Do solar panels actually increase the value of a home? I recently asked my followers this question, and the results were mixed:
46% of those people think that solar panels increase your home value. In reality, the answer depends. As an Illinois resident, homeowner, and real estate investor who’s bought a variety of properties over the years, I am quite in tune with the market dynamics in my area.
In my first video for my Everyday Solar channel, I dive deeper into the question of whether solar panels increase your home value. You can watch the video below, or keep reading to find out the more nuanced answer.
How Solar Panels are Paid for
What you need to understand first is that there are four primary ways homeowners pay for solar panels.
Firstly, many homeowners pay in cash upfront for their panels. Secondly, they may opt for a loan product such as a home equity line of credit or a loan from the solar installer. The third and fourth methods involve leasing solar panels or entering a power purchasing agreement respectively.
If you believe that leasing panels or having a power purchase agreement will raise your home value, you might want to reconsider. Such arrangements are unlikely to increase the value of your home and could, in fact, create difficulties when trying to sell your home. These are long-term contracts, typically lasting 15 or 20 years. If you want to move out just a few years into the contract, you could face significant issues.
Even though these contracts are “transferable,” they often come with various challenges. It’s important to remember that potential buyers may not value solar panels as much as you do. Asking them to step into a lease agreement with a monthly payment or power purchasing agreement with yearly escalation clauses may not be attractive to future owners.
Leasing and power purchasing agreements can be problematic and I wouldn’t recommend them to anyone. They’re not likely to increase your home value and could result in a plethora of issues when selling your home.
Transferring Solar Panels
If you’ve taken a loan for your solar panels, you need to be aware of potential issues during the transfer process. The process can be complicated and time-consuming, often taking up to 60 days. This can disrupt your closing date and lead to numerous complications, especially if the new homeowners want to move in before closing.
Will Solar Panels Increase Home Value
The question remains, do solar panels increase the value of your home? The answer largely depends on your location. Here in Illinois, the adoption of solar energy is still ramping up, so prospective homeowners may not be willing to pay a premium for a house with solar panels. They are usually more concerned about the location, school district, safety, and lifestyle suitability.
On the other hand, if you are in high energy cost areas such as California or Hawaii, solar panels might be a more attractive feature.
Conclusion
In conclusion, if you’re planning to move within a few years of installing solar panels, you’re likely going to face challenges recouping your investment. That’s why understanding the financial implications, including federal tax credits and state incentives, before purchasing solar panels is essential. Prepare yourself for a longer-term investment to truly reap the benefits of solar energy.
If you’re interested in solar, join our Facebook group where I answer your questions together with other experts. You can also use our calculator to get a first impression on the cost of solar for you.