If a seller states "SELLER WILL NOT ACTIVATE ANY UTILTIES" in the description on Trulia.com, does this mean they will not even activate them for inspection after a contract is agreed upon? If so, it's not even worth looking at this property right? This is a bank owned property.
Thanks for any insight!
i think it means YOU would have to activate the utilities, if you wanted a full inspection. Depends on your risk level. When we bought our first rental, my uncle (who is a great handyman and master electrician) looked over the house for me so I personally was OK with not having a formal inspection or having the utilities on. And our price was so good that if we had to deal with a huge issue (and we did, the sewer line had to be replaced) we still came out ahead...
Build that into your offer price: Needs rewiring, needs replumbing, needs new HVAC etc
I've bought a couple REOs where they said no utilities would be activated, and no inspections allowed.
I will always attempt to turn on the utilities, and will run inspections even if the contract does not have an inspection contingency. Assuming you have lawful access to the house, this is the course I would recommend.
When we couldn't get power on, I've brought a generator on site with an electrician. Also for a house with the water turned off, we had a water truck brought on site to test the septic and make sure there were no big issues there.
For me, it was more then worth it, given how reasonable the purchase prices are.
Place #1 I paid $133k for, put ~$25k into it, and it just appraised for $230k a few months later.
Place #2 I paid $166k for, put ~$40k into it, and it should appraise for $310k or so just a couple months later.
Great deals often mean more work and more cash upfront, and sometimes you won't see that money back if you end up backing out. IMO that's the reason the deals are there, and you need to be willing to do stuff others are not.
often there is a charge for the activation of the utilities. The bank doesn't want to pay it, so you would be responsible for it. If the property has been winterized and you want to get the water turned on for inspection then you would be responsible for getting someone out to turn on the water and for re-winterizing it should you decide not to buy. (You can also get plumbing checked with an air test, where they put air under pressure into the lines and see if/howmuch leaking there is. That's a cheaper option but less complete info)
Tip: sometimes the electric isn't actually turned of to the house, it's simply shut of at the main panel. Check the breaker box ;)
@Edith TenBroek Many REOs have had copper stripped, and often the condenser of the HVAC system is gone. It may involve water lines, or electric wires. Activating utilities (blindly) could be a disaster, or a hazard. That has been the case for the ones I have seen with that statement, which means you have to assume major work. And turning them on when it says the seller will not activate them could leave you with liability for additional damage.
@Walt Payne good call! I hadn't considered that possibility.
I have bought 3 REOs. None of the utilities were ever turned on at all during the buying process.
In all 3 instances there has been something that we didn't plan for go wrong.
My advice would be to make a very conservative offer and maybe none at all depending on your experience level and appetite for risk.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing