or in some cases, even less than their current electric rate. They almost always include inflation escalators equal to or higher than the actual inflation of electric rates. Furthermore, these agreements are usually long-term agreements ranging from 20 to 30 years. The system cannot be factored into the appraised value of the property because seller don’t own it.
If you are listing a property with a power purchase agreement or a lease, you will need to either, find a buyer that is willing to assume that agreement or have the seller buy out of the agreement before listing the property.
The new homebuyer has the option to continue the solar lease, but if they do not decide to take up the lease, the lease remains entirely the original homeowner’s responsibility.
According to GTM Research U.S. Distributed Solar Service, Homeowners are increasingly owning their own solar panels rather than leasing them from a third party. In 2014, 72% of solar users leased their panels but that shifted in late 2016 to just 47%.
If you have a listing where the solar is owned, free and clear of loans and/or financing then the solar system is an asset to the transaction. If it is a leased system, it could be a determent.
If you are buying or selling a house with solar panels it is very important to have a Realtor who understands the status of solar panel ownership. For a seller, this factor can determine whether the house can be sold for a higher value. For a buyer, this factor will play into the ability to get a loan for the house.
Many utilities have programs such as net metering, or rate plans, billing arrangement whereby a customer who generates their own electricity from renewable energy resources can receive a credit on their electric utility bill. These plans may or may not be something that a new buyer is interested in.
SYSTEM SIZE, PRODUCTION, AND SAVING AND AGE
The best way to capture this data is from the paperwork received from the company that installed the solar system. The original solar installer should have included the size of the system, the projected annual production in kilowatt hours, as well as the avoided cost of electricity per kilowatt hour. If the original installer is not available, then hiring a professional third party to complete this information would be helpful. At Love The Green Real Estate Consulting Firm, we use a worksheet created from the Residential Green and Energy Efficient Addendum.
INSTALLER AND MAINTENANCE PLANS
Modern solar systems require very little maintenance. Often it is just keeping the panels clean. In many cases the original installer, if local, will create a maintenance plan for the homeowner.
One of the best things about solar panels is that they are built to last. Even with slight degradation, they can be effective for 30-40 years and beyond. Solar warranties are key to have; they provide a sense of security through the lifespan of your panels.
There are four key components to have in your entire solar warranty – a product warranty, labor warranty, performance warranty, and roof warranty. Each component of the solar warranty is equally important to ensure you’re getting the best value possible with your system.
A product warranty ensures your parts and materials. Some parts of a solar system, like the inverter, typically have a product lifespan of 10 years. For the panels themselves, our product warranty usually lasts for 25 years and covers any panel replacements that may be necessary if they break.
Having a labor or workmanship warranty indicates that your system will be properly installed. This includes proper conduit and wire runs, proper solar panel installation, and so on. Without a solid labor warranty, labor can be costly when your solar system requires maintenance, meaning more money out of your pocket to perform any necessary work. This is why a labor warranty is imperative.
The performance warranty guarantees a minimum electricity production during the warranty period. Just like any other electronic device, solar panels and their parts will marginally degrade over time.
HOME OWNER ASSOCIATIONS
It is important to know the current guidelines for solar panels within a HOA. Some of the older documents restricted size and location of panels. Older panels may be grandfathered and new ones are not allowed. There are steps that can be taken to deal with HOA restrictions. We will review those in a separate blog.
KNOWLEDGE IS KEY
We don’t know everything about solar panels. We do know the questions to ask and have a deep resource of experts. Be sure to connect with us, if you are planning on buying or selling a home with solar panels.