PACE (Property Assessed Clean Energy) is a new way to finance energy efficiency and water conservation upgrades to buildings. PACE pays for new heating and cooling systems, lighting improvements, solar panels, water pumps, insulation, and more for almost any property – homes, commercial, industrial, non-profit, and agricultural. The idea is great – who doesn’t want more energy efficiency? Lower Energy Bills? Better Environmental Health?
But real estate agents, closers, abstractors and title companies, BEWARE. We may have a problem.
The PACE advertisement reads:
“Property owners across the US are using PACE because it saves them money and makes their buildings more valuable. PACE pays for 100% of a project’s costs and is repaid for up to 20 years with an assessment added to the property’s tax bill. PACE financing stays with the building upon sale…”
While that is a true statement, PACE financing does stay with the building upon sale, it’s not quite that simple. Once PACE is added as an assessment, it becomes part of the real estate taxes. And, as we all know, real estate TAXES are a FIRST LIEN.
So, let’s say Home Owner Holly uses PACE to install $30,000 worth of PACE-energy efficient fixtures (with a 5% interest rate on the 20 year PACE Assessment) and enjoys low energy bills. Two years later, Holly is offered a new job out of town. She lists the home with Realtor Rick. Rick is excited because he is an energy efficiency advocate and lists all of the energy upgrades for this fine home, selling for only $249,900. Bobby Buyer comes along and makes an offer of $240,000. Holly agrees. She is thinking the buyer will just take over the house and taxes.
Bobby Buyer applies for a loan of $192,00. They order title work. The title company and abstractor know that the $28,000 is a first lien along with the taxes. Holly has not thought to use any of the money saved from her lower electric bills to pay the PACE lien. She thought PACE told her the PACE financing would “stay with the building.” She never thought she might have to cough up the money at closing. . Bobby’s lender does not want to be in Second position behind a $28,000 PACE lien, so now the conundrum. Where does that extra $28,000 in PACE money come from at closing?
I’m not saying PACE’s a bad idea, I love energy efficiency! But let’s make sure everyone understands PACE and how it works.
Another frightening case for County officials. This time the Ventura County’s Online Credit Card Payment System in the Tax Collector’s office was foiled. It appears to have been hacked from a location somewhere in the Philippines, according to county officials, and it sent out emails to an unknown number of people who had previously paid their taxes online through the system. The Ventura County, CA Tax Collector, Steven Hintz, says received a “phishing” email, as he had previously used the online system to pay his taxes. He knew it hadn’t been sent, and knew enough not to open it. Others who did respond to paying their real estate taxes online may have a problem. Read more at the LA Times and catch the news and video news report at KEYT News
In Illinois, workers couldn’t access the Cook County Recorder of Deeds website on April 12th. Worse, they complained they were being rerouted to sex sites. More at the Chicago Tribune While computers are wonderful and marvelous things, we must all take care when accessing information that was not sought from supposedly “official county sites.”
The Washington Post has a good article for our clients and a reminder for us of the paperwork involved in closing a real estate transaction. It discusses what documentation should be kept and why along with some good pointers. It reminds us that the key documents are the HUD-1 settlement statement, the promissory note, the deed of trust (mortgage), the truth-in-lending disclosure and the deed. It highly recommends an Owner’s Policy of Title Insurance, and suggests that you should also keep copies of all paid invoices for all major repairs, improvements and additions that affect your cost basis in the home. I.e. capital improvements, that include the following: building an addition, replacing the roof, paving a driveway, installing central air conditioning, and rewiring. IRS Publication 551 , available at IRS.gov, provides detailed information for determining increases and decreases to your home’s cost basis.
Good Catch ALTA! Another new lien has been introduced by the Federal Housing Finance Agency that could impact our title searches, abstracting, closing and title insurance policies. But what type of lien? We don’t know – perhaps a mortgage type lien, or perhaps a tax or assessment lien?
Accordingly, ALTA has sent a must read ALTA letter to the Federal Housing Finance Agency asking for clarification about the process by which a Property Assessed Clean Energy (PACE) lien is created, administered and satisfied. Without additional information regarding PACE liens, abstractors will not be able to properly identify whether or not property being searched has a PACE lien. Additionally, it is not clear the priority of such lien – upon recording, or as a form of government taxation. Read More at Business Wire and Housing Wire