What is PACE?
It’s a simple question with a not-so-simple answer. PACE stands for Property Assessed Clean Energy; it is a new way to finance home improvement projects through annual payments on a homeowner’s property tax bill. Eligible projects include, but are not limited to, new air conditioning units, impact resistant windows, new insulation and hurricane shutters.
It is not just for residential improvement projects though. PACE programs can also be used on commercial properties to replace a roof or install solar panels to generate renewable energy. Financing terms (typically from 5 years to 20 years) and interest rates vary depending on the PACE program the property owner selects. The maximum total cost of the improvement cannot exceed 20% of the property’s assessed value.
Who is eligible for a PACE loan?
This is a simple question with a somewhat simple answer. Not everyone who wants use a PACE loan to buy new windows or doors is eligible. The property owner must meet the following requirements:
- Have a minimum 10% equity in the property,
- Have paid their property taxes on time during the last three years (or period of ownership if less than 3 years)
- Be current in their mortgage at approval
- Have no involuntary liens on the property
- Must not be in bankruptcy
Not every contractor is eligible to participate in a PACE improvement project either. Each PACE program provider has a certified list of contractors that a property owner can choose from. If a property owner would like to use a contractor they are familiar with, most PACE providers will gladly certify them after a screening, training and review process. PACE Program providers also vary by municipality.
What happens during a transaction when PACE is involved?
This is another simple question with a not-so-simple answer. As a REALTOR®, the most important piece of information you need to know when selling a property with a PACE assessment is that there is a possibility that the assessment will stay with the property and not the seller. Some mortgage lenders, mainly government backed loans such as Fannie Mae & Freddie Mac, may require full repayment of the special assessment upon the sale of the property.
If you are listing a property with a PACE assessment, you should always disclose that there is a PACE assessment on the property tax bill. Listing agents should also include the remaining balance and payment terms, and the associated benefits PACE improvements have on the property such as energy & insurance premium savings, safety and comfort. If you are selling a property with a PACE assessment, you should include a brief addendum to the purchase contract noting the buyer accepts the special assessment as part of the purchase agreement and ensure the special assessment is properly disclosed to the buyer’s lender via the Preliminary Title Report. Florida Realtors® has created a PACE contract addendum, it can be found by clicking here.
See below for a full list of PACE Program providers for each County