Jan
17

PRACTICAL ADVICE – REMEMBER TO WINTERIZE YOUR VACANT HOME

When a homeowner is struggling financially and has already moved out of a home that is in foreclosure or a pending short sale, they often ask “Can I turn off the utilities?” or the better question is “Should I turn off the utilities?” No one likes to have the expense of heating a vacant home, especially when the homeowner is already struggling financially. From a legal perspective, even if a home is in foreclosure, a homeowner is responsible for all the utilities, maintenance, real estate taxes, homeowner’s association fees and insurance for a home until the foreclosure is completed and the ownership is transferred to the mortgage holder or other third party. If a home is sold as a short sale, the bank holding the mortgage will usually agree to pay all normal closing costs which include attorney’s fees, Realtor commissions, title charges, and real estate taxes but they rarely agree to pay water bills, past due association fees or repairs to a home. I have never seen a bank agree to pay gas or electric bills through a short sale closing so gas and electric bills are most definitely the homeowner’s sole responsibility.

If the homeowner is trying to sell the home before a foreclosure is completed, they should discuss turning off the utilities with their Realtor first. A home that has no utilities on will not show as well. Certainly, a home that is cooled appropriately in the summer and heated appropriately in the winter is simply more appealing than an extremely hot or cold home without working lights. However, there are certainly times where the homeowner just can’t afford the utilities any longer and the decision has to be made to stop the services. If the home is being sold, the utilities will have to be turned back on before closing for the buyer to inspect the property and for the appraiser to inspect the property for the buyer’s lender. Typically, if the homeowner has not paid the utilities and a balance is owed, the utilities will not turn the utilities on for the inspection or appraisal until the past due bill is paid which can be a problem. In some instances, the utility company will turn the services on for 24 hours only to allow for the inspection but there is no guaranty they will accommodate when there is a balance owed. In other words, I would rather see a homeowner turn off the utilities before they are in a position where they can not pay a bill that is owed.

If the utilities are turned off and the home is an area that is subject to freezing temperatures BE SURE THE HOME IS PROPERLY WINTERIZED BEFORE TURNING OFF THE GAS AND ELECTRIC. The cost to winterize a home by a plumber is typically $100-200. A financially struggling homeowner might think this is too expensive and may even try to winterize the home by themselves but a homeowner should NOT winterize a home themselves unless they are absolutely sure they are doing it correctly. Every winter our office deals with homes that are not winterized properly and the pipes burst from freezing. It is unpleasant to receive a call from a Realtor that informs us water is coming out of the walls and light fixtures because they just turned on the water for a final walk through before closing. Equally unpleasant, is to receive a call from a Realtor when they stopped by a home after the temperatures raise above freezing to find a home flooded because the water was still turned on and no one knew the pipes had burst when the water was frozen. As a general rule, homeowners insurance does not cover the repair of burst pipes which could cost $1,500 to $7,500 or more depending on the damage. Insurance may cover all or part of of the cost to repair the damage to the home caused by the burst pipes. To make matters worse, a home that is not promptly repaired and is allowed to sit until the weather is warm will probably become a victim of severe mold. We have actually dealt with houses where the mold was so bad from leaking pipes that the Village authorities would not allow anyone in the home without a hazardous material suit on and the bill repair for that home was $30-40,000. In a worst case scenario, the house can not be sold because you can’t find a buyer interested in buying a home with burst pipes; the home goes to foreclosure; and the homeowner is held responsible for the deficiency on their mortgage due to the greatly devalued home. In other words, the cost of a properly winterized home is a very reasonable expense.

If the homeowner is in foreclosure, the homeowner can call the bank holding the mortgage and tell the bank that they are moving out of the home and ask the bank to winterize the home. However, once the bank knows the property is vacant, they probably will also “secure” the home by changing the locks. The property preservation company should be willing to provide a key to your Realtor to continue showings but it can take a few days or weeks to get a key. The homeowner should also be diligent in making sure that property is winterized promptly before they turn off the utilities. I have seen instances where a bank placed an order with an asset preservation company to winterize a home and the asset preservation company waited two months before they tried to winterize the home and by that point the pipes had already frozen.

In conclusion, the best solution is to keep the utilities on for as long as possible but set the thermostat at 55-60 degrees during the winter months. I would suggest that if the home is on the market, then place a sign by the thermostat instructing any Realtor to be sure the temperature is set at the temperature you designate before they leave the home. We have received complaints that a Realtor or inspector will turn up the heat to be sure the furnace is working properly but than leave the heat set above 70 degrees which drives up the heating bill. In other extreme, the heat was actually turned off instead of turned down and the pipes froze which leads to one more important reminder. A vacant home must be checked on a regular basis.

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