Will PACE affect my ability to sell?

Will PACE affect my ability to sell?

Source: http://www.floridarealtors.org/NewsAndEvents/article.cfm?p=3&id=355698

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Question: I’m looking into the PACE program offered through Charlotte County to finance certain home improvements for solar and other energy reduction replacements for high electricity hogs such as HVAC, water heaters, pool heaters, etc.

Since the financing creates a tax lien that can be passed on through higher real estate taxes to new owners, do you consider it a big negative if, say, I wanted to sell my home in less than five years?

I thank you in advance should you choose to respond.

Answer: Thank you for the question. I’m sure other readers could also benefit from the PACE program. So before answering your question, let’s set the stage by explaining the benefits of this program. In Florida, the PACE program is also referred to as the AllianceNRG Program.

In simple terms, the PACE program provides financing to home and business owners who want to upgrade their properties with energy-saving and wind-mitigation improvements. These improvements benefit the property owners by reducing energy costs, insurance premium costs, and environmental emissions. They also provide the added security of storm fortification.

The PACE website below states that these improvements can deliver a high return on investment. For example, wind mitigation improvements can slash your annual wind-coverage premiums by up to 77 percent.

But what if you don’t have the money or credit-line to pay for these improvements? The PACE program provides an innovative solution to this. It provides private funding. The county facilitates the process of repaying the loan by creating a special, non-ad valorem assessment which is added to the annual property tax bill.

Because the loan is collateralized by the property and further protected by its status as a property-tax lien, the lender can provide more flexibility than a conventional lender. Your credit score doesn’t matter. If you default on your home, property-tax liens are among the first to be paid from the proceeds of a foreclosure sale. This minimizes risk to the lender.

For a residence, the maximum loan amount is generally 20 percent of the property appraiser’s just (market) value. You will be required to have work performed by an approved contractor who has been vetted on many levels by the program.

Now let’s paraphrase your question: Would participation in the PACE program have a negative impact on your ability to sell your home? The key here is that PACE allows you to pre-pay the balance of the loan at any time, with no penalty. That removes the lien and it becomes a non-issue to the buyer.

You can pay off the PACE balance with cash up front, or it can be paid from your proceeds at closing. So assuming you will have the cash or enough equity in your home to do this at closing, it’s not a problem.

If you are not able to pay off the balance at closing, then the PACE balance and property-tax lien can be assumed by the buyer. But from my perspective, yes, that would create a negative impact on your ability to sell your home. In that scenario, you would be asking the buyers to pay higher property taxes, annually, to pay for something you wanted. Their unfamiliarity with the PACE program will further deter them from assuming your obligations.

In summary, your participation in the PACE program should not have a negative impact on your ability to sell your home as long as you can pay off the loan balance at, or before, the closing.

For more information on the PACE program, go to floridapace.gov or call 855-509-9922.

Copyright © 2017, Charlotte Sun, Brett Slattery. Brett Slattery is broker/owner of Brett Slattery Realty LLC.

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