Many purchase contracts and listing agreements specify that sellers
will continue to provide utilities while selling a home. This means making sure
the utility bills are paid. In some communities, if utilities are disconnected
for nonpayment, they can't be turned back on unless the previous delinquency is
paid in full.
When
Delinquent Utility Bills Interfere with Selling a Home
A delinquent utility bill is less of a problem
when the seller has equity than when a seller has an underwater home. That's because a seller
with equity might receive enough money at closing to pay outstanding utility
bills. There is no profit for a short sale seller.
If a bill becomes a lien and is attached to
the home, it typically must be paid at closing. Otherwise, it would affect the
new buyer, and the buyer might not be willing to close under those
circumstances. Moreover, a title insurance policy would except that lien
from coverage, providing the title company was even willing to issue coverage.
It is important to note that in a non-GSE HAFA short sale, the federal guidelines
do allow payment of a utility bill from the seller's relocation incentive,
subject to a certain dollar maximum. However, the guidelines do not authorize
payment of a lien. That's where you can get caught between a rock and a hard
place. If the utility bill is recorded against the property and becomes a lien,
that's a huge problem for some sellers of a short sale. Especially a short sale seller without
enough money to pay the utility bill.
Why
Utilities Need to Stay On During Home Selling
Sometimes, sellers don't think about the
utilities or the buyer when they are getting ready to move. They of course will
make sure to begin service at their new home, but are sometimes so distracted
and overwhelmed with the moving process they don't realize that turning off the
utilities at their existing home could carry consequences.
Here are some reasons to keep the utilities
connected in a vacant home:
· Showing the home. If
the home is still on the market for sale, utilities are very important. Heat
and AC maintain the interior comfort for home buyers. If it's too hot or too
cold inside the house, a buyer might not even make it to the third bedroom. A
buyer might spin on her heels and walk out.
· Maintaining integrity
of the home. Twice in the last several years, water pipes have exploded
during December freezes in Sacramento and flooded vacant homes. The pipes burst
because the heat was turned off -- standing water inside the pipes froze,
expanded and broke the pipes. Homes need to breathe, hardwood floors can be
damaged in extreme heat or cold temperatures.
· Providing security.
Some homeowners install a timer on a light fixture or lamp to automatically
turn on and off at certain hours at night. A little light can make a home appear
occupied. It's also a good idea to leave a porch light on at night. It
discourages break-in attempts.
· Buyer's appraiser.
If the buyer is obtaining financing, that lender will hire an appraiser. The
appraiser will perform certain tests that can only be performed if the
utilities are working. If the utilities are not connected, many appraisers will
not complete the appraisal until the utilities are turned back on. If the
buyer's appraiser cannot finish the appraisal, the buyer will not get the loan
and cannot close.
· Buyer's home inspection. Most
buyers want to do their due diligence, which includes a home inspection. A home
inspector cannot check receptacles nor test water pressure nor ensure a gas
stove is working properly without utilities.
· Buyer's final walk through. Many
purchase contracts provide for a final walk through. This means the buyer
verifies the home is in the same condition as it was when the buyer first
viewed it. If the utilities have been turned off, the buyer cannot obtain this
verification.
Buyers and buyer's agents can help to reduce
utility costs for the seller between the time the purchase contract is ratified
and prior to closing by:
·
Turning off lights when leaving
·
Monitoring the thermostat
·
Closing drapes and / or blinds
·
Ensuring all water valves are tight and secure.
A buyer
should treat a seller's home the way a buyer would take care of her or his own
home . . . because soon enough it will be. Care and consideration make for good
relations between the parties. It's a good idea to keep all parties in a
transaction civil and speaking to each other, especially if they might need
something from each other down the road. Little angers a seller more than to
receive an outrageous utility bill after closing.
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