Solar Panels and Home Value: What Buyers and Lenders Need to Know in 2027

Owned solar panels can increase appraised value — but the increase is market-dependent and appraiser-driven. Fannie Mae and Freddie Mac accept the income approach (PV Value methodology) or sales comparison using solar-equipped comparables. A typical owned system (6–10 kW) may add $15,000–$25,000 to appraised value in markets with high electricity rates and strong buyer demand (California, Arizona, Hawaii). In lower-utility-cost markets, the value add is smaller. The key requirement: the panels must be owned outright and not subject to a lease or Power Purchase Agreement (PPA) that encumbers the title. Appraisers use the Fannie Mae solar energy system appraisal guidance to determine how to reflect solar in the report.

Leased solar panels (or PPA agreements) are one of the most common title complications in residential real estate in 2027. The lease is typically recorded as a UCC-1 financing statement or fixture filing against the property. Problems this creates: (1) Title concerns: many lenders require the lease to be subordinated to the mortgage — meaning the solar company's claim ranks below the lender's; if the solar company refuses to subordinate, the lender may decline the loan; (2) No appraisal value add: leased systems do not contribute to appraised value; (3) Transfer complexity: the lease must be assumed by the buyer or the seller must pay to buy out the lease before closing. Before making an offer on a home with solar, ask for the lease agreement, the buyout amount, and confirmation that the lender will accept the subordination terms. The CFPB guide on solar leases explains consumer rights.

The federal Residential Clean Energy Credit (IRS Form 5695) allows homeowners to claim 30% of the total cost of a solar photovoltaic system installed on a primary or secondary residence. This 30% rate was set by the Inflation Reduction Act (IRA) and applies through 2032, stepping down to 26% in 2033 and 22% in 2034. The credit applies to the full system cost including panels, inverter, mounting hardware, wiring, and installation labor. It is a non-refundable credit (reduces your tax bill dollar-for-dollar but not below zero; excess can be carried forward). Example: $28,000 system × 30% = $8,400 credit. The credit applies only to owned systems — lease payments do not qualify. Full details at IRS Residential Clean Energy Credit.

Yes — there are several ways to finance solar through your mortgage: (1) Cash-out refinance: if you have sufficient equity, a cash-out refi can fund the system at mortgage rates (currently 6–7.5%) — lower than solar-specific financing; (2) FHA Energy Efficient Mortgage (EEM): allows borrowers to finance energy improvements including solar up to the lesser of the cost of improvements or 5% of the home value (up to $8,000); (3) Fannie Mae HomeStyle Energy: finances energy improvements up to 15% of the as-completed appraised value; (4) PACE financing: Property Assessed Clean Energy — repaid through property tax bills; but PACE liens take priority over the mortgage (first lien position), which many conventional lenders will not accept. The safest approach for most homeowners is cash-out refinance or a dedicated home improvement loan. See the DOE homeowner's guide to going solar.

Appraisers use one of two primary methods when valuing owned solar panels: (1) Income approach (PV Value): estimates the present value of future electricity savings over the system's remaining useful life (typically 25–30 years), using local utility rates and solar production data. NREL's PV Value tool is the most widely accepted methodology by Fannie Mae and Freddie Mac; (2) Sales comparison approach: identifies comparable sales of similar homes with and without solar in the same market and adjusts for the solar feature. In practice, the income approach is preferred when comps with solar are scarce. Appraisers must document their method in the report. If the appraiser dismisses solar value without explanation, a borrower can file a Reconsideration of Value (ROV). The NREL solar home value research provides the academic basis for valuation.

In many US states, there are property tax exemptions that prevent solar installations from increasing your property tax assessment, even if they increase market value. As of 2027, over 35 states have enacted some form of solar property tax exemption or exclusion. Examples: California (Section 73 of the Revenue and Taxation Code) excludes active solar energy systems from assessed value through 2025 (extensions pending); Texas exempts 100% of solar system value from property taxes; Florida offers a renewable energy property tax exemption for residential properties. Without the exemption, a solar system adding $20,000 of appraised value in a jurisdiction with a 1.2% mill rate would increase the annual tax bill by $240. Check your state's exemption status through the Database of State Incentives for Renewables and Efficiency (DSIRE).