You may wonder why utilities can become a problem, when you try to buy a home. In quite a few Columbus OH homes for Sale utilities have been shut off. Many buyers and their Columbus real estate agents end up struggling with utility issues just days before they plan to close. Some even lose their contract, due to utilities.
Let me share some tips on what to do, if the utilities are shut off.
Why must utilities be turned on?
There are really 2 reasons:
- You want to know for yourself that the mechanicals in the house you plan to buy are working. You always should hire a property inspector to check the furnace, make sure the plumbing does not leak and the lights can be turned on safely.
- Your lender will require that the mechanicals are in working condition, and will require them tested during the appraisal.
Now you know, why utilities must be turned on, but why is it a problem?
When you make an offer on a distressed property, such as a bank-owned, REO, HUD home or short sale, you may run into issues with utilities. Most of the time they have been turned off by the seller. So you have to get them turned on, at least temporarily, for the property inspection and appraisal.
Let’s take a closer look at the different types of sellers, and how to handle the utilities for each case.
- Regular Retail Sale: If the seller still lives in the house or just moved, the utilities will be on and in the sellers name until the closing. You won’t have any problems in that case. If the seller has already moved and turned off the utilities, you should be able to have them turned on again for your inspection.
- Distress Sale, Short Sale: If your seller has financial difficulties and is behind on the mortgage payments, you should expect that utilities are also past due. Often they have been shut off for non payment. In that case, it will be almost impossible for the seller to turn them on again without paying all outstanding fees, which the seller can’t afford. So the buyer will have to step up and temporarily put the utilities in their name, at least for a few days to complete the inspection and appraisal.
- Bank-Owned Homes: Here it depends on the lender and their property manager or the Columbus real estate agent listing the home. Many banks will turn on the utilities, if requested by the buyer. However, it will depend on the listing realtor or property manager to handle the details. We found that some of them are not very motivated to do it. To turn on the gas or water, the utility company needs to get inside the house. Somebody has to wait for them at the house to give them access. As they don’t give you an exact time, only a 3 hour window, you may waste half a day waiting at a vacant house for the utility company to show up.
- HUD Homes: For these properties you need a special permission from HUD to turn on the utilities for your inspection. Gas and electric are less of a problem, however, they may not allow you to turn on the water, if their property condition report states that the plumbing will not hold water.
What should you do, if you are not allowed to turn on the water or any other utility service?
The key here is to know, if your lender will underwrite a mortgage without all utilities turned on. You need to ask this question when you apply for a loan, even before you make an offer. An experienced Columbus real estate agent and loan officer should know how to handle the utility question or even help you get the utilities turned on.
Many contracts on distressed houses and HUD properties never close, because the utility issues are not addressed at the beginning. They typically come up when the loan is in underwriting a week before the planned closing, and they may kill the deal.
Don’t get yourself into this very frustrating situation! Use the tips in this post and ask the questions right away. I have worked with lenders that will approve mortgages without all utilities turned on. I am specializing in HUD homes and know exactly how to get the utilities turned on, so there’s one less thing for you to worry about!
Thanks for reading the susannenovak.com Blog!
Posted by: Susanne Novak, ABR, FIS, GRI
Columbus Real Estate Agent helping First Time Buyers.
(614) 975-9650