When homeowners think about improving their houses with solar panels, HVAC systems, EV chargers, water saving systems, etc., HERO or PACE loans are an appealing option. Home Energy Renovation Opportunity (HERO) or Property Assessed Clean Energy (PACE) loans are a form of financing that allows homeowners to borrow money for eligible energy-efficient upgrades. This loan is then repaid through their annual property tax bill over many years.
While these loans can be helpful, they can also become problematic when selling a home. Consider Emma, Successor Trustee for her deceased grandmother’s trust. Most documents are neat and orderly, and Emma’s real estate agent has no trouble finding a buyer for her grandmother’s home.
They’re already in escrow when the title company discovers a HERO loan against the property. Emma remembers her grandmother replacing the windows in the house, but she didn’t think anything of it, after all it was years ago. Turns out, Grandma took out a HERO loan to install these energy-efficient windows and there were no monthly bills because her payments were collected with her annual property taxes.
The unfortunate thing is that the HERO loan was $30,000 and recorded against both the person and the property. This means the HERO loan on Grandma’s house must be paid off at the close of escrow.
HERO loans can easily go unnoticed by a Successor Trustee and their Trust Attorney because the payments are collected with the property taxes, rather than in monthly installments. These loans can delay escrows and add unwanted stress onto heirs, but there are ways to lessen the impact!
For one, looking over the tax distribution section of the seller’s property tax bill will tell you whether or not there is a HERO or PACE loan recorded against the property. Finding them earlier in the selling process will give all parties more time to sort and solve any issues that may arise.
Here at Affinity Escrow, we believe it’s the little things brought together that make all difference. Taking the time to read deeper into the property tax bills may save you time and energy in the long run. If you have any questions or would like to know more, call us at 619-260-1200, visit our website, or email Jamie at jamie@affinityescrowservices.com.
