Solar Panels, HERO programs, Predatory Loans

Did you know that many of the programs that claim to help homeowners improve their homes may actually do more harm than good? Programs like HERO or Home Energy Renovation Opportunity, solar power programs and other loans have been in the news lately due to allegations from disgruntled homeowners. These programs may have been created with the purpose of helping residential homeowners upgrade  energy efficient homes but they have instead put many homeowners in debt or worse, at risk of losing their homes. 

These energy forward programs work by allowing homeowners to finance their improvements and pay them back through their property taxes as a tax lien. Some programs even allow homeowners to finance one hundred percent of their improvements. This may sound like an amazing offer but some downsides were quickly noticed. Many banks who lend out mortgages oppose these programs because they are no longer first in line to be paid back. Because the loans are paid through their property taxes, they must be paid back first or the homeowner is at risk of losing their home all together. 

The homeowners who participated in some of these programs also have their own grievances with the loans. Many were approached by door to door salespeople who the homeowners claimed did not mention the extremely high interest rate that went along with the financing. Some homeowners allege that the door to door sales people pitched them a Free Solar Program, when the financing was most definitely not free. Numerous homeowners were also upset to find out that they could not sell their homes until the energy loan was paid off, since most banks refuse to lend on a home that they are not in the first position to be paid back on. 

So what can you or your client do if you are considering applying for an energy focused residential home loan program? Firstly, do your research on the specific program you or your client is considering. Ensure that it’s not one of the many programs with mass lawsuits, or fraud allegations. Secondly, always read the program documents in their entirety to be certain that the interest rates are within a range you or your client are comfortable with. Consider if you or your client plans on selling the property in the near future, because many banks require that the new debt be settled before selling. It’s easy to be sucked into an offer that sounds too good to be true, so that’s why we always recommend that you work with a real estate broker who can advise you on these matters.

Realicore has had experience with clients on both sides of the real estate transaction. These predatory loan programs usually must be paid off in escrow or the new buyer must agree to take on the payments once they close escrow. It complicates real estate transactions and sometimes kills the transaction because of the high pay-off costs and prepayment penalties. Keep up to date on everything related to real estate by signing up for our newsletter below!