PACE Loan on Your Home in California: What West Valley Sellers Must Know

You put solar panels on your house back in 2016. Or maybe it was a new HVAC system, replacement windows, or a cool roof — funded through the HERO program or Ygrene when everyone in Woodland Hills and West Hills was doing it. You barely think about it now. It just shows up as a line item on your property tax bill every year.

Then you decide to sell. And somewhere in the middle of escrow, your agent or the title company drops a word you weren't expecting: PACE lien. And suddenly your buyer's FHA lender won't close.

This is happening to West Valley sellers right now — not because they did anything wrong, but because PACE financing was designed in a way that most homeowners never fully understood. Here's what you need to know before you list.

What PACE Is — and Why So Many West Valley Homes Still Have It

PACE stands for Property Assessed Clean Energy. It was a financing program that allowed California homeowners to pay for energy improvements — solar panels, insulation, HVAC, windows, roofing — through a lien attached to their property taxes rather than through a traditional loan.

The appeal was real. No money down. Payments spread over 10–25 years. No impact on your mortgage. The pitch from HERO, Ygrene, and CalFirst Bankcorp was that you'd essentially finance your solar system through your tax bill and the energy savings would offset the cost.

LA County ran the largest PACE program in the state. At its peak, tens of thousands of Valley homeowners enrolled — especially in zip codes like 91367 (Woodland Hills), 91307 (West Hills), and 91304 (Canoga Park), where solar adoption was highest. LA County finally shut down its program in 2020 after a surge of fraud complaints, deceptive sales practices, and lawsuits. NBC Los Angeles covered the county's settlement of PACE loan lawsuits. Spectrum News LA reported as recently as 2023 that homeowners were still dealing with the fallout.

But here's the problem: the county ending its PACE program didn't erase the existing assessments. If you enrolled between 2012 and 2020, your PACE lien is still active — and it will follow your home right into your next buyer's escrow.

What PACE Means When You Go to Sell

The core issue is how PACE is structured legally. It is not a personal loan. It is a property tax assessment lien — which means it attaches to the land itself, not to you. When you sell, it transfers to the new owner by default, just like property taxes would.

That wouldn't be a problem if all buyers could simply take it over. But they can't — at least not easily.

FHA, VA, and USDA buyers are blocked. PACE assessments hold super-lien priority in California, which means the PACE lien is senior to the first mortgage. FHA and VA lenders won't underwrite loans on a property where their lien position is subordinate to a PACE assessment. That means any buyer coming with an FHA or VA loan — which is a large chunk of the active buyer pool — cannot close unless the PACE lien is paid off first.

Conventional and jumbo buyers may have options. Some conventional lenders will allow a buyer to assume an existing PACE assessment, as long as it's fully disclosed, the payments are within certain ratios, and the servicer confirms the terms. Others won't touch it. It depends entirely on the lender and the loan program. This is worth investigating early — not mid-escrow.

Your preliminary title report will flag it. When title is ordered, the PACE assessment will appear as a lien on your property. It's not something you can overlook or hope the buyer doesn't notice. For more on what shows up on that report and how to address it, see preliminary title report issues for California sellers.

California Disclosure Requirements for Sellers

You are legally required to disclose an active PACE assessment. Here's where it shows up:

• Transfer Disclosure Statement (TDS) — Section C: You must check yes and describe the assessment, including the balance and annual payment amount.
• Seller Property Questionnaire (SPQ): The SPQ specifically asks about PACE/HERO/Ygrene assessments and the terms of the financing.
• C.A.R. RPA: The California Residential Purchase Agreement has language requiring buyers to be informed of any existing PACE assessments before close.

Failure to disclose a known PACE lien can expose you to post-closing liability. Even if the buyer's title company and lender would have caught it, failing to disclose what you know creates legal risk you don't want to carry. For a full overview of your California disclosure obligations, see California seller disclosure requirements for Woodland Hills sellers.

Your Three Options for Handling PACE in Escrow

Once you know you have a PACE assessment, you have three paths forward:

1. Pay it off at close from your sale proceeds. This is the cleanest solution. Contact your PACE servicer — HERO/Renovate America, Ygrene, or CalFirst Bankcorp — and request a formal payoff quote. The payoff can be handled through escrow, just like paying off a mortgage or a lien. This clears the lien completely, opens your home to all buyer types (including FHA and VA), and eliminates the issue. The tradeoff is that it reduces your net proceeds. If your PACE balance is $20,000, that's $20,000 less you walk away with. For help modeling exactly how this affects your bottom line, see net proceeds for Woodland Hills home sellers.
2. Transfer it to the buyer (with their lender's approval). If your buyer is using a conventional loan and their lender will accept the PACE assessment, you may be able to transfer the remaining payments. The buyer takes over the annual property tax payments going forward. This keeps your proceeds intact but narrows your buyer pool — you're essentially limited to cash buyers and certain conventional financing. It also requires full disclosure and lender underwriting of the PACE terms.
3. Negotiate a credit or price reduction in lieu of payoff. Some sellers and buyers split the difference: the seller credits the buyer at closing for some portion of the PACE balance, allowing the seller to avoid a full payoff while giving the buyer cash to handle it post-close. This only works if the buyer's lender will close with the PACE assessment in place — again, FHA/VA won't, so this is a conventional-only workaround.

There is no magic fourth option. If your buyer needs FHA or VA financing and you can't pay off the PACE lien, the deal doesn't close. That's exactly the scenario that surfaced in BiggerPockets threads under headlines like "PACE loan on property making it very hard to sell — urgent." It blindsides sellers who assumed the assessment would just carry over quietly.

A Note on the 2024 CFPB Rule

In December 2024, the Consumer Financial Protection Bureau finalized new PACE underwriting rules that added consumer protections for future PACE financing. These rules don't eliminate existing assessments, but they do establish stricter ability-to-repay standards for new PACE loans going forward. If you enrolled in a PACE program and feel you were misled about the terms, California's DFPI (Department of Financial Protection and Innovation) oversees PACE servicers and handles complaints.

What matters for selling is straightforward: existing PACE assessments are still liens, still require disclosure, and still need to be resolved before or at closing if your buyer is using government-backed financing.

How to Find Out If Your Property Has a PACE Assessment

Not sure whether your home has one? Here's how to check:

• Pull up your most recent LA County property tax bill. PACE payments appear as a separate line item labeled "contractual assessment."
• Contact the LA County Auditor-Controller's office and ask about any special assessments on your APN (Assessor's Parcel Number).
• Have your agent or escrow officer order a preliminary title report early — it will show any recorded PACE liens.

If you installed solar panels, a new HVAC, windows, or roofing between 2012 and 2020 and financed it through HERO, Ygrene, or a similar program, there's a reasonable chance a PACE assessment is still active on your property. It's worth confirming well before you list — not after you're in escrow with a buyer who can't close. This situation is different from owning solar panels financed through a standard loan; for that comparison, see how solar panels affect home sales in California.

PACE isn't insurmountable, and it doesn't have to kill your deal. But it needs to be on the table from day one — not surfaced mid-escrow when you've already removed contingencies. The sellers who get blindsided are the ones who didn't know to ask. The sellers who close cleanly are the ones who ran their numbers, got a payoff quote, and planned for it in advance.

If you're thinking about listing a West Valley home and you're not sure whether a PACE assessment is a factor, I'm happy to walk through it with you before you do anything else. Reach out at jasonfranklinre.com or call/text directly — no pressure, just clarity.