Despite a flourishing market, selling solar isn’t always easy. Prospective solar customers have concerns about everything from ROI and how to finance their system, to how it will affect the aesthetics of their house. And they’ll likely want to know what having a PV system will do to the value of their home — now and in the future if they want to sell.
The more specific you and your sales team can be about the benefits of installing solar, the better. And research continues to produce compelling data about how solar can increase the value of a home. This information can go a long way towards helping a prospect feel confident about making the leap.
In this blog, we’ll look at some facts about how solar affects home value — and the studies behind them — that will help you close those tough clients.
Their house will sell for more
Lawrence Berkeley National Laboratory (LBNL) conducted a report that definitively showed that homes with solar sold for more than houses without it. The 2015 study, Selling Into the Sun: Price Premium Analysis of a Multi-state Dataset Of Solar Homes, analyzed 22,000 home sales in 8 states, 4,000 of which included PV systems, from 2002 to 2013.
The study found that each watt of solar added an average of $4 to the home’s value in California and an average of $3 per watt elsewhere. This amounted to an average increase to the home’s selling price of $20,000 in California ($4 x 5,000W for the average system size) and $15,000 outside California ($3 x 5,000W).
While that study is extensive in both timeframe and number of properties, it’s also seven years old. To say the housing market has changed since then would be an understatement, and savvy customers are going to want more recent data.
A Zillow study from 2019 shows that even with all the ups and downs of the housing market, buyers will still pay a premium for houses with solar. Controlling for factors like size, location, number of bedrooms and bathrooms, and age, homes with solar sold for an average of 4.1% more than those without.
For the rest of this blog, we’ll use data from both studies.
Learn more about the types of solar buyers you’re likely to encounter by checking out our research on the 5 Types of Solar Buyers.
Their house will sell faster
A 2006 study by the National Renewable Energy Laboratory (NREL) looking at specific properties in California dubbed by their developer as “high-performance” homes — homes that are both energy efficient and generate electricity — found that houses with PV systems sold 20% faster (and for 17% more) across several subdivisions built by different California builders.
This study of several hundred home sales also revealed that if a solar system was already installed and factored into the price, buyers were more likely to choose that house over others without solar. Some other interesting findings include: the aesthetics of a PV system were not identified as an obstacle to purchasing and the resale value was not damaged by the presence of a solar system.
But, again, this data is more than 15 years old, and only looks at a couple hundred data points. What do more recent numbers say?
Well, there’s been surprisingly little research on this topic over the past 15 years, but what is out there supports the idea that solar does, in general, help a house sell quicker.
Interestingly, further Zillow research shows that while houses with solar do sell for a premium, they tend to sell marginally slower (about 2 days on average) than those without panels.
That’s not the entire story, though. As energy rates increase, and home buyers become more attuned to environmental issues, solar panels — and other “green” features like programmable thermostats and car charging stations — can increase the demand for a home.
“There is increased demand for green living. More than 80% of buyers now say energy-efficient features are important in selecting their home,” Sarah Mikhitarian, a Zillow senior economist, explained to CNBC. “We are increasingly finding that these attributes are important to prospective homebuyers. This is part of the reason that there is a premium associated with it. The other piece is that there is true value provided by solar panels — namely, future energy savings.”
They’ll likely recoup the cost of the system when they sell
The 4.1% selling price premium the 2019 Zillow study found equals about $9,300 for a “median-valued” home in the US. (Maths review: Think of “median” like the median of the highway — half of homes are valued higher, half lower.) The average cost of a PV system is $2.77 per watt, according to EnergySage data from January 2022. This means a 6-kW system would cost about $16,600, before any incentives, and about $12,300 after the federal solar tax credit discount.
Even given that these prices and the incentives offered vary wildly, a nice shorthand is that a homeowner will likely recoup most of the cost of their solar installation when they sell their home. And again, that’s before factoring in any of the savings they’ll see on their energy bill.
Educating your customers on the basics is a great way to close deals. Download our Solar Sales Follow-up Kit and let it answer the questions for you.
There are many factors that could influence how much (and whether) a PV system adds value to a home. Here are a few other considerations to make your customers aware of when considering the increased home value solar may provide.
Regional markets and electricity costs? They matter
One factor to keep in mind is that the largest increases to the value of a property may tend to come in regions with high electricity rates and strong solar incentive programs. High energy costs can make a home with a PV system more sellable, according to a 2015 New York Times article. For instance, Long Island’s high energy rates have been a boon for the solar market there; the area is home to about 40% of all solar systems in New York. Gerard O’Connor, a local appraiser, stated that buyers are “certainly willing to pay more” for a home where high electricity prices increase the savings from PV systems.
The 2019 Zillow study shows that regional markets are still a critical factor today. For example, the premium in New Jersey is almost 10%, and big metro areas, such as San Francisco (4.4%), often check in above the national average.
Higher energy costs can also mean higher value for homes with solar during the appraisal process. When appraisers consider the role of a PV system in the calculation of a home’s value, electricity produced by the system can be considered income, whether due to savings or utility production credits, as noted in appraisal guidelines for green and high-performance properties from the Appraisal Foundation (see p. 36-38).
Ensuring PV is factored into home value
Lenders, real estate agents, and appraisers should account for the value added by a solar system — and some may not know to do this (so your customer should point it out). The Federal Housing Authority (FHA) and Fannie Mae both have guidelines for valuing the system during appraisal. Sandia National Laboratories has a free tool designed to help real estate appraisers and others calculate the value of a new or existing PV system.
Most data focuses on owned PV systems
Much of the research to date, including the LBNL and Zillow studies discussed here, focus on homes where the PV system is owned by the homeowners — not third-party owned systems financed with PPAs and leases. Also, leased systems or ones paid through a PPA will not be included in an FHA or Fannie Mae appraisal.
Beyond the need for more data on how third-party-owned PV systems affect home resale value, these types of systems present their own unique complexities in the home sale, such as the need to transfer a PPA or lease to the buyer.
System size and age
PV system size can also affect a home’s resale value. While the Zillow study doesn’t break down its data by system size, other research by Berkeley Labs has shown that each additional watt of solar capacity can add $4 to a home’s value.
Another influencing factor might be the age of the system when the home is sold. The LBNL study notes that the depreciation of aging solar systems may decrease the value added to the home during appraisal. However, as the study authors note, it’s unclear exactly how system age impacts the numbers because there has been little research about it given the immaturity of the American solar market.
Going solar is a significant decision for any homeowner. It requires careful consideration about the pros and cons, and a good amount of trust in the contractor they work with.
So build that trust! Be prepared to provide research-backed information about the benefits of solar, including the value it can add to their home in addition to the instant utility bill savings. This will help you build trust with prospects, and keep customers — past and present — happy that they chose to work with you.
Looking for more ways to help educate potential customers?
The Solar Sales Follow-up Kit explains all the basics, from how panels work to the solar incentives homeowners can take advantage of, in a handy, easy-to-read format that’s perfect to give to curious customers.
Does a solar system increase the value of a home?
Multiple studies indicate that a solar system can increase the value of your home. Research by Berkeley Labs has shown that each additional watt of solar capacity can add $4 to a home’s value.
Does a solar system make it easier to sell a home?
There is not clear evidence either way on this question. While research by Zillow shows that more than 80% of buyers say energy-efficient features are important in selecting their home, it also found that homes with solar panels sold very marginally slower (2 days on average) than houses without solar panels.
Does the increase in home value vary by region?
Yes. The national average, according to Zillow, is about a 4% increase in home value. But this varies widely depending on your state, energy rates, and other factors.
Are there other solar benefits to consider?
Yes! All this is independent of the energy bill savings, and cost certainty, that solar delivers to most customers.