Whether you’re considering selling your home in one year or ten, knowing how a home improvement project will impact your home’s resale value can make or break the decision. The conventional wisdom from HGTV and home improvement magazines is that updating your kitchen, renovating your bathroom, and building an addition are among the smartest ways to increase the resale value of your home. But there’s another home improvement that you may not realize can add serious value to your property: installing a solar energy system.
Multiple studies by Lawrence Berkeley National Laboratory (LBNL), a research laboratory affiliated with the U.S. Department of Energy, have shown that solar can improve the value of your home. The lab’s 2015 Selling Into the Sun report analyzed sales of solar photovoltaic (PV) homes in eight different states over 11 years with the goal of determining just how much value solar adds to your home’s sale price. The key finding: on average, homebuyers are “consistently willing to pay PV home premiums” of approximately $4 per watt of installed solar capacity. For a standard 6-kilowatt (kW) solar PV system, this means that solar can add $24,000 to your home’s resale value.
While a $24,000 increase in property value is compelling, knowing how much a solar panel system costs, and how that cost compares to other home renovations, illustrates why going solar is truly the best investment you can make in your home.
According to EnergySage data, the average cost of a solar panel installation in 2015 was $3.70/watt, which means an average 6-kilowatt (kW) system has a $22,200 price tag. Tax breaks and other incentives drastically reduce that cost – once you subtract the value of the 30 percent solar tax credit, your total solar installation costs are a little less than $15,600.
When you sell your solar home, you will be able to recover your installation costs and more, but how does this compare to more traditional home improvement projects? To determine the answer, EnergySage used the Remodeling 2016 Cost vs. Value Report, which evaluates project costs and resale value for a variety of home renovations. What we found is that you are not likely to recover your costs for the majority of home improvement projects (see chart).
According to the Cost vs. Value Report, a $20,100 minor kitchen remodel – which includes replacing appliances and upgrading countertops and fixtures – only adds $16,700 to your home’s resale value. That means you will recover 83.1 percent of your project costs. You’ll recover even less with a bathroom remodel, just under 66 percent. The same is true for a deck addition. In contrast, by installing a solar energy system you will recover 154 percent – that’s 54 percent more than you spent in the first place!
Perhaps you’re now wondering why homebuyers are willing to pay so much more for a solar-equipped home. The most important reason is that these prospective buyers can reduce or even eliminate their electric bill when they move into in a solar-powered home. Solar panels can help save money in the short term, and additionally protect from increasing utility rates for the 25+ years that they generate electricity. And it doesn’t hurt that solar reduces one’s impact on the environment by producing emissions-free electricity.
If you’re considering going solar as a way to improve the resale value of your home, remember that increased property value is only one component of solar’s financial benefits. That value doesn’t take into account the month-to-month savings you will see on your electricity bill – money that you can use to make other investments (like finally adding those granite countertops, or investing in the stock market).
So what’s the downside? Buying and installing a solar panel system on your home might seem like a more complicated process than other home improvement projects at the outset. However, you can use home equity loans and lines of credit to go solar, just as you can to make other updates to your property. Many solar financing options are low-interest, and most require zero money down. And unlike a disruptive home remodeling project, solar can typically be installed in a single day. Take a look at EnergySage’s short Solar Power Installation in Less Than a Minute video to see just how quickly a solar installer can get your system up and running.
As with any other home improvement project, the best way to ensure that you’ll be satisfied with your solar installation is to get multiple quotes from contractors first and then compare all of your options. To get started, use a solar calculator to estimate just how much you can save. Once ready, register your property on the EnergySage Solar Marketplace to easily receive and compare multiple quotes from pre-screened solar installers in your area.
Vikram Aggarwal is the founder and chief executive of EnergySage, the online solar marketplace. EnergySage simplifies the process of researching and shopping for solar. By offering shoppers more choices and unprecedented levels of transparency, EnergySage allows consumers to select the option that provides the best value for them, quickly and easily. Read all of Vikram's posts here.
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