The bottom line is if the seller didn't pay them (and to be honest with you, most of the time they go UNPAID), this could now be what is standing between you owning that home and the house going to the next buyer who is willing to pay them.
If left unpaid, they show up as liens against the property. Some short sale lenders in the past have paid these liens but now we are finding that is not the case and the buyer s often left holding the bag because a seller has left hundreds and sometimes thousands of dollars left of unpaid utility bills.
The lenders have the option of which liens they will and will not pay. Make sure that the agent representing the seller orders all liens against the property early, midway, and again at the end. Be prepared for the unexpected and if i doesn't happen then great, but if it does appear, you were prepared.
Decide early how much in additional funds of your own money, as a buyer, that you are willing to contribute to this sale if it should get to that point. We are talking about money "on top of" your offer price. You don't have to put it all out on the table up front, just know in the back of your mind what your willing to do and be prepared.
Your head is probably spinning right about now, lol. Real estate differs across the country and from state to state. If you are in Sacramento, it's best to take the advice of a trusted REALTOR from the Sacramento region.
I'm sure all of the agents on this feed are experienced, and in general terms we all are in agreement, YES, you should be concerned about outstanding bills against a short sale property and we have all graciously contributed to various ways you can protect/prepare yourself. :)
Have a great week!
If they are in So Cal they could not care less about buyers. They are chosen by the banks and have loyalty only to the bank and not at all to the buyers.
This is despite an ethical and legal requirement for escrow companies to be neutral parties.
On the water bill issue, In Columbus, Ohio and Franklin County the water bill can be attached to the property as a lien. More specifically, however and something no one here mentioned, the Sewage portion of the water bill will become the new home owners responsibility, not the entire water bill.
Also know that, again in Central Ohio, title companies rarely check for outstanding water or any other utilities so it's up to you to make sure they're all paid up.
Unsecured utilities are a different story. The utilities companies should not refuse service to the new owner when the new owner can show the change of ownership. They may not establish new service in the new owner's name without proof of the change of ownership. If you do run into a problem, ask for a supervisor & ask them for a written rule that allows them to refuse service. Utility companies have rules and regulations and they can't just refuse service because they feel like it.
If you had an account with the utilities company before at a different address & you had past due payments there, the utilities company may require a deposit as a condition of establishing service at the new address. If that's the case, the deposit requirement is not because of the prior owner's past due payments, but because of your own payment history with that utilities company.
This may all sound a bit confusing, but it's really not that difficult. It takes a few extra phone calls & make sure the listing agent knows about any outstanding utilities issues so that the listing agent can forward that to the escrow officer to make sure it appears in the HUD-1 that goes to the lender with the offer. Don't assume that the listing agent knows everything about the property and that the escrow officer who will prepare the HUD-1 will put all the necessary items on the HUD-1. It's also possible that new things will surface while you are waiting for the lender approval. Study the prelim carefully and make sure it shows all liens that you think should be in the prelim (you will probably not receive a prelim until the approval has been issued, but some title companies will prepare it and it will be included with the short sale package, depending on the lender requirements for short ). You don't want to receive an approval and then find out that the lender never knew about a lien because it was not listed in the HUD-1. Frankly, I don't think it would be unreasonable for a buyer to request a copy of the HUD-1 that was sent to the lender together with the offer. I have had cases where I received a short sale approval letter from the listing agent and I had to figure out myself what was actually approved and found out that we were over $2,000 short. The listing agents never bothered to compare the approval letter and the HUD-1 and had no idea that there was not enough money to pay for everything the contract called for. In those kind of situations, the escrow officer is your friend as they will strive to reconcile the HUD-1 and approval letter. Had I not requested a copy of the HUD-1, I would not have been able to discover we were short as I would not have had anything to which I could have compared the approval letter. When I receive the short sale approval letter, I ask the sellers to sign it indicating that they read and approved it and I go over it and compare it to the HUD-1 to make sure there are no inconsistencies. I don't want my buyer to go into escrow and spend money on inspections thinking that everything is alright, when it is not. If there are inconsistencies, the buyer should know before spending money on inspections & an appraisal and not find out at the last minute that we are short and more money is needed to close escrow. While receiving a short sale approval is exciting, the work is not done until all the numbers add up. Many approval letters will require further negotiations and if an agreement cannot be reached, the seller essentially fails to provide a short sale approval as specified in the short sale addendum. The devil is in the detail.
Do you have a provision in the sales contract that Seller pays all outstanding utility bills? If not, I would recommend an addendum. The addendum would also weaken your position in the eyes of the short sale lender. So, ask your Realtor what they think is best for you and you chances of getting the home.
I hope this helps.
In this era of short sales, unfortunately, there are no set standards, processes that are consistent. What the bank is payng for one day can and often does change monthly. I must say that the only thing I've seen them consistently pay has been, and I hope will continue to be, outstanding property taxes and buyers credit on FHA loans.
Bottom line, seller's lender is now negotiating everything, including utilities.
Water liens can be filed against the property. Other utility bills such as electrical or gas are not. However, if the water company files a lien against the property, it must be paid off before title will record. This means if the seller doesn't have the money, you will probably have to pay it.
As far as the electrical and gas utilities, if the seller did not pay the bill, the utility companies may refuse service to you until those past due bills are paid. You will receive the phone numbers of the utility companies in your preliminary title report, and you may want to make sure they are paid, but generally title will check on this for you as well.
It is a good idea to do your own due diligence search and ask questions of the escrow officer to make sure nothing was missed. I routinely call the utility companies and ask about past due charges and alert the escrow agent as it has happened to me many years ago that a lien for delinquent utilities appeared on the buyer's first tax bill as it was missed by the escrow officer and not paid at the close of escrow. Luckily, the former owner agreed to pay. The escrow company did not offer to pay.
You'll need the assessor's parcel number to look up the tax bill info. Below is the link to the Sacramento tax collector's website. If you don't know the APN #, you can look it up by address on the tax assessor's website. http://www.assessor.saccounty.net/AssessorsParcelViewerAppli
I hope this helps.
DRE # 01326917
Ferdig Real Estate Solutions
If the existing loan originated with Countrywide, lord help you.
If you signed a short sale addendum, you have given the seller the right to continue marketing the home, accepting higher offers and sending those offers to the bank, which could knock you out of the ballpark.
As for the utilities, assuming the title and escrow is located in Sacramento, they will find out if there is a lien for the water. There may also be liens for the HOA, and many lenders will not pay those types of liens. If the seller has no money for those liens, then it's up to you to pay them off.
Welcome to the wonderful world of short sales!
(utilities are not attached to the land as is water, sewer and garbage).
I remind my title rep to help me insure that is done. I suggest that you as the buyer request in writing email is fine- that your title rep send the demands to the water,sewer,and garbage companies and clear the HOA fees, if applicable, as well. I know from experience with HOA fees, I as the listing agent had to pay , in advance on my credit card , for them to release the transfer fees to the escrow officer.
So as others have said its the title rep that can clear the debts. Of course talk to your realtor, so they can raise a stink if needed with the out of town escrow companies. Also want to call the water companies and electric companies yourself and find out if you can turn them on for inspections. I as listing agent have turned them on in my name for a short time to close the deal. Good looking out