Is Ygrene and PACE Home Improvement the Right Path?

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Since 2013, tens of thousands of families in Florida have added impact windows, solar panels and generally improved the quality of their homes using Ygrene (spelled Energy backward) and PACE (Property Assessed Clean Energy) loans. The allure is simple. Do “green” and hurricane-resistant improvements to your home and not take a penny out of pocket. It seems too good to be true. And, as it turns out, it likely is.

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Some background first. Ygrene is a California-based company that arrived in South Florida ahead of other companies who also now qualify for PACE loans, getting a head-start in obtaining necessary agreements by Miami-Dade, Broward and Palm Beach counties. In short, Ygrene partners with local banks and local governments to do construction-based loans in a whole new way.

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A 2019 study from the University of South Florida (funded in part with about $9,500 from Ygrene) makes the case for the PACE program’s benefits. It found that Ygrene’s projects have reduced greenhouse gas emissions in Florida equivalent to driving 114,000 cars for a year and saved enough electricity to power 78,000 homes for a year. Using an economic model that Ygrene developed, the researchers also found that contractors have made about a billion dollars from the program and that homeowners will have saved more than a billion dollars in insurance premiums over the lifetime of the improvements. Seems great, right?

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However, here are some additional facts to know about PACE loans in Florida. When you borrow money from this program, they are loans that are (a) not governed by typical disclosure laws and (b) are loans that are repaid as an obligation on your property tax bill. These incredibly important facts are often overlooked by the homeowner as they forge ahead with their home improvements.

As a real estate agent, here is what I have come to learn:

  1. The PACE Financing will create a priority lien against subject property. You pay your vendor through annual taxes, not to the contractor or vendor.

  2. Since a PACE loan is an add-on to your property taxes, it takes a superior position to even your primary mortgage! This is a sneaky way for a PACE loan to get around your mortgagor, even years after your original purchase.

  3. If you ever are unable to pay your tax bill, you can (at the most extreme case) lose your home. In essence, the underlying PACE loan removes your homestead rights!

  4. When you go to sell your home, if the buyer is financing, you will be required to pay off the entire PACE loan in order for the transaction to close.

  5. If you are thinking about refinancing (especially now with historically low interest rates), think again! You will be forced to pay off your PACE loan before the refinancing loan will even take a look at doing the deal. Why? See #2

If that isn’t enough, there are many lawsuits and claims that the PACE-approved contractors often inflate the cost of the home improvement project because they are not competing on the open market for your business. The PACE interest rate is also typically higher than a home equity line or other such financing.

I’m not saying to completely avoid PACE and Ygrene. I am simply saying there are many facets to doing home improvements in this manner. As always, read the fine print because, as your parents told you, “If it seems too good to be true, it probably is.”