Leave the Utilities Connected If You Move While Selling Your Home

Disconnected utilities can cause headaches for everyone involved

In Escrow II
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Many purchase contracts and listing agreements specify that sellers will continue to provide utilities while they're selling a home. This also means making sure that the utility bills are paid. If utilities are disconnected for nonpayment, they often can't be turned back on unless the previous delinquency is paid.

This can obviously place a burden on the buyer, and it can cause some headaches for the seller as well.

When Delinquent Utility Bills Interfere with Selling a Home

A delinquent utility bill is less of a problem when the seller has equity in the home—the property isn't underwater. A seller with equity might receive enough money at closing to pay any outstanding utility bills at that time, but there's no profit for a short sale seller. The bill typically must 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.

A title insurance policy would likely except that lien from coverage—if the title company was even willing to issue coverage at all under these circumstances.

Guidelines allow payment of utility bills from the seller's relocation incentive in some short sales with government entities, but this is usually subject to a certain dollar maximum. And the guidelines do not authorize payment of a lien. This can be a huge problem for some sellers of short sales—especially short sale sellers 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 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.

If the Home Is Still on the Market

Utilities are very important if the home is still on the market for sale. Heat and air conditioning maintain interior comfort for potential homebuyers. A buyer might not even make it to the third bedroom if she's uncomfortably hot or cold while she's viewing the premises. She might spin on her heels and walk out.

Maintaining the Integrity of the Home

Water pipes have been known to explode during December freezes and flood vacant homes. The pipes burst because the heat was turned off—standing water inside the pipes froze, expanded, and broke them.

Homes need to breathe, too, and hardwood floors can be damaged in extreme heat or cold temperatures.

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. It's also a good idea to leave a porch light on at night. It discourages break-in attempts.

Make It Easier 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. Many appraisers won't complete the appraisal if utilities aren't connected, at least until they're turned back on. Without the appraisal, the buyer won't get the loan and won't be able to close.

The Home Inspection

Most buyers want to do their due diligence, and this 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.

The Buyer's Final Walk-Through

Many purchase contracts provide for a final walk-through. The buyer verifies that the home is in the same condition as it was when he first viewed it. The buyer can't really do this if the utilities have been turned off.

Some Tips for Buyers and Buyers' Agents

Buyers and buyers' 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 he would take care of his 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 each other down the road. And little angers a seller more than to receive an outrageous utility bill after closing.

Timing Is Everything

When you're signing loan docs, ask the escrow company which utility companies, if any, it routinely notifies. City utilities are often notified by the title company 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. First, you're never sure until the ink dries that closing will come off without a hitch. Second, 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 that time. What, really, will a few days cost you?

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 her own name.

At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.