The lien that wrecks a home sale usually isn't on the mortgage statement. It's sitting in the property tax bill, on a line nobody in your family has read closely in years.
Here's the version of this I watch play out most often. Somebody knocked on your parents' door, or called, and offered a new roof, or windows, or an air conditioner, or solar panels. There was no money down. There was a mention of a government program, or a county program, or an energy program, and the words were true enough to be reassuring. Your father signed something on a tablet in the driveway. The work got done, and the work was probably fine. Nobody in your family thought about it again, because no bill ever arrived in the mail with a lender's name on it.
For 8+ years I bought houses from families in transition, and I learned that the expensive surprises are almost never hiding where people look. They're hiding on the documents nobody reads because they seem routine.
So let me hand you the thing worth knowing. That signature may have attached a loan to your parents' house that gets collected through the property tax bill, sits ahead of the mortgage in line, and has to be cleared before you can sell. Most families find out about it three weeks before closing, when there's already a buyer, a moving date, and a bed reserved at an assisted living community. That's the worst possible moment to learn what a number is, because by then you've lost the ability to walk away from anything.
You can check for this in an afternoon, right now, while nothing is urgent. That's what the rest of this is for.
What the CFPB Found When It Studied These Loans
The product has a name: PACE financing, short for Property Assessed Clean Energy. According to the Consumer Financial Protection Bureau, PACE loans are voluntary transactions secured by the borrower's home, but they're repaid through the borrower's property tax bill rather than through a separate monthly statement.
In May 2023 the CFPB published a report called Property Assessed Clean Energy (PACE) Financing and Consumer Financial Outcomes. It's the most useful document on this subject, and it isn't an opinion piece. The Bureau matched loan data from PACE financing companies against de-identified credit records for more than 200,000 consumers who applied for PACE financing between July 2014 and June 2020. Then it compared people who took the loan against people who applied and were approved but didn't go through with it.
The findings are worth reading slowly.
On cost, the CFPB found PACE loans increase a homeowner's property tax bill by about $2,700 per year on average, which the Bureau calculated as an average increase of about 88 percent. That is not a rounding error on a fixed income. It nearly doubles the single largest recurring bill on a paid-off house.
On price, the report found the average PACE loan carried an interest rate of about 7.6 percent, with fees averaging about $1,300 per loan, and estimated annual percentage rates that ran roughly a full point above the stated rate once those fees were counted. The Bureau found more than a third of these loans had APRs or fees high enough to meet the definition of a high-cost mortgage under Regulation Z.
On consequences, the CFPB found that getting a PACE loan increased mortgage delinquency rates by 2.5 percentage points over the two years after origination, compared with those approved applicants who didn't proceed. For reference, the Bureau noted the average delinquency rate for these borrowers in the two years before the loan was 7.1 percent, which means the loan raised the risk of falling behind on the mortgage by roughly 35 percent.
Two more details tell you what kind of sales process produced these loans. The CFPB found the effect on mortgage delinquency was larger for borrowers with lower credit scores, which matters because parts of the industry marketed PACE as a solution for people with imperfect credit. And a little more than 13 percent of borrowers received multiple PACE loans, with many originated at the same time or within a few months of each other.
Why It Lands on the Tax Bill Instead of a Statement
This is the mechanism that makes the product so easy to miss, so it's worth understanding before you go looking.
A normal home improvement loan generates a lender, a statement, and a phone call when you're late. PACE generates a line on the property tax bill. If your parents pay their taxes through a mortgage escrow account, which most people with a mortgage do, the servicer absorbs the increase and raises the monthly escrow payment. Your parents see the mortgage payment go up and often assume the county raised their taxes.
If they own the house free and clear, the increase shows up once or twice a year on a bill that many older homeowners pay without itemizing, because it's arrived every year of their adult lives and it always goes up a little.
The CFPB spelled out why this structure is riskier than it looks. Because PACE payments are collected with property taxes, failing to pay the PACE portion generally means failing to pay the tax bill as a whole. And as the Bureau noted, mortgage servicers will generally pay a delinquent property tax bill on the homeowner's behalf to protect the lender's security interest, then turn around and collect the shortage from the homeowner. That's the pathway from a home improvement you barely remember to a mortgage delinquency you didn't see coming.
The CFPB also found more than 70 percent of PACE borrowers had a mortgage already when they took the loan, so this is not a product that mostly landed on people who owned nothing.
What Happens When You Go to Sell
Here's where this stops being an annoyance and starts costing your family real money.
Residential PACE assessments are generally structured to take priority over existing mortgage liens, the same way ordinary property taxes do. The mortgage market has a firm answer to that. Fannie Mae's Selling Guide, section B5-3.4-01, states that Fannie Mae "will not purchase mortgage loans secured by properties with an outstanding PACE loan unless the terms of the PACE loan program do not provide for lien priority over first mortgage liens." The guide explains the reason plainly: the standard Fannie Mae and Freddie Mac security instruments prohibit loans that have senior lien status to the mortgage.
Read that from your buyer's side. If your parents' house carries a PACE assessment with priority, the loan your buyer is trying to get generally can't be sold into the conventional market while that assessment is still attached. In practice, that means the balance gets paid off at closing, out of your parents' proceeds, or the deal restructures around it.
So the money is real and it comes out of the same pot that was going to fund care. A remaining balance on a roof financed at 7.6 percent is not a small line item on a settlement statement.
And notice the timing, because the timing is the actual injury. Nothing about this surfaces until somebody runs title. Title gets run after you've listed, after you've accepted an offer, after your mother has told her friends she's moving, and after the community has your deposit. At that point your family isn't deciding anything. You're absorbing a number.
That's the pattern worth naming. Calling an agent starts a clock. Once the sign is in the yard, every unpleasant discovery arrives with a deadline attached and a room full of people who need you to keep going. The families who do well are the ones who found the ugly paperwork months earlier, when the only cost of a surprise was a phone call.
How to Check Your Parents' House This Week
None of this requires a lawyer or a hard conversation about the future. It's an afternoon of records.
1. Read the actual property tax bill, line by line
Not the amount due. The itemization. You're looking for a line that reads as a special assessment, a district assessment, an improvement assessment, or a line carrying a program name rather than a taxing authority. County bills separate ad valorem taxes, which are based on the home's value, from non-ad valorem assessments, which are flat charges attached to the parcel. A PACE obligation sits in that second group.
2. Pull the parcel record from the county yourself
Every county tax collector and property appraiser posts parcel records online, searchable by address or owner name. Pull your parents' parcel and read the current and prior year bills. Do this yourself rather than asking your parents to find the paperwork, because the paperwork is frequently gone and the question tends to land as an accusation.
3. Search the county land records for a recorded assessment
PACE obligations are typically recorded against the property. Search the register of deeds or county clerk's land records by owner name and look for any notice of assessment, lien, or agreement recorded in the years after a visible improvement to the house. A new roof or new windows with no recollection of writing a check is the thing that should send you to the records.
4. Ask the question in a way that doesn't sound like an audit
Don't ask your father whether he signed a loan. He'll say no, and he'll believe it, because it was presented as a program. Ask what year the roof was done, who did it, and how it was paid for. If the answer is any version of "they said it goes on the taxes" or "there was no payment," you have your answer.
5. Get a written payoff figure before you talk to anybody about listing
If you find an assessment, call the county tax collector and the program administrator and ask for the outstanding balance, the payoff amount, the remaining term, and the interest rate, in writing. Knowing that number early is what converts a closing-table emergency into one line in a plan.
6. Know what the new federal rule does and doesn't do
The CFPB issued a final rule, Residential Property Assessed Clean Energy Financing (Regulation Z), published in the Federal Register on January 10, 2025, at 90 FR 2434, and effective March 1, 2026. It applies Truth in Lending Act requirements and ability-to-repay standards to PACE transactions going forward. That's a meaningful change for anyone approached tomorrow. It does not retroactively undo an assessment already sitting on your parents' house, so the records check still matters.
Frequently Asked Questions
What is a PACE loan?
PACE stands for Property Assessed Clean Energy. According to the Consumer Financial Protection Bureau, it's financing used to pay for home improvements that's secured by the borrower's home but repaid through the borrower's property tax bill rather than through a separate loan statement. It's typically sold at the point of the home improvement, through contractors, which is why many homeowners remember the project clearly and the financing not at all.
Does a PACE assessment have to be paid off when the house is sold?
Usually yes, in practical terms. Fannie Mae's Selling Guide section B5-3.4-01 states that Fannie Mae will not purchase mortgage loans secured by properties with an outstanding PACE loan unless the PACE program's terms don't provide for lien priority over first mortgage liens. Since most residential PACE assessments do take priority, a buyer using conventional financing generally can't close while the assessment remains attached, so the balance is typically paid off at closing out of the seller's proceeds.
Which states have residential PACE programs?
The CFPB's report identified California and Florida as the two states where residential PACE lending was active during its study period of July 2014 through June 2020. The Bureau also noted that residential PACE lending was active in Missouri during that period, though few loans were made by comparison, and that a small pilot program launched in Ohio in 2015. If your parents live in California or Florida, this deserves a check.
How much does a PACE loan actually cost?
The CFPB found the average PACE loan carried an interest rate of about 7.6 percent with fees averaging about $1,300 per loan, and that estimated APRs ran about a full percentage point above the stated interest rate once fees were included. The Bureau found more than a third of the loans it studied had APRs or fees high enough to meet the definition of a high-cost mortgage under Regulation Z. On the tax bill, the CFPB calculated an average increase of about $2,700 per year, roughly 88 percent.
Will the new CFPB rule cancel a PACE loan my parent already has?
No. The final rule was published January 10, 2025 and took effect March 1, 2026, applying Truth in Lending Act protections and ability-to-repay requirements to PACE transactions. Those protections govern how PACE financing is originated and disclosed going forward. An assessment recorded before then stays on the property, which is why checking the tax bill and the county land records is still the practical step for an existing obligation.
About Ryan Riggins
Ryan Riggins is a senior transition advisor and former house flipper. After 8+ years buying homes from families in transition, he walked away from the cash-buyer side to help families avoid the $50K mistakes he used to profit from. Based in Greensboro, NC. NC Real Estate License #361546, eXp Realty. Founder of Riggins Strategic Solutions and the SeniorSafe app.
Want to know what the house actually nets? The free Net Proceeds Calculator shows what's left after liens, payoffs, and costs come out: rigginsstrategicsolutions.com/tools/net-proceeds-calculator
Want a step-by-step guide? The Senior Transition Blueprint is free, all 20 modules and 69 tools: rigginsstrategicsolutions.com/the-blueprint
Not sure where your family stands? The free Family Readiness Score takes five minutes and shows the gaps across the home, the money, the legal documents, care, and family alignment: rigginsstrategicsolutions.com/tools/family-readiness-score
Need a personalized plan? The Senior Transition Roadmap is free, by application. It adds calls with Ryan and 90 days of email support: rigginsstrategicsolutions.com/the-roadmap
Selling a parent's home? Ryan finds and vets the right local agent for your situation and stays in your corner on the whole sale, at no added cost to your family: rigginsstrategicsolutions.com/in-your-corner
Coordinate the family in one place. SeniorSafeApp keeps daily check-ins, medications, and documents where the whole family can see them: seniorsafeapp.com
Sources
All sources checked August 14, 2026.
- Consumer Financial Protection Bureau, Property Assessed Clean Energy (PACE) Financing and Consumer Financial Outcomes, May 2023: repayment through the property tax bill, 2.5 percentage point increase in mortgage delinquency over two years against a 7.1 percent prior baseline, average property tax increase of about $2,700 per year and about 88 percent, average interest rate of about 7.6 percent, average fees of about $1,300 per loan, more than a third meeting the Regulation Z high-cost mortgage definition, more than 70 percent of borrowers holding a pre-existing mortgage, more than 13 percent receiving multiple PACE loans, and active lending in California and Florida with limited activity in Missouri and a 2015 Ohio pilot. https://www.consumerfinance.gov/data-research/research-reports/property-assessed-clean-energy-financing-and-consumer-financial-outcomes/
- Consumer Financial Protection Bureau, Residential Property Assessed Clean Energy Financing (Regulation Z), final rule, published January 10, 2025, 90 FR 2434, effective March 1, 2026. https://www.federalregister.gov/documents/2025/01/10/2024-30628/residential-property-assessed-clean-energy-financing-regulation-z
- Consumer Financial Protection Bureau, final rule page confirming the March 1, 2026 effective date. https://www.consumerfinance.gov/rules-policy/final-rules/residential-property-assessed-clean-energy-financing-regulation-z/
- Fannie Mae Selling Guide, section B5-3.4-01, Property Assessed Clean Energy Loans, dated October 8, 2025: policy on purchasing mortgages secured by properties with an outstanding PACE loan and on lien priority. https://selling-guide.fanniemae.com/sel/b5-3.4-01/property-assessed-clean-energy-loans
