One of the key benefits of owning a solar panel system is its potential to enhance your property value and home equity. Yet, understanding how this works can sometimes feel complex, as the system’s value isn’t always immediately apparent. This explanation, courtesy of Spartan Solar, will break down the ways solar panels can affect your property’s appraisal value and what it means for homeowners that make the switch.
The Explicit Value of Solar Panels
To grasp how solar panels impact home value, it helps to start with their immediate financial benefits. These explicit advantages make solar panels a worthwhile investment even before considering their effect on property equity.
Here are the two main financial perks:
- The Federal Investment Tax Credit (ITC):
Installing solar panels qualifies homeowners for a tax credit equal to 30% of the system’s total cost. This significant financial incentive helps offset the upfront investment. Note that this percentage may change over time based on changes to federal legislation. - Savings on Electricity Costs:
Solar panels generate electricity on-site, reducing or even eliminating the need to rely on the utility grid. This means immediate energy savings for homeowners, which translates into lower utility bills.
Because of these benefits, many homeowners begin seeing financial returns immediately after installing their system. Unlike traditional assets that often depreciate, solar panels hold their value well, as demonstrated by Fair Market Value (FMV) assessments.
The Implicit Value of Solar Panels
Beyond explicit financial incentives, solar panels offer additional long-term value by addressing the rising cost of energy. These implicit benefits also contribute to increased home equity:
- Electricity as a Valuable Commodity:
The price of electricity typically increases over time, meaning the energy your solar panels produce becomes increasingly valuable. Think of it like owning a gas pump 50 years ago—the cost back then may not have been much, but imagine the costs of that same gas today! - Rising Offset Costs:
As utility rates climb, the value of offset electricity grows. A solar system that initially saves $50 per month may save $60 or more over time, depending on rate increases.
These factors play a critical role in determining the FMV of a solar panel system, which directly influences how much it adds to your property value.
Understanding Fair Market Value (FMV)
For a solar panel system to add value to your property, it must be owned outright or be in the process of being financed. Systems that are leased or part of a Power Purchase Agreement (PPA) don’t increase property value unless they are fully bought out.
The FMV of a solar panel system is determined by three primary factors:
- System Age and Quality:
Includes the durability of components, engineering design, installation quality, and warranty coverage. - Power Generation Capacity:
Systems that produce more energy tend to have higher value. - Local Utility Rates:
The higher the cost of grid electricity in your area, the more valuable your system becomes.
Additionally, systems with little to no outstanding balance (fully paid-off systems) generally have higher FMV, making them a more attractive feature for potential homebuyers.
What the Research Says About Solar and Home Sales
Contrary to the myth that selling a home with solar is challenging, data suggests the opposite. Solar panels not only make properties more appealing but also increase their market value.
- Homebuyer Preferences:
A 2021 Zillow study found that 67% of homebuyers preferred energy-efficient homes over less efficient ones. On average, homes with solar panels sold for 4.1% more than comparable homes without them. - National Renewable Energy Laboratory (NREL) Findings:
NREL cites The Appraisal Journal which states that average home values increase by $20 for every $1 saved annually in energy costs. For example, a solar system saving $1,000 annually could add $20,000 in property value. - Berkeley Lab Data:
Another study by Berkeley Lab estimates that every watt of solar adds about $4 to a home’s value, making even modest systems a worthwhile investment.
Maximizing Solar Value: Selling a Home with Solar Panels
While solar undeniably adds value, it’s essential to recognize that home appraisals are both an art and a science. Results can vary based on the system, the property, and local market conditions.
Spartan Solar is committed to transparency and guidance throughout the solar installation process. This includes planning for the future—whether you’re enjoying the benefits of your system long-term or preparing to sell your home. Contact us today to learn more about how solar panels can transform your home and your future.
Spartan Solar
https://gosolar.spartansolar.earth/