In the real estate market, there is a difference between things that seem likely to increase a home’s market value and those that actually do result in a higher price at closing.
If you’re currently thinking about installing solar panels on your home in Colorado (as many Colorado homeowners are), you might be wondering which of those categories solar power belongs in.
Swimming pools, wall-to-wall carpeting, extensive landscaping, and high-end appliances in mid-range houses — these are all things that people expect will up their home value but don’t. Real estate experts say those upgrades sound nice but have minimal impact on pricing or appraisals.
But solar panels are different. Pools, yards, and carpet upkeep can all cost a homebuyer money in the long run, whereas a solar power system will save them money (in the form of lower monthly energy costs) and require almost no ongoing maintenance.
So how will a solar power system affect a home’s value? Fortunately, there have been a number of major studies aimed at answering that very question. Let’s take a look at the results.
A study by the United States National Renewable Energy Laboratory (NREL, a subset of the U.S. Department of Energy) documented the average cost savings associated with a solar panel system and then compared it to the closing prices of homes with solar panels across the country. Here’s what they found:
For every $1 a solar panel system takes off of your home’s monthly energy bill, your home value increases by $20.
As formulas go, “savings = profit” isn’t a bad one.
That value increases even further, according to the study, in these three situations:
- The home is located in an active solar market. (Denver, for example, ranks #8 nationally for number of solar panels per capita and #9 for overall solar capacity.)
- The home has a greater number of solar panels (or higher-quality solar panels) than other homes in the market.
- The home appraises at a higher average dollar value. Higher-end homes tend to see the greatest resale impact from a solar power system, though the $20-for-$1 formula holds true among mid-range homes as well.
In a similar study, the Lawrence Berkeley National Laboratory (LBNL) found that for every 1 Kilowatt (kW) increase in the size of your rooftop solar power system, your home’s resale value increases by $5,911. And while this particular LNBL study focused primarily on resale values in California, researchers say they expect to find similar results in the next stage of their study, which will focus on home sales nationwide.
Time Is Money
For those asking, “How will a solar power system affect my home’s value?” here’s another consideration: time on the market.
A separate study by the Department of Energy found that homes with a solar power system sell 20% faster than homes without one.
Less time on the market can mean additional savings for you and your family in terms in reduced storage and transportation costs, as well as avoiding the need to reduce the asking price or temporarily de-list your home. It can also hedge against the risk of ending up with two mortgages at the same time.
Consider the Local Market
Colorado has a reputation as an especially eco-conscious state. That’s particularly true in more densely populated areas like Denver and Fort Collins.
While solar panels offer economic benefits to even the most environmentally disinterested homebuyers, they may prove especially attractive in cities where the average homebuyer tends to care a great deal about the environment.
There are some buyers who simply won’t consider a home without solar power (or who at least strongly prefer one where solar panels are already installed). Without solar panels, you could be closing yourself off from a population of potential buyers — never ideal in a competitive market.
With Solar Panels, You’ll Even Save Money Before You Put Your House on the Market
The best part about installing solar panels on your Colorado rooftop is that even if you aren’t planning to put the house up for sale anytime soon, you’ll enjoy cost-savings benefits right away.
Solar panels free you from having to rely entirely on the electric company to power your home, which means lower bills each month.
In fact, many utility providers will even offer you an incentive for using solar power during peak hours. (That’s in addition to the various tax incentives available to people who install solar panels in 2019.)
Pro Tip on Appraisal and Listing Your Home
Yes, if you add solar to your home, it should be worth more when you sell it. The ‘should’ is because there are several caveats. First, the system needs to be ‘owned’ not ‘leased’. If you’re planning on paying cash or doing a loan, then you will own the system. Next, you need to hire a qualified listing agent to handle the sale. Agents that have taken my class or agents that have taken the National Association of Realtors ‘Selling the Sun’ course would be considered qualified. That listing agent can then calculate the contributory value the solar adds to the home compared to similar neighboring homes and add that to the listing price. The listing agent will properly market the house and solar and discuss the benefits of solar to any buyers and buyer’s agents. The listing agent needs to explain to the buyer/buyer’s agent how to hire a ‘qualified’ appraiser. Only appraisers that have taken courses on valuing homes with solar should be allowed to perform the appraisal. Because the appraiser usually contacts the listing agent to get access to the home, he/she will be able to vet any appraiser that calls and make sure they are qualified. If they are, they’ll use the same valuation system that that agent used (PVvalue.com) to determine the line item addition to the home’s value.
Without going through these steps and hiring qualified partners, it is pretty rare that a homeowner can sell their home for more – unless it happens to be a cash transaction without an appraisal. A standard bank appraiser won’t normally add value for solar simply because they don’t know how. By going through these steps, it is more likely that you’ll be able to sell your house for a premium as well as more quickly because the better the home is marketed and the more clear the solar benefits are laid out, the easier it is for a buyer to jump on the chance to get that home. Buyers, even in our market, that are unfamiliar with solar are actually pretty hesitant about buying a home with it – they need someone to explain all of the details to them as well as prove the value with utility bills. Unfortunately, the real estate industry isn’t very solar friendly or knowledgeable, so buyers may get a lot of misinformation from their own agent. Hiring someone that can provide the correct information with documentation is the best defense against this.
Schedule a Home Energy Audit in Denver or Fort Collins, CO
Want to learn more about how a solar power system will affect your home’s value — or other steps you can take to make your house more energy-efficient, cost-effective, and appealing on the market?
A good first step is simply to schedule a home energy audit with our team of Colorado energy experts.
REenergizeCO can determine where and how your home is losing energy, identify the most cost-effective ways to increase energy efficiency, and help you understand your most sensible options for solar panel installation.
We are here to answer any questions homeowners may have about home insulation, energy audits, and solar power.Contact Us