Many purchase contracts and listing agreements specify that sellers will continue to provide utilities while they're selling a home. If utilities are disconnected for nonpayment, they often can't be turned back on unless the previous delinquency is paid, and that places a burden on both the buyer and seller. Sometimes sellers don't think about the utilities when they're getting ready to move and vacate. Of course, they'll want to make sure to begin service at their new home, but sometimes they're so distracted and overwhelmed with the moving process that they don't realize that turning off the utilities at their existing home could carry consequences.
Utilities are essential if the home is still on the market. Heat and air conditioning maintain interior comfort for potential homebuyers, and having access to electricity is mandatory. People will want to see how the home functions, which is virtually impossible without power.
- Leaving the utilities connected while selling a home makes the process easier for the buyer, the appraiser, and the home inspector.
- The title company often notifies city utilities at closing that a change of ownership has occurred, but don't turn off the utilities until after you've officially closed the deal and signed the papers.
- Keeping utilities on can also prevent damage and provide security.
Home Sale Interference
A delinquent utility bill is less of a problem when the seller has equity in the home, because they might receive enough money at closing to pay any outstanding utility bills at that time. However, there's no profit for a short-sale seller—the bill must typically be paid at closing if it becomes a lien and attaches to the home. Otherwise, it will affect the new buyer, and the buyer might not be willing to close.
Guidelines allow payment of utility bills from the seller's relocation incentive in some short sales with government entities, but that is usually subject to a certain dollar maximum and the guidelines do not authorize payment of a lien. That can be a huge problem for some sellers of short sales—especially for short-sale sellers who do not have enough money to pay the utility bills.
Water pipes have been known to explode and flood vacant homes during winter freezes. The pipes burst because the heat is turned off, and standing water inside the pipes freezes, expands, and breaks them. Homes need to breathe, too, and hardwood floors can be damaged in extreme temperatures. The heat will cause gaps in your hardwood floors and eventually cause a need for replacements. The cost of the damage from such instances is much more than you would have been paid in utility bills, so it's not worth the risk of letting it happen.
Utilities Provide Security
Some homeowners install a timer on a light fixture or lamp to automatically turn on and off at certain hours. A little light can make a home appear occupied and deter potential robbers. It's also a good idea to leave a porch light on at night, as it also discourages break-in attempts. Without access to electricity, your home becomes more susceptible.
Ease on the Appraiser
The lender will hire an appraiser if the buyer is obtaining financing. The appraiser will perform certain tests that can only be performed if the utilities are working, and many won't complete the appraisal if utilities aren't connected. Without the appraisal, the buyer won't get the loan and won't be able to close.
Most buyers want to do their due diligence, which includes a home inspection. A home inspector can't check receptacles, test water pressure, or ensure that a gas stove is working properly without utilities. It will be hard to convince a buyer to make a purchase without having the home inspected.
Many purchase contracts provide for a final walk-through. The buyer verifies that the home is in the same condition as it was when they first viewed it. The buyer can't really do that if the utilities have been turned off.
Tips for Buyers and Their Agents
Buyers and their agents can help to reduce utility costs for the seller between the time the purchase contract is ratified and prior to closing. It's just a matter of taking a few simple steps:
- Turn the lights off when you're leaving.
- Ensure that all water valves are tight and secure, not dripping.
- Reset the thermostat to where it was if you changed it.
- Close drapes and blinds if you opened them.
A buyer should treat a seller's home the way they would take care of their own home; care and consideration make for good relations between the parties. It's a good idea to make sure everyone involved in the transaction is civil and speaking to each other, especially if they might need something from one another down the road.
Timing Is Everything
When you're signing loan documents, ask the escrow company which utility companies, if any, it routinely notifies. The title company often notifies city utilities at closing that a change of ownership has occurred. Try to refrain from turning off the utilities on the morning of closing if that's not the case. You're never sure until the ink dries that closing will come off without a hitch, and you might want to leave the buyer a little wiggle room, if only as a courtesy.
It can take some utility companies several days to turn services back on again, so you might not want to leave your buyer in the dark until then. At the very least, you or your agent should touch base with the buyer or the buyer's agent to ascertain the status of the utilities. Find out when the new owner will be establishing service in their own name.