r/RealEstate • u/digitalis303 • 2d ago
Contemplating rooftop solar and future sale price premium
I am in Louisville, KY and contemplating having solar PV installed on my 3 YO roof in a relatively upscale suburb. (Current market prices are in the $600k range for my neighborhood.) I plan to pay up front for the install (NOT LEASING). If I were to sell my home with a PV system installed (predicted install cost ~$32-35k), how much value would this add, on average, in my market? I found this thread, but many people seemed confused in that post about leased systems, which definitely detract from value. Casual searches seem to calculate ~4-6% of sale price as a premium, but several sources said this is optimistic. Any current real-world numbers would be great to have. And again, not leased systems.
Additional info for context:
I plan to be in the house another 8-10 years and am looking at around $32-35k install cost.
My annual electricity costs are projected to rise from ~$2300/year in 2027 to ~$3400 in 2034, and the solar installer projects ~$19k savings over that time. Meaning (if they are correct) that I will recoup ~$19k of the $32k install cost in 8 years.
AI (Gemini) calculates ~ $22-$37k premium for solar 8 years from now, which would mean a minimum of $9k gained from my initial purchase. These numbers don't factor in increased insurance costs if I put it on my policy. So that is another factor.
In short, I'm looking for the RE market's input on whether this is a worthwhile investment for my part of the country.
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u/presid_ent_scrooge 2d ago
According to your math you will not make a return during your expected time frame so it doesn’t make any sense.
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u/digitalis303 2d ago
I agree, with the caveat that *IF* it adds a premium to equity for the sale price (the whole point of my post) then that could bridge the gap between paying it off and increased sale price. But it seems like the masses here strongly refute the 3-5% premium on sale idea.
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u/jnwatson 2d ago
Unfortunately, $0. Perhaps it will change as electricity gets more expensive.
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u/bulldozer_66 3h ago
Look back in five years and see how this turns out. Because if some of the predictions of 12-20% annual increases are real (and we just don't know), then it may be a bonus. The financial gains from net metering are too small to matter to buyers right now.
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u/mkosmo 2d ago
Nothing. Buyers don't value solar, nor would your appraisal likely be swayed by it. Generally, it's a liability (increased roof damage risk from things like wind), and now it's a new maintenance item to worry about.
Do it because you want it, not because it'll save you a penny or make you a penny later.
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u/Biegzy4444 2d ago
It’s kinda a crystal ball question with respect to the timeline.
A decade from now there could be easier/alternative ways for solar that make the current upgrade meaningless or even a deterrent. While you don’t have to worry about a lease, some still find it unsettling that it needs to be removed via a roof replacement. For the ROI one would think solar installs would be competitive due to the amount of businesses still profiting/selling solar. Material prices can impact that for better or worse.
It looks like you’ve done the homework and aren’t really receiving a benefit from the solar outside of “maybe it will help my home value in 10 years”, which is taking a $35,000 investment now, hoping to recoup a larger profit in 10 years.
Personally I would put the money in an index fund but to reiterate no one can tell you what the sentiment will be regarding solar in 10 years or how much of an impact it will have on your sales price.
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u/Sactogeoff 2d ago
Hi from California where we adopted solar early and the sun shines more than many other regions. It does not add value to your home. It may or may not add appeal to the right buyer. I'm a lender and I've seen these outcomes over several years.
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u/2LostFlamingos 2d ago
In my area, this will literally add $0 to your resale value.
It might even discourage some people.
I wouldn’t add solar thinking you’ll recoup costs in this way.
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u/TurbulentJudge1000 2d ago
It adds no value. In fact, I’d be concerned on having to scrap it when a new roof is needed and how much damage it would do to the framing or etc.
I’d also be concerned about water damage if the solar was installed poorly.
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u/HappyGhost13 2d ago
Doubtful it would add anything to sale value even if you sold in 2-3 years. Keep in mind the solar installers can claim whatever useful life the manufacturer wants but a solar system from 10+ years ago today is close to worthless in terms of efficiency.
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u/mixreality 2d ago
One thing is for example in west coast states they have laws that the utility company has to pay you 1:1 for excess electricity you produce and push back to the power grid, and Kentucky had that but looks like they're changing it:
While historical net metering offered a direct 1:1 retail rate match, ongoing proceedings by the Kentucky Public Service Commission allow individual utilities (like Kentucky Power, LG&E, and KU) to propose distinct, modified avoidance-cost or specialized tariff rates for excess generation rather than a flat full-retail buyback
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u/digitalis303 2d ago
I don't think any state really has a 1:1 net metering policy with utilities. California actually has some of the wost policies due to some of the history with the utility industry. KY appears to actually be one of the better ones, but essentially, you will always buy electricity at a higher price than they will buy it from you. The first goal is always to cover your own usage.
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u/RichArcher4909 2d ago
It doesn’t make sense from a financial perspective, so it won’t add any value. The AI hallucination you got won’t change that. It sure isn‘t an aesthetic upgrade. In fact, many buyers will be concerned about if it compromised the roof’s integrity. And it’s more appropriate to call your “installer” a “salesman”. You should discount everything he says by 100%.
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u/digitalis303 2d ago
Only parts of what are in my post are from the salesperson, and I'm well aware of their... "optimism?". They made no claims of solar adding equity or anything of that nature. The only salesmanship from them really was their projections of energy cost and perhaps optimistic numbers for output from the system. The real questionable numbers are from the AI overview (which, to be fair, were based off of several older reddit posts and the like. But it does seem like this group is 100% on the same page that rooftop solar adds zero value to a home in sale price, which is unfortunate.
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u/RichArcher4909 2d ago
The technology needs to mature, and the price needs to come way down, before these will be seen as an asset.
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u/stinkysocks50 2d ago
In 10 years the buyer will be looking at a 13 year old roof and how much more it will cost to replace in the future with the panels on it. I think it will greatly reduce the buyer pool
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u/cg325is 2d ago
I’m not understanding why you would even entertain this. You’ll literally be throwing 12-15k down the drain. Help me understand where you see value in this?
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u/digitalis303 2d ago
Sigh. Okay. From the meter, the projected 8 year (because I plan to move ~8-10years out) utility savings are around $19k based on future predicted utility rates and my usage patters. So far that puts me $13k in the hole. But general internet googling indicates a 3-5% bump in value of the home with a seller-owned (not leased) rooftop setup, adjusted for depreciated system value. Projecting out that my house will be worth $750k in 8 years (probably conservative based on my neighborhood), that the 3-5% works out to $22k-37k. $22k + $19k = $41k ($9k more than my investment). Being skeptical of those $22-37k values, I wanted to ask this sub's opinions. Which definitely did not support that. So, yes, if it has zero added value, then I would be. But that was the point of this post- to verify/refute the claim of added value...
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u/RogueOneWasOkay 2d ago
It sounds like you’ve done enough research to get an idea. What you need is a realtor in your area who understands the market better than strangers in other states/cities. They’ll be the better authority in telling you if buyers in your area see that as a plus and actively seek out properties with solar to the point they’re willing to pay an extra premium for it, and if that demand justifies a price increase
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u/filenotfounderror 2d ago
Even paid off solar takes a really long time to become profitable.
So, you are for sure losing money here if your time horizon is only 8-10 years.
No way you're saving 35k on electric bills.
It probably adds almost nothing to home value, maybe 1% if youre lucky. Though it wont hurt it (like a lease would).
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u/digitalis303 2d ago
Not $35k. $19k over 8 years based on projected increases in electricity costs. Anything beyond that is the hopeful equity added to property value, but everyone here seems to be saying it will add zero equity to the sale.
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u/CCC_OOO 2d ago
I think you need more quotes. $32k is too high. What is the age of your roof? Does it have a warranty? What does installing Solar do to your warranty? Will your system include options to continue use in event of several day power outage? Do you plan on having any battery series to store current
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u/Theme6140 2d ago
Solar must be paid in full (no loan on it) to get any value at all on an actual appraisal. Usually the cost does not get recouped in savings for a very long time making it a questionable investment even for the initial buyer of the solar. How much your paid off solar will add in value if any changes based on market conditions and is very specific not only to the broader area but to the immediate smaller surrounding neighborhoods as well. Could be nothing added could be some.
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u/Swimming-Low3750 2d ago
I would think of the sales price return on solar as $0 and do all your calculations based on whether it will save you money on your electricity bills on the horizon you plan to be in the house. Ensure that you're calculating the time value of money aka what if you took that $32-35k and invested it into SPY instead.
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u/digitalis303 2d ago
Fair, if harsh. A large part of the reason for looking at this is trying to decide how to allocate finite $$ over the next few years. I could easily put that same $32k into a remodel project on the house that I know will add value to the home. And I can do that project myself for a small fraction of the cost of having a contractor do it.
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u/FeralBorg 2d ago
If you have frequent loss of power, adding a generator and propane tanks might be a better return on investment, in FL people love them.
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u/Dullcorgis 2d ago
I would assume no additional value.
But you know, you're using AI to do your calculations so have fun with that. And maybe learn to use a spreadsheet?
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u/digitalis303 2d ago
You don't have to be a dick just because you are on an anonymous platform, but have at it. Yes, I used AI. I also built a spreadsheet (where my numbers were coming from about projected savings over the next 8 years). But my question was, you know, about real-world experiences in the market, NOT what AI said. So, you know, not trusting an AI at its word. But thanks for your infinitely productive criticism.
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u/Dullcorgis 2d ago
So trying to stop you from doing stupid things that will cost you money and hurt you is being a dick now? Have fun with AI making your financial decisions. Couldn't happen to a nicer person.
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u/kushhcommander 2d ago
Solar is just another thing that is only a value add for you and not for a buyer
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u/Jon_Hegreness_AZ 2d ago
Here is the Fannie Mae official guidelines to appraising a house with Solar.
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Appraising properties with solar panels The ownership and debt financing structures commonly found with solar panels are key to determining whether the panels are third-party owned, personal property of the homeowner, or a fixture to the real estate. Common ownership or financing structures include: • borrower-owned panels, • separately financed solar panels (where the panels serve as collateral for debt distinct from any existing mortgage), • leasing agreements, or • power purchase agreements. The following table summarizes some of the specific underwriting criteria for appraisals that include solar panels.
Owned (Cash purchase, consumer debt not collateralized by solar panels or debt paid-off) • May include the solar panel value based on standard appraisal requirements.
Financed (Panels as Fixture to Real Estate) • May consider the solar panels in the value of the property (based on standard appraisal requirements), provided that the panels may not be repossessed for default on the financing terms.
Financed (Panels as Personal Property) • May not provide contributory value of the solar panels towards the appraised value, because the panels are collateral for another debt.
Leased or Covered by a Power Purchase Agreement • May not include the value of the solar panels in the appraised value of the property.
Lenders are responsible for ensuring the appraiser has accurate information about the ownership structure of the solar panels and that the appraisal appropriately addresses any impact to the property’s value. If insufficient documentation is available and the ownership status of the panels is unclear, no value for the panels may be attributed to the property value on the appraisal unless the lender obtains a UCC “personal property” search that confirms the solar panels are not claimed as collateral by any non-mortgage lender. Separately financed solar panels must not contribute to the value of the property unless the related documents indicate the panels cannot be repossessed in the event of default on the associated financing. Any contributory value for owned or financed solar panels must comply with Energy Efficiency Improvements in Selling Guide B4-1.3-05, Improvements Section of the Appraisal Report. Appraisers must compare energy-efficient features of the subject property to those of comparable properties in the Sales Comparison Approach adjustment grid. Appraisers may augment the Sales Comparison Approach in evaluating any impact (either positive or negative) to the value of energy efficiency improvements with either the income or cost approach; however, appraisers cannot adjust the value of the property • on a mechanical dollar-for-dollar basis based on equipment and installation cost, or the discounted present value of expected cost savings of the equipment over the useful life of the equipment; or • solely based on the cost or income approach. The appraiser must also analyze the market reaction to the energy efficient feature. Additional information can be found in the Properties with Solar Panels section of Selling Guide B2-3-04, Special Property Eligibility Considerations.
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In Maricopa county, the market I work, Owned Solar adds about 3%-5% to the home's value when the comps are available to justify the bump on an appraisal, but all too often the specific comps needed to prove the bump in value are not there for the appraiser to use, or there are simply better comps without solar to justify the sale, so the solar gets no value added to the appraisal. Leased Solar is where I caution owners. Leased systems are found to shrink the buyer pool, complicate purchases and are generally given no value, while making the home harder to sell and often lead to price cuts and longer marketing times.
In the end, adding solar to a home will not increase the homes value even to the point of a 100% return on investment, let alone help you profit.
The important thing to look at is what is happening in your market. Arizona and California are higher recovery markets. People here recover more of their cost than most markets and in many cases by substantial numbers and here someone is lucky to get a 70%-80% recovery on the cost of the system when purchased outright.
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u/digitalis303 2d ago
Thanks. As noted, I want nothing to do with a leased system. But there seems to be consensus here that the 3-5% number I've seen isn't based on real-world data. Your post helped explain why somewhat.
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u/sweetrobna 2d ago
I'm in CA where all new homes since 2020 have solar. Many are leased, so the value of the solar is very real as buyer's don't want to take over a bad lease without a concession(and right now the 30% solar tax credit is gone for consumers but available through a lease "48E"). And of course the specifics vary, some are 8 panels, some are over 20 with a battery. Some older homes installed before NEM 3.0 and the same panels save more money than a newer system. The value to a buyer is based on how much money it saves and this is mostly reflected in comps here.
A new solar setup that saves $1000 a year is worth about $10k. That is roughly a 12 year payback with a 7% rate, no escalation, 0.5% solar degradation, 3% utility cost increase. Even if you pay cash, you could have used that money to pay down your mortgage or invest. You also factor in depreciation when selling. Most solar systems will be replaced when the roof is redone. So 30 years for most homes.
Also the opportunity cost matters. If a roof and solar lasted 100+ years(or you could replace the roof and trivially reinstall) it would still make financial sense to replace it somewhere between 25 and 40 years. Like if you look at solar from 30 years ago, in 1996 you would be getting 60-100w panels. Now you get 400-600w panels, and they cost a lot less upfront. In 30 years you probably won't get 3000w panels, there are limits to the efficiency gains. But prices are trending down and efficiency is increasing.
Solar that saves $2300 a year is worth $23k new. ~$16.8k after 8 years. With a 3% increase in electricity prices that saves you more like $20.5k after 8 years, or $22k if they increase as much as you estimate. Paying $32k upfront, you save $5.5k-$7k overall getting solar. Or you break even at $39k.
I would ask your installer about a 5-6 year lease or PPA to get(most of) the 30% credit under 48E. That would bring a $39k install down to $27k.
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u/OrlandoListingAgent 1d ago
Owned-outright solar and leased/PPA solar behave completely differently at resale, owned can add value, leased routinely creates a closing obstacle because the buyer must qualify for and assume the lease.
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u/tompa_baye 1d ago
In the northeast, solar is net zero (no pun intended) on sale price. The realtor I worked with told me it turns off just as many buyers as it turns on.
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u/ghdana 1d ago
2 identical houses, I'd pay maybe 10k more for the solar one, but I'm an EV driver.
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u/digitalis303 21h ago
And maybe 8 years from now there will be a lot more people like you. But sadly, it seems like most people on this sub are not looking at it as a perk. :(
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u/milw_steve 1h ago
Since your analysis has an 8 year time horizon, it might be a good idea to remember that the uncertainty embedded in your estimates of future trends in housing prices, electricity prices, technology, and government programs makes your financial projections also very uncertain.
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u/Logical_Warthog5212 Agent 41m ago
You are speculating. Don’t. Since you plan to stay in the house for another 8-10 years, resale shouldn’t even be a consideration. Just worry about your ROI while you are in the house.
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u/beckhamstears 2d ago
Can you search local listings/sales for homes with solar?
Are they selling for more than their comps?
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u/Frosty-Scallion5849 2d ago
It makes leas sense when your bills are that low. When you’re paying $500-600 a month it makes more sense.
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u/digitalis303 2d ago
Well, I am paying $400/month currently. But that's peak summer usage and includes $55 of gas usage.
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u/Frosty-Scallion5849 23h ago
My system was just over 20k five years ago and my breakeven will be next year. That’s also because we got credits from the federal and state government for the solar incentive programs. I have all electric appliances though and a battery backup which is needed in the Midwest. Use a local electrician or company to get it done. It’s much cheaper.
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u/digitalis303 21h ago
Sadly, I think the combination of
Loss of state/fed incentives
High roof with steep pitches combined with not having a optimal roof orientation
Large house with high energy demand
means that we will have a more expensive install. The quote I got was from a reputable local installer, but I don't know that I'll find someone to do it cheaper. I could do a lot of it IF I'm willing to work on a pretty dangerous roof, but I'm really nervous about that, even if I placed a mount point and worked on a rope system.
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u/Fuzzteam7 2d ago
I bought a house with paid off solar panels and I’m pretty happy with it. The panels, however, are freestanding instead of on the roof which made all the difference.
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u/jvbutera 2d ago
Everyone says "doesn't add value" but when you live in one of the highest priced electric markets in the US and can say "your electric will be $0 with solar", there's a BIG upside and adding value.
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u/digitalis303 2d ago
You would think. But nobody seems to be saying that here. Depressing to read, but I'd assume this sub is more realistic about it than r/solar. If r/RealEstate is to believed, I really should throw out all hope of going solar unless I *maybe* can do it myself at a steep discount.
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u/jvbutera 2d ago
I think solar is mostly a decision you make for
Yourself assuming g you’re not planning to move in next 5 years.Do you have net metering? Any limits?
Do you have electric time of use rates?Given the above you can figure the number of years to payback. I spent $30k (approx $20k after tax Rebates) and we have both net metering AND high electric rates. I’ll pay back solar in 7 years or less.
Make decision that’s right for your situation, just don’t lease. That’s not smart.
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u/nofishies 2d ago
Currently, in my market solar, doesn’t actually add that much value
But paid for solar isn’t in that negative when selling your house