PACE Loan on property making it very hard to sell! urgent!

Buying & Selling Real Estate
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PACE Loan on property making it very hard to sell! urgent!

Jacob Rincon
Flipper/Rehabber · San Diego, CA · Member since 2019 · 15 posts · 1 vote

Hello,

I'm currently selling a property in san diego california that has a 48k PACE loan on it built into the tax bill for solar panels that were put on by a previous owner. I'm now having trouble selling the property due to the lenders not wanting to lend to the buyer because then their loan would be in 2nd position while the PACE would be in the 1st position, meaning that the PACE would need to be paid off first before the FHA loan. I'm currently struggling and thinking that instead of me just transferring over the payment to the buyer, i'd instead have to pay off this whole 48k in order for them to get the funding to purchase this house.

My first thought was (well i'll sell to someone else then), but upon some further research i discovered that all FHA loans will not lend to a buyer looking to purchase a home with a PACE loan on it. is this true? Also if it is not true, what type of lenders will loan to a buyer looking to buy a home with a solar panel PACE loan on it?

if someone could please provide some advice on what i should do? it's been on the market for a while and "hoping
" for a cash buyer to purchase it just doesn't make sense. This is a flip and i will end up losing money on this project if i have to pay off this 48,000 for it to be able to sell. please help!

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  • Mary Erickson
    Investor · San Diego and Dallas · Member since 2020 · 21 posts · 10 votes
    6y

    Where in SD is the home located?   Cash buyers expect good deals, it sounds like this isn't going to be a good deal with the price of the house and the loan payoff.  Can you offer seller financing with a good downpayment and a 5 year balloon?  can you  have your money tied up that long?  As a cash buyer in San Diego I would add the price you are charging, plus the PACE loan and if the house isn't still a good deal I would walk away.  Is there a penalty for paying the PACE loan off early?

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  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    6y

    @Jacob Rincon there should be a way for you to subordinate the PACE loan in order for a buyer to use FHA financing. Have you called the loan provider to see if they will subordinate or temporarily release the lien? I believe renovate and the other major PACE loan providers are willing to take 2nd position or release the lien to facilitate the transaction. https://www.urban.org/sites/default/files/publication/82756/2000865-FHA-Clarifies-Financing-on-Properties-with-PACE-Loans.pdf

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  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    6y

    Oh man those pace loans are bad news, I believe there are options through the lender to move the pace loan to 2nd position. 

    $48k for solar seems outrageous, pace loans have killed a few deals for me over the years they wouldn’t pencil with them. I hope you can work this out. 

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  • Nick Geller
    Member since 2020 · 2 posts · 0 votes
    6y

    It's my understanding that a pace loan can appear to be 48k for solar but I think there are ways to add other things in too like low water use landscaping.  I would not be surprised if this 48k was for more than just a solar system but either way it seems to be a problem.

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  • Jacob Rincon
    OP
    Flipper/Rehabber · San Diego, CA · Member since 2019 · 15 posts · 1 vote
    6y

    Unfortunately after speaking with the loan company, they have a policy where they refuse to move into 2nd position. I should have done a little more reasearch on the type of loan in the beginning, unfortunately this is my first flip and i'm learning the hard way. I can't have my money tied up for any longer so i'll have to take this as a learning experience and move on, pretty bummed that this solar is making my first deal unprofitable. Thank you all for your advice.

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  • Nick Geller
    Member since 2020 · 2 posts · 0 votes
    6y

    Is it possible to switch strategies and rent the property instead?  I know rents are really high right now in SD but I guess it depends on a lot of factors to see if that would work for you.

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  • Jacob Rincon
    OP
    Flipper/Rehabber · San Diego, CA · Member since 2019 · 15 posts · 1 vote
    6y

    Nick,

    Unfortunately the amount that i could charge in rent wouldn't cover the monthly expenses. I'm currently trying to find if there is anything on the sale that wasn't disclosed when i purchased the house.

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  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    6y
    Originally posted by @Jacob Rincon:

    Nick,

    Unfortunately the amount that i could charge in rent wouldn't cover the monthly expenses. I'm currently trying to find if there is anything on the sale that wasn't disclosed when i purchased the house.

    If you have purchased the home, you are likely limited to damages and possibly a legal battle to obtain the damages.  It could be worth it if you find a big enough non-disclosure but it seems unlikely (but no harm checking).  

    Good luck

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  • Jacob Rincon
    OP
    Flipper/Rehabber · San Diego, CA · Member since 2019 · 15 posts · 1 vote
    6y

    So this one a couple cases i found in the disclosures, it clearly says that there is a PACE on the property as checked yes. But the seller never provided me documents stating how much the payoff is, how it is paid, etc.. and also they checked the box that says " is the cost of any alteration of the property being paid by an assessment on the property tax bill" as no. when that is how the PACE loan is paid and the fact that it is being paid through the tax bill is what is screwing me because that means that it is being paid to the government, and the government always has to be paid off prior to the lender on the house. is this enough to have any sort of battle?

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  • Jacob Rincon
    OP
    Flipper/Rehabber · San Diego, CA · Member since 2019 · 15 posts · 1 vote
    6y

    And then under the section "other", number 1. and 3. are both checked as no. 

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