Solar panels result in 4.1 percent home sale premium on average

Homeowners who had solar energy systems installed at their home typically earned a nice premium when selling the property, according to the real estate site Zillow.

A variety of solar energy systems are available for residential use, including solar panels to help offset electricity use or heat up the home's water. According to a recent Zillow analysis, homes with these systems sold for an average premium of 4.1 percent, or $9,274 more than a comparable home without a solar system.

Zillow conducted the study in recognition of Earth Day. The report is based on sales figures as well as the Sun Number for approximately 84 million homes. This figure, which falls between zero and 100, assesses the potential for solar energy at a home by scrutinizing factors such as the average number of sunny days per year, the orientation and pitch of the roof, and when sunlight is blocked by trees or other obstacles.

The median Sun Number in the United States was 78. Sunnier metro areas in the West ranked higher, with median scores of 93 in Las Vegas, 90 in Phoenix and San Jose, and 89 in Los Angeles and Denver. Cities with lower Sun Numbers included Detroit (67), Seattle, and Atlanta (both 69).

New York City had the highest percentage premium from solar systems, as residences with this feature sold for 5.4 percent more than comparable properties without solar – an added benefit of $23,295. San Francisco had the second highest percentage premium at 4.4 percent, but the largest monetary premium at $41,658. In Los Angeles, solar systems resulted in a typical premium of 3.6 percent, or $23,295.

"Energy conservation isn't only good for the environment, it can also translate into big savings on electricity bills as well as help to reduce the strain on the electrical grid," said Sarah Mikhitarian, senior economist at Zillow. "The Sun Number provides a starting point for potential energy savings, but speaking with a local expert can help homeowners decide whether it pencils out."

Mikhitarian said buyers are often willing to pay more for a home with solar energy because they expect to save money on energy bills in the future. Other energy-saving updates, such as installing more efficient windows or appliances, can have a similar effect. Zillow says another possibility is that homes with solar energy systems are more likely to have other attractive features, such as heated floors.

Researchers at the Berkeley Lab, a facility supported by the Department of Energy, reached a similar conclusion in a 2015 study. Working with appraisers in six states, the study concluded that buyers are willing to pay an average of $15,000 more for a home with a 3.6-kilowatt solar photovoltaic system.

Solar panels tend to be a more valuable item in a home sale when they are purchased rather than leased. Craig Berry, writing for the mortgage site HSH.com, says sellers who acquired solar panels through a loan simply need to resolve any outstanding liens, with ownership of the panels transferring to the buyer.

Leased solar panels are more complex, since the system is owned by the solar company. Buyers need to understand the terms of the lease and how it might be transferred.

Even if they are leased, solar panels can still benefit homeowners by reducing their energy expenses. However, they can also lead to complications during a home sale. Jeff McMahon, writing for Forbes, says the lease may disqualify some buyers by increasing their debt-to-income ratio. It may also delay or cancel a closing if the lease is not transferred in time for the sale.

READER COMMENTS

Loading comments...
Hide Comments