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Sustainable Real Estate Basics: The ROI of Solar Power

While homebuyers of the past tended to focus on curb appeal or school districts when looking for a new home, this year has seen a notable new housing trend: energy efficiency and sustainable living. From reducing energy bills to increasing home value, there are countless reasons why buyers invest in eco-friendly homes.

One popular sustainability feature is a solar array, which can contribute to a high return on investment (ROI) from which both home sellers and buyers can benefit. As a real estate agent, understanding the ROI of solar panels — and where those returns have the greatest impact — can help you determine if your clients should take advantage of a solar-powered property.

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Potential Returns for Homes with Solar Panels

A solar array can be a premium add-on to feature when showing a home, especially in terms of property value. On average, a 3.6 kW solar energy system can add up to $15,000 to a home’s selling price — a premium of nearly $4 per watt. With solar picking up in popularity, those returns bring an extra degree of security should your client decide to flip the home down the line.

If the added resale value of a solar array doesn’t sway your buyers, the energy bill savings might. Over the course of several years, an average array can decrease electricity costs by over $10,000. Most home buyers will readily embrace the ongoing savings that solar panels provide, and the fact that they won’t have to deal with system installation expenses themselves can be another huge incentive.


Can Your Clients Benefit from Solar?

As appealing as those average returns sound, not all buyers will benefit equally from solar power. While solar panels do have the potential to reduce a homeowner’s energy bill significantly, the exact ROI of a solar array will depend on area sunshine and utility rates.

Solar Power Real Estate

Sunshine Levels

Sunny states like Arizona, California, Nevada, Hawaii, and New Mexico have the most solar energy potential, making it easy to demonstrate the benefits of an array as you’re showing homes in those areas. However, if you’re selling in a state that sees less sun — including Alaska, New York, Oregon, Vermont, and Washington — you may have a harder time sealing the deal. Homes in overcast states can still make use of solar energy, but homeowners won’t see as big of an impact on their monthly bills unless they have an extensive system installed.


Energy Rates

Along with sunshine levels, high utility rates also affect the ROI of solar energy. Residential energy rates range between 8.64 cents and 36.90 cents per kWh, depending on the state. When U.S. households consume an average of 10,932 kWh per year, annual utility bills can be as low as $945 or as high as $4,034 — a significant range. Solar panels are most beneficial to homeowners living in a states on the higher end of that rate spectrum, including Alaska, California, Hawaii, Maine, New York, and New Jersey.

Considering both sunlight and energy rates together, buyers looking at housing in places with lots of sun and high electricity costs, like Hawaii and California, stand to benefit the most from solar. Buyers in other areas can still see benefits from using solar panels, but you may need to highlight the long-term payoffs more than the immediate benefits in those cases.


Selling Solar Power in Real Estate

Wherever your clients are looking to buy, take some time to get familiar with the solar market in the area. Helping your buyers understand the return on investment of solar power will enable them to make a more informed decision when finding a sustainable forever home.

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