Will Solar Panels Add Value to My Home?

I'll attempt to answer this question both from a mathematical perspective, and from a "what buyers are thinking" perspective. Remember, this blog is primarily written for those who live in the North East, which I consider to be solar challenged.

How Much Can I Save With Solar Panels on My House?

Today's solar panel systems have huge benefits over the solar systems that were made even 10 years ago. There have been enormous gains in efficiency in the panels (you get more energy from fewer panels) and today's systems can be installed with the ability to sell power back to the grid, where in the old days of solar, any excess

energy generated was wasted. Still, power generation is modest, especially in the north east, where we have plenty of cloudy days and tall trees which impacts potential sunlight. For the homeowner who's doing a solar project to be good to the environment: Good for you! But read the next couple of paragraphs to understand how it impacts your homes value. For homeowners thinking about saving money with solar panels, I'll outline a framework for how you should think about solar, and you can see if it works for you.

Solar Panels work best
in Sunny Parts of the World

Solar Panels as A Capital Expense Item for Your Home

Houses have many capital expense items. A capital expense items is an item that has a long life, but requires significant capital, or money, to replace when it's usable life is over. Typically, capital expense items include Roofs, Burners (gas or oil), Windows, and Septic systems. If you're going to pay for solar panels, you can add solar to that mix. Solar installations costs vary widely depending on how many panels and how complex a system you put in. 5,000 to 20,000 is a big range, but a average system for most homes is going to fall in there. If thing line up right, you could be generating 400-600 kilowatt hours of energy, which saves you $48-72/ month. For ease of calculations why don't we say $60 for 12 months which is $720/ year. If you've spent 15,000 on your solar installation, it'll be 20 years before your installation is "profitable" and that's assuming it doesn't need maintenance or repair in that time frame. A twenty year time frame is a long time, and that, folks, is why most homes sold in New England do not have Solar. I can guarantee you that when Solar has a five year payback we'll be seeing these systems pop up all over the place, but that's just not the case right now. Still though, once they are in place, they save the homeowner money, right? So the systems should be worth something on the open market. Well, let's see.

Leasing Solar Panels - Always a Good Idea?

The most popular solution for Solar - by far - is systems where the Solar company "leases" you the panels, for little upfront money. These leases are typically 15-20 years, and they are structured so both the homeowner and the solar company benefit. Although there are a LOT of variables, most systems try to generate $100-$125 in savings a month, a portion of which is passed on to the home owner, and a larger portion is passed back to the Solar Company. In this way, the Solar Company "pays" for the panels that they put on your roof. This solves most of the capital issues, and most Solar companies are now also including language that if the roof needs to be replaced, they will take the panels off and put them back on when the roof is done. But be aware: If you go to sell your home, the Solar company needs to approve of the new buyers in order to transfer the system in their names. So selling your home just got a little more complicated. If they don't approve of the new owner, I'm not sure what happens - but they may require you to buy out the panels, and then you should re-read the previous paragraph. Because of the complications, any homeowner who is thinking of moving in 3 years or less probably shouldn't lease or buy panels, in my opinion. The risk is too great it will be a burden when you sell.

How Home Buyers Should Look at Solar Panels

Home buyers should include the savings of solar in their final analysis for the home. Note, they should calculate the SAVINGS, not the EXPENSE. If you spend 15,000 on solar for your home and sell it the next day, your home is not worth 15,000 more! If you're saving $60/month, technically, that will allow you to spend another $60 a month on your mortgage, a month, and that works out to about $10,000. (I'm overlooking future maintenance costs here as well). So, if it was me, I would value Solar over a home without based on what I save, but I probably wouldn't pay it all (the full $60) because I am taking ownership of another system that likely will need some fixing by professionals over the lifetime I'm in the house. If you are buying a home with a leased system, see how many years are left on the lease, and read carefully who is responsible for moving the panels if there's a roof replacement, and what happens to the panels after the lease is up (do you get to keep them? yeah!). This is a NEW industry, and leases will probably have lots of different clauses as we get through wider scale adoption.

The truth about How Home Buyers Look at Solar Panels

Solar is still a rarity in New England, (but becoming less so....) and most buyers are pretty flummoxed by the new systems. Although I don't agree with everything in this Bloomberg article, you can see what I mean). And if you had to add the panels to the front of your home and it doesn't add to the curb appeal.... Well, it's not good. Typically, I find most buyers are unwilling to pay any extra for solar. The unfamiliarity, and the uncertainty of the effectiveness, are big negatives to over come, and so we don't see a big push by the buyers for these homes. There are certain buyers, to be sure, who are "Green Focused" and will make financial and personal sacrifices for homes that meet their world view, but there are fewer of them then you might expect (at least in my experience). You could argue, in fact, that septic systems are "green" systems, relative to sewer systems (which require processing which expends significant energy and chemicals). Yet I find that most people are more comfortable with sewer, for the low cost, low risk scenario it presents. (To be fair, I'm not sure the septic guys are marketing the "Green-ness" of their systems. Maybe they should?)

Overall, I'm very optimistic on Solar's potential - especially in parts of the country where a rain day is a special event. Look for Solar energy to be part of the package in California and Arizona, and once that takes root, the systems may get cost effective enough to find their way out East.

Do Good Things Today!
Matt Heisler
*All information is posted in good faith and is assumed to be reliable, but may rely on third party information sources.

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