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Do Solar Panels Increase the Value of Your Home?

Austin Energy’s solar rebate program has experienced many ups and downs in the last 12 months, and one question I get asked by home owners evaluating their home value or potential home value is “how much more can I sell my home for if it has a solar array on the roof?”. The answer is a little surprising.

Why did I put solar panels on my roof? I was sitting at a closing last week, having represented the buyers through the construction of a new home at The Skyway Austin. The buyers brought up the topic of adding solar panels to their roof in the future, and the builder calmly announced that the technology was not cost effective yet. I bit my lip, as this was a time for the builder and buyer to walk out feeling happy, and to avoid conflicts. I have panels.

When the Austin Energy rebate was at its peak, I had Celestial Power install a 3kW Solar PV system on my roof. In a few days time, I’ll be reaping the rewards of the federal tax credit for such things, and for the last eight months I’ve been enjoying lower utility bills because of it. So clearly my opinion is a little different. My thinking is pretty simple on this – the payback period considering current energy costs and the production capacity I have in my array is long. The value I have added to my home however, is large and immediate and puts me at a profit before I even generate any power.

So how much do solar panels increase home values? If you research this, you tend to find one of three answers:

  • The home value increases by some ratio of the cost of the panels. Some pundits treat renewable energy remodels as any other remodel – updating a kitchen, adding an extra room and so on. This Old House may say that you get 87% return on investment for a minor kitchen remodel, and some people quote a ratio for solar implementation projects. Personally, I don’t like this approach as panel prices change quickly, there isn’t much data to support it, and the effects of rebates which come and go add too big a variation into the picture. In short, the cost of replicating a solar system to add to a new house in Austin depends on the time of year, the size of the Austin Energy budget and many other factors.
  • The home value rises by $20 for every $1 saved from your annual utility bill. This is the old fall back that is touted from a 1998 article in the Appraisal Journal that says: “the selling price of homes increased by $20.73 for every $1 decrease in annual fuel bills”. I like this approach as it takes into account the lower costs of living in an energy efficient home – the value changes with the cost of energy. I also like this as it increases the value of my personal home by more than my out-of-pocket cost for the system.
  • The home value is unchanged. I don’t put much stock in this, though I did see a recent appraisal for a home with a solar array with the following line: “the market will typically not pay more for solar panels at this time due to limited use in the market”. The appraiser’s logic was that if there are no comparable home sales with solar systems, then she doesn’t have any data to produce a value. I can see the reasoning here, and the danger is that even if a buyer wants to pay more for a home with solar panels, then the lender won’t allow them to. The answer here is to use a mortgage product from a more enlightened lender.

So which is the right answer? I prefer to stick with the dated but data-driven approach of the Appraisal Journal, which also includes the following in it’s summary: “The implication for appraisers is that cost-effective energy efficiency investments do appear to be reflected in residential housing market values. Therefore, the appraised value of energy-efficient homes could understate their actual resale value if the comparables used in the appraisal do not reflect the value of a cost-effective energy efficiency investment.”

I think that there’s gold on them thar roofs, and the trick to realizing the gold when you sell your home is to focus on the lower cost of living that they provide, and by marketing to the right buyers.

Garreth Wilcock is an Austin EcoBroker ® and Realtor. EcoBrokers have additional training and resources which help them market green homes. Call him on +1 (512) 829-1351 if you would like to discuss your home’s value or search for an energy efficient home.

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