"You either die a Hero, or live long enough to see yourself become the villain."
You may or may not have heard about the uproar being dealt with over the famous (and now infamous) H.E.R.O. program. But it's become more and more of an issue in recent months as home values continue to rise and homeowners are wanting to cash-in on the new equity before it's too late. It appears for now that the program, which was once hailed as a "hero" to homeowners is being looked at closely as possibly now being...a villain.
H.E.R.O., the Home Energy Renovation Opportunity, came about to assist homeowners in obtaining energy efficient repairs & upgrades to their existing home without large out of pocket expenses. The total amount for the repairs/additions are attached to the property taxes and are paid for over time. Sounds good. But for many homeowners, it can be a problem if they ever want to refinance or sell their home. The loan takes a first-lien position on the home, meaning that if the home is sold or refinanced, the H.E.R.O. loan stays with the house as number one with the taxes. Not a problem if you have a great low interest rate and are thinking of staying forever (or long term) at your current residence. But if you think there's a chance of selling in the near future, I'd be wary of adding a huge 2nd loan.
I recently closed escrow on one of my clients that had a $20,000 H.E.R.O. loan. Luckily, they were able to sell and pay it off and still walk away with a good chunk of change in their pocket. But I've also spoken with 2 other sellers who were not so fortunate. Both were divorce situations, both had to sell, both had large H.E.R.O. loans and both were upside down because of it.
Another issue arising out of the recent rush to add these types of home improvements has been disclosure. The question of "was the homeowner properly disclosed of the ramifications of obtaining this type of PACE loan?" has been passed around and is now gaining the attention of District Attornies. Just yesterday, the Inland Valley's Association of Realtors (of whom I am a member) had an open forum about the H.E.R.O. program. One of the special speakers was, Riverside County Deputy District Attorney Raymond Ramirez. Mr. Ramirez confirmed and investigation is currently underway on how consumers are being sold energy efficient types of products through the H.E.R.O. program.
You can check out the entire news article about the meeting by clicking HERE!
Currently, the "jury" is still out on the H.E.R.O. program in regards to how the program is being presented to consumers. But if you're looking to add energy-efficient products to your place of residence, I suggest you get with me first to discuss whether or not it's a good fit for you.