Wow Lashawn our market has really come to that. Isnt that why we have listing agents to take care of those things when the seller cant? I dont think the buyer should be responsible for the utilities especially in this market. good luck to you!

LaShawn, I don't think that the buyer should be responsible for anything on the house until after the new deed has been recorded.  Good luck!

I've had buyers have to do this before, I think it is more common with short sales & foreclosed homes. We turn on the utilities in our name for our listings if the seller/bank won't.

Thanks Heather! I was shocked to see that also! I'm still not sure how to proceed though if the Buyer does like it???

Stick to your guns. A Buyer does not own the property and has no legal claim to the property until closing. The Buyer would assume a huge liablity (and bill) if the property is vandalized or broken into. Truth be told, would it even be legal for an one to turn on any utility at a property they are not authorized (deed, lease, etc) to say is theirs? Would your Buyer have access to this property 24/7 until closing? Contact the Listing Agent and make these points. This argument should change their tune.

Are they wanting to sell this home? They want the buyer to do what? That is crazy!

that is truly said that they make people do that, but that is what we have come to.  I had a client last year that did not want to do the inspections when he moved in and turned on the water.  Waterfall, yes, broken toilets, yes.

If the buyer wants the home...and it's a deal...and they know what they are getting into....why not! It's a short sale or foreclosure...someone is losing their shirt...get the deal done...who cares about something a minor as utility fee if they are getting a discount!

Hello.  I am an appraiser and with the recent increase in FHA appraisal requests, I am running into this situation quiet often. (we have to have water/sewer & electricity on for FHA appraisals) In some areas I have found that the buyer is not even allowed by the utility companies serving that area to get things turned on in their name.  Personally, I think it is up to the owner to have utilities turned on.  I could understand waiting until a buyer is fully approved for financing but it would appear to be another cost that seller should expect.  It is also something that could easily discourage a potential buyer and with a large inventory of homes on the market this would seem counter productive on behalf of the seller which in the case of bank owned properties could result in further reduction of shareholder profit potential which would drive more stock investor money out....and none of us need that right now.  Worst case I agree listing agent should take care it... get it done, get it sold, and on to the next...

The real question is why would you do an inspection. The home will be sold as is. Your buyer will be taking a risk if they buy a short sale. If they are not willing to take that risk they probably shouldn't be looking at short sales at all.

You see this on Bank owned homes. I list bank owned homes and the electricity is always on, but sometimes the gas and water/sewer are not.  Gas is not necessary if a home has been winterized - and isn't necessary in the summer.  So a lot of banks don't want to turn it on.  And often times when a home is foreclosed on - there is a water lien.  So no one wants to pay the water lien until there is a pending sale.  All depends on the bank. 

We see this a lot in Arizona, the short sales that are vacant and the foreclosed properties. Unfortuantely it is what things have come to. Does not make it right, but it may come down to who turns onthe utilities to get an inspection done, the seller (the bank) who likely won't, the prospective buyer (liability) or the listing agent (also liability). The banks are just not always open to doing this at all. A sign of the time I guess.

Beth makes a great point about this...very interesting case here!  Wow!

Tom Davis - Delaware Realtor

LeShawn:  The buyer does not want to do it, I understand.  The seller is losing, or has already lost the house, to they are not going to do it.  It is up to the listing agent to get the mortgage holder to do it, and they probably don't want any part of it.  I would think the listing agent would be the only one who could insist that the lender do it.  It all depends on how much juice the lister has with the lender.

We are seeing this more and more in Arizona.  In fact, our broker has created a disclosure for buyers to sign informing them that the banks may not turn on all utilities for inspection of the property.  It also discloses that in the even that they turn on the utilities, they are assuming all costs, liability and responsibility.  I don't agree with the banks not turning on the utilities, but it is what it is.  Let me know if this disclosure form is something you'd like to take a look at.  Hope that helps ~ Eydie

We have been severely warned about this in our office after an agent in our area turned on the electric and the property burned down.  Guess who was liable?  The more scrupulous listing agents will advise you to write into your purchase agreement that the seller will turn on utilities for inspection.  For showings, prepare to do them in daylight and with flashlights.  Do the home inspection once the utilities are on, but not at yours or your buyer's expense.  It is not the responsibility of either of you.  Move on otherwise.  By the way, "as is" means the seller will not fix what is wrong, not that you have no right to know what is wrong.

I ran into this problem in Feb.  As with any part of a real estate transaction, everything is negotiatable. In may case the buyer paid to have the water turned on and the listing agent paid to have the electricity put back on. Ater the inspection the agent had the electric company turn it off. The key here was to time inspection so that no one incured much cost.

I would also not feel comfortable having my buyer pay for utilities because of the fact that he is taking a huge liability doing so.

Our board's purchase agreement says "Seller will ensure that necessary utilities (gas, power and water) are turned on and supplied to the Property within two (2) business days after execution of this Agreement." Still, several banks and distressed sellers do not comply with this.

Beyond the inspection issues, it also affects landscaping and curb appeal. Without power and water for automatic sprinkler systems, grass and plants quickly die in the desert heat.

Not appropriate, but the bank owned people don't care.  They often set unrealistic conditions which are NOT negotiable and we cave and do it.  Why? Because it is best for the buyer to do the inspection, but certainly not appropriate or fair. 

I would not expect anyone to turn on power until you have a contract securing the property for your buyer, and your contract should have a due dilligence period.  The contract should suffice to justify the utility company allowing it to be turned on in the buyers name.  The buyer should just look at it as part of the expense of their home inspection.  After all, they are probably looking at homes that have instant equity positions of $20-50K so an extra $45 for a utility bill is not a major expense, and if it discovers a non-functioning appliance, AC or water heater it allows them to budget accordingly or get out.

This is actually pretty common on bank owned property around here.  It stinks for the buyer.  Our contract states that the seller will turn on utlities but the banks don't sometimes.  When that is the casa then the buyers have a big decision to make.  They can go to another home or bite the bullet and pay the utils.

we discussed this in a class about financing yesterday... the consensus negotiate it in the contract on any listing with the utilities turned off.  And get the appraiser in during the small window of opportunity while the utilities are on.  

Sounds like an unreasonable request.  Even a short sale should have the power on...if they want to sell!

I wouldn't think this would be the buyers responsibity. In reference to Ron's post, sure the property is being sold "As Is" but the buyer may still want an inspection prior to making an offer so that they can be fully aware of what they are getting into.

Stupid....the bank should be responsible to have the listing agent turn on the utilities at least to have the inspection done whether or not if it's As-Is..the buyer still has the right to inspect so does that mean the prospective buyer has to open an electric and water account? Ridiculous...the agent should be doing that on behalf of the bank or owner of record. Makes no sense to make it even more difficult for a short sale listing to sell.

When a buyer "wins" a HUD foreclosure bid those are the terms of the inspection, the buyer pays for the utilities to be turned on for the inspection and the agent must be there at the time of the turn on... I did go to the turn on of the inspection and guess what... THE WATER IN THE UTILITY ROOM WAS TURNED ON AND BLASTING ALL OVER THE HOUSE when the utility company turned the service on... so I found out first hand why the Agent must attend the service turnon.  Just a part of earning our commission.  :)

It's this way with quite a few foreclosed homes - especially the ones that have been winterized.  If the buyer wants an inspection, the buyer pays to have the property de-winterized, utilities turned on and then re-winterized.  Needless to say, few buyers do this.  Bottom line is that the property is most likely going to be sold "as-is" anyway.  If the buyer can't assume that responsibility and/or the lender has requirements that aren't "as-is" friendly, move on to another home.  I'm more concerned about you allowing the bank to dictate your commission.  Your commission is between you and your client, the buyer, correct - not you and the bank?  EVERY time I have held my ground on my commission on a short sale, the bank has caved.  They try and DICTATE what we earn - I don't think so!  Stand your ground...we work hard for our commissions.

Tina in Virginia

There has been a big debate in Virginia regarding the commission issue with banks.  If they offer x% in the MLS and then try to short you at the listing table it could lead to a hearing with the local assocation.  A commission offered in the MLS is considered a contract between brokers and can't be changed without the brokers permission.  Showing up at the closing table and trying to say the bank only offered x so we are going to split that with you could be a major violation.  Stand your ground when it comes to dollars. 

When it comes to turning on utilities I ask for the lender to give us written permission but you need to be there to make sure that when they turn the water on in case someone has left the spigots open!

LN,

The person who owns the home must take FULL responsibility to make sure the electric is turned on.

Too many liability issues will arise. What would happen if a fire occurs?

Do you know who the insurance company or seller will seek compensation from? This is one issue you need to stay away from.  

I come across this all the time, IMHO this is totally ridiculous.  However, you are working with unyielding banks who don't seem to have an sense of logic.  I don't think you are going to be able to change it.  

AS A LISTING AGENT WITH 15 -20 Short Sales at one time..

Sorry Buyer wants a deal buyer has to do some of the work.. I say that because I currently have power / water / trash pick / gas bills from all over the state hitting my desk as an REO agent.. and a few Short Sale listings.

If the Buyer has done all the homework and is committed to the house and is only using the inspection as a confirmation of the value of the house then what is the hassle of turning on the power.. you would try on a pair of paints even if it said size 6 wouldn't you ?

I provide the buyer a letter of authorization to establish service with the final agreed purchase and sale agreement.. this seem to do the job 99.99% of the time.

If the seller has defaulted on the loan you can guess the status of the ulities.

Hmmm save 20 -50K on a house or refuse to turn on the power you decided.

 You can still request the seller to turn on utilites in the offer it is part of the negiotiotion.   6 months ago the banks in my area would do nothing that has changed they now have to work with buyers or the house sits. 

Around here, I don't even think the buyer has the authority to turn on the utilities since they are not tied to the home in any way?  How would you do that?  I've heard the listing agent can have the utilities turned on for a day for something like $25-50, that's not too bad.  Apparently the utility companies are aware of the issues and have made it easier to do (around here).  You definitely don't want to do a home inspection with all the utilities off.

If you write the offer, most contracts specify that the utilities must be on for inspections.  If the house is vacant and the utilities off, it's probably a foreclosure.  The banks will usually turn the utilities on for safety, i.e., sump pumps, etc.  They don't want a flooded basement with no electricity. 

Buyers are so used to getting everything for FREE until the day of settlement, it's hard to get them to understand that "if they want an inspection", they will active the utilities for a day. 

Banks are drowning in these things.  Unfortunately, the bank employee that made the policy that the prospective buyer will activate the utilities, knows absolutely nothing of real estate sales.

Proof that banks aren't good realtors.

I would laugh if it was funny, but it is not.

So many times I send an appraiser out and the water/lights are off..... which means an unnecessary final inspection for my borrower because the underwriter isn't going to allow that on an FHA loan.

I do not think that the buyer should be paying for that.  That  is crazy

I do not think that the buyer should be paying for that.  That  is crazy

I do not think that the buyer should be paying for that.  That  is crazy

Common around here for REOs and short sales.  It the utilities have to be on for the inspections or appraisel, the buyer has to turn them on in their own name and are responsible for the bill.  The trouble comes in with delinquent water bills.  They are paid at closing by the seller.  Sometimes the seller (bank) will pay the fee prior to closing, other times they will not and the deal falls apart. 

Here in Arizona I have an agent friend who is looking into REO sales. The bank he spoke with yesterday stated that utilities and other costs to have the house ready for inspection were to be paid as his upfront cost in order to get the listing. It sounds as if this agent might be passing the costs onto the buyer agent or buyer. As mentioned above the utilities could be delinquent for several months. The cost might be $180.00 not just a connection fee of say $35.00. 

Besides the cost who needs the libabilty. I'm sure your broker doesn't. Remember you are the agent for your broker and you both could be sued.

In North Carolina the sellers require the Buyer to turn on all utilities only when is a foreclosure.

With a short-sale you can negotiate that with the Listing agent for the Sellers to turn the utilities on and if they don't want to do it is because the seller has a balance with the utility companys and they company will not turn it on until the pay that balance.

Find out about that.

Also be aware that short sales can be risky for your client, My BIC had a situaton where her buyer was buying a short sale and one week before closing, they found out that the house was already sold in the court house.

Hope this can help!

I am seeing this in greater numbers in the Greater New Orleans area. For inspection, if no liens are in place and the Seller has release liability I will pay the 10 bucks.

Great post. Interesting comments.  Great Idea to put into the offer/contract that they will put on the power for inspection.

Hi there,

Like others, I'm seeing fewer and fewer REO's & vacant short sales with utilities. Big mistake imho, "if you can't see it, you can't sell it" as Barb Schwarz used to say. However in our purchase agreement in CA it states the "seller" will have utilities on for the inspection and final walk through.

Now realize these are "as is" (actually present physical as in the contract) so to speak, but we still do a final walk through just to be sure nothing else has been removed/damaged during the escrow process.

Good luck in your situation.

I think that is nuts.  The buyer should not be expected to have the utilities turned on. 

As a listing agent, I've had out-of-area sellers say they buyers should turn on the utilities for their inspection.  If I can't get the sellers to do it, I do it myself.

Here in Texas, our contracts require the seller to have the utilities turned on for inspections.  I guess if you're dealing with a bank, they may have proprietary paperwork that states differently.

Just went through this with one of mine.  Common on some REO's and short sales out here.  My buyer had to go ahead and get it turned on for his inspection and appraisal.  I've had to go buy every day and make sure the place is still okay.   I wrote it into the contract and it got rejected by the seller because she had no money to turn on the utilities, and the bank wouldn't do it.

Liability and more, I wish we could make these banks do what other sellers have to do...

LaShawn ~ Hmmm... That sounds pretty frustrating. We have yet to see that in our market, but I imagine that it is coming.

I know! We showed a short sale last night and they'd turned the power off. The pool had turned a nice color of algae green, too. It was after 8PM when we'd arrived, so it was dark and we were trying to look at the house in the dark. We tried flipping all the switches on in the breaker box, too, and that didn't help. My hubby ran out and bought some more flashlights (the ones we bought last week, my son had left on and the batteries had already run out!), so the neighbors called the LA to let them know there were lights on in the home. So, we got to talk to the LA and he said he was turning the power back on and cleaning the pool by Saturday. Of course, this is the house our clients love!! I can't imagine having to have the buyers pay to turn the power on.

Thanks,
Terri Hayley

LaShawn... I have never heard of such a thing.  You represent the buyer, and you need to look them.  I would let your clients know this, and if they proceed with the home inspection, and still wish the place once this is done,then I would see about getting the charge credited back to them at closing on the HUD.

Besides some potential liabiltiy issues in our contracts is makes it clear that the seller will have the utilities turned on.

The unfortunate reality is that the seller and the bank usually don't care if you buy the house. The seller not only wouldn't have the power turned on for you, it's likely they couldn't if they tried. Power is likely off because they didn't pay their bills for about 6 months, and unless they pay a couple of thousand dollars, the power will remain off.

A lot of listing agents ask for the buyer to turn on utilites while others already have them on. I think it's up to the listing agent since they represent the seller.

Thanks to all for your comments and suggestions. Clearly, with as many bank-owned properties there are for sale, I can forsee this being as issue we'll all soon be facing at some point of our career (and probably sooner rather than later). I have taken everyone's comments into consideration and will review the options, liability and potential issues that may result if my Buyer chooses to proceed with this particular home...I'll be sure to keep everyone informed.

By the way, I did follow up with an appraiser in the area and he shared that although FHA does not require that the power be on, the guidelines say it should be noted in the appraisal and that usually it will be treated like a final inspection and the appraiser will have to go back out to the property once the power and water is on and test both...

It is NOT a big deal for the BUYER (or even the seller) to turn the power on for one day.  They just have to be sure to get the inspectors, appraisers, etc.  all scheduled the same day.  If the seller refuses to do it and the buyer refuses to do it, then they just don't have to buy that house or they can buy it blindly. (not recommended, but they COULD) There are not any set rules in this business and no two sales are the same!  Remember everything can be negotiated.  It just may not be negotiated to your side of the deal. There are too many houses out there  for sale and you can not make a buyer or a seller do anything. But, you can ask.   A listing agent is NOT responsible for utilities unless it is negotiated up front either. 

Sure seems like that shuld be the sellers responsibilty, not the buyers

It has become more and more common in Maryland for the buyer to pay to have the utilities on, I have had two in the last three months (short sales) and the buyer has turned on the power.  Is it fair, nope, but in these cases the sellers either refused, or had no resources to pay for such.

Depending on the circumstances and the market, everything is negotiable. Sellers some times pay for the inspections and closing costs. In this situation however the buyers are paying for the inspection. If the utilities have to be turned on for that to take place then they would have to add it to the cost of doing business. The ball is in the buyers court.

We have to do it in Michigan sometimes to get the inspection done.  What else are you supposed to do.

As a matter of professionalism I think the seller should be responsible. It's in bad taste to ask a prospective client to "sample" the property. 

Not shocked.  I've seen a few of them... and I think it is terribly short-sighted of the bank, and weak on the part of the listing agent to not take care of it. 

I would agree with you. It would be an unnecessary expense for them if they don't like it and could be quite costly. I have never heard of such a thing. They are really hurting themselves there.

Happens here all the time with short sales.  It's just a little fact of life we live with!

For what it is worth, my utility companies in Bastrop only allow the owner or listing agent to turn on utilities.  The buyer can't get them turned on until after closing and they have to show a settlement statement, the listing agent has to show a listing agreement, or the owner has to do it themselves.

What are you griping about? These are REO properties; if the utilities are off, then price the offer accordingly.

The buyers I work with like ranch style homes, so there's no second-story plumbing to worry about.

I would think the seller would want to cooperate with the buyer to help get the house sold. As a buyers agent there might be an exception if they absolutely fell in love with the house and they are willing too pay for the necessary means to get the house. With as many homes on the market as there are though I would think there would be a house or two with a very motivated and helpful seller. Good Luck showing and hope this may help.

Well, it doesn't seem "right," but there are a TON of tire kickers out there.  A seller has all but abandoned a house when selling short in many cases.  The listing agent is going to take perhaps a 30% cut in the commission...and will likely work 4 times as hard and only close half of the listings.  So it shouldn't be the listing agent's responsibility, either.  Tough situation.  I do believe though, that if the buyer is genuinely interested in the house, it should be an issue that can be overcome.

Normally this is the order that it would happen (the would get just Temporary power for the day of the Inspections ONLY).

1. Seller
2. Listing Agent
3. Buyers Agent
4. Buyer (if they really want this property and it needs power in advance for any reason).

Nothing surprises me these days anymore!

It is a buyers choice!  Just do it!  It may be hte best spent money the buyers will ever spend!

If they really want the house they need to ask BEFORE making an offer:

1) what is my liability for turning on utilities for a property I don't own?

2) what are the fees associated with turning on utilities?

3) what are the past due bills for utilities?

4) is it worth it?

5) is this the house I want considering 1-4 above?

If so, do it.

In our contract it specifically states that the utilities need to be on for all inspections and remain on till closing.  In our humid climate, mold and other issues can come up with no AC running

I don't know much about short sale but I have noticed that many REO properties in this area require the buyer to be responsible for utilities as well. (The banks do not want to take much responsibility for anything.) It seems that the buyers agents are fronting the costs and then being reimbursed through the bank at the close of escrow (provided that it closes). Keep in mind that at least in CA, when the gas company comes out they will need to get into the property and turn off all gas appliances BEFORE they will turn on the gas (Due to obvious safety reasons) so someone MUST meet them at the property and allow them access.

Just got a first listing from a bulk REO buyer. So I did write it into the listing agreement that the seller will agree to turn on the utilties at their cost for any buyer inspections. Been there and seen that one before and it is not fun to argue over this, which should be working in the first place.

CONGRATULATIONS LA$HAWN - YOUR FIRST FEATURED POST (and I know there are more to come)!  What a timely topic and some outstanding responses.  Wow, this is a sensitive situation with liability issues galore.  I believe that the seller is responsible (even if it is a bank) to make the house available for a buyer to inspect and have the utilities on.  I'm sorry, it is not the buyer's responsibility regardless of how good of a deal they might be getting.

LaShawn, From what I have seen in our marketplace,  the listing agents for the REO's have been responsible for getting the electric and water turned on when a property is listed. I have an agent who currently has over $7,000 of his own money invested in lawn care, keys and locks and electric and water bills. This is the cost of doing business. They submit the bills monthly and are reimbursed. In fact the listing agent is REQUIRED by some of the banks to put the electric and water on as a condition to getting the listing! Something doesn't sound right if they are telling you it is up to the buyer or the buyers agent!

I am thinking of buying my grandparents old house but I know that the water service has been cut-off. To reapply (and become a member to receive water service), the fee is $800! I know that the sellers (my aunts) will not shell out any money to get it turned on. I don't know if I am willing to spent that much money on a house that I might not buy.

I am thinking of buying my grandparents old house but I know that the water service has been cut-off. To reapply (and become a member to receive water service), the fee is $800! I know that the sellers (my aunts) will not shell out any money to get it turned on. I don't know if I am willing to spent that much money on a house that I might not buy.

Hello. I deal with this situation a lot and I tell my buyer's that it is their choice but I think it should be the buyer that takes on the cost. The seller can't turn it on 20 times or however many times until a buyer buys it.  If the buyer wants a inspection and a good inspection, they should take on the responsibility.