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