Solar and Energy-Efficient Improvements HERO/PACE Programs
Real estate agents and mortgage professionals are warning of potential roadblocks with a program that finances solar and energy-efficient improvements to Inland homes.
The hurdles could involve lost sales and problems at escrow for homebuyers, lenders, real estate agents and sellers.
The Home Energy Retrofit Opportunity, or HERO, program was created by the Western Riverside Council of Governments in December 2011. WRCOG is a multi-city agency that oversees planning and development in areas west of Banning.
The premise was the program would offer homeowners an affordable way to finance energy-efficient products, lowering their utility payments and increasing the value of their home.
Costs are written into property tax bills as an added assessment, and payments can stretch out for up to 20 years. Interest is tax-deductible.
HERO is one entity in the Property Assessed Clean Energy program, which began in California in 2001 and has since spread to 31 states. WRCOG manages the California HERO program. And in October 2013, San Bernardino Association of Governments signed on as an administrator of the HERO programs in its respective county.
Things for Yor Realtor to Look for:
- Check homes closely for energy-related or water-saving upgrades, like drought-tolerant landscaping, solar panels, new windows and doors.
- Ask clients if the upgrades were funded with PACE or HERO-type assessments linked to property taxes, and advise them of the prospect that they may have to pay this off under certain mortgage or refinancing scenarios.
- Check title reports carefully for signs of the assessments, which act as a first lein against the property. They may show up in the tax section with such listings as Mello Roos, and not in the unpaid lien portion of the report.
- Review sales offers carefully to learn about a buyers’ prospective funding
Things for Sellers to Know:
- The HERO loan is recorded against the property as a tax lien.
- The tax lien is in the first position, meaning that if a homeowner goes into default, HERO gets paid before any other creditors, including the lenders that hold the mortgage.
- That first position is so important that the Federal Housing Finance Agency prohibits Fannie Mae and Freddie Mac from purchasing mortgages or notes with PACE liens. Weeks ago, an FHFA statement pointed out the risk this first-lien status poses to taxpayers, real estate agents, banks and homeowners about the marketability of a house.
- Understand your responsibility to disclose the improvements and how they are funded.
- Be prepared to be asked to pay the balance on the improvement, if the home is refinanced or sold; in some cases, the sellers have been asked to trim their sale price when an undisclosed assessment surfaces at escrow.
Source: http://www.pe.com/articles/hero-758344-program-home.html
