Do you have the power on when you wholesale the property?

Question

I'm not a wholesaler, I'm a potential buyer. I called the utility co. and the property I'm going to see has the power turned off right now. Is this the norm when buying from a wholesaler, and should I go ahead and put down my deposit (if I like the place) without having the power on to test it? What is the best way to handle this? Thanks.

Chris Martin · Answer

Thanks Bienes. This is different than what is in the link I posted above. I suspect, but obviously don't know, that they don't turn the electric on because the power has been off for a long time. To get power back on for Progress Energy (and other utilities) requires a meter base inspection from the local inspection department and requires identifying a licensed electrician on their form. While not that much, they could end up spending a few hunderd dollars...

So I agree with Will and Carlos. You are reduced to what the property preservation companies face. Lug out a generator to test electrical and an air compressor to test the plumbing. Not ideal... but if it were me, I would insist that the price be adjusted accordingly.

Sidebar: EH == EconoHomes. I'm not advertising, am not affiliated in any way, and have not bought from them. Their name wasn't used in the other post I referenced becase (as we concluded later) the OP was avoiding using the name to retain her marketing fee.

Will Barnard · Answer

Bienes, it all depends on the seller and what is going on with the specific property. I have been in many REO properties where the utilities where on and I have been in some where they were off.

Some banks will turn them on for your inspections while others will not. Find out from the wholesaler (as he/she is not the current owner of the property) if the bank or agent can provide utilities for inspection.

You should not buy without having utilities on for your full and complete inspection. They could have pipes clogged by cement, AC that does not operate, or any other number of issues that can be hidden with utilities turned off.

Steve Babiak · Answer

It's probably REO, so the electricity is usually off (unless there is very good reason - I went through one that had a sump pump running continuously even though the weather was and had been dry; I suspected a spring of some sort was pumping water into the basement).  Something to get used to in this time of numerous REO properties ...

Jairus King · Answer

Good afternoon All,

I really wanted to chime in because I am in a similar situation. Most of the homes I encounter here through REO or wholesale and don't have the utilities. The banks really don't care and will not connect power (as is) means as is with them. They won't connect for every "tire-kicker" that may be interested. Not sure how to resolve these going forward other than to inspect well and have enough budget to handle problems that may arise. Any ideas or input?

Bienes Raices · Answer

I looked at that link you posted Chris--this isn't anything as complicated as that. That is interesting about the power being off for a long time--that may well be what happened in this case.

Bienes Raices · Answer

Chris, I don't want to give out specific names on a public forum, but it was sold to a buyer by an LLC as special warranty deed at the top of the bubble in 2006, and then quit claimed into a trust by that buyer a year later. It still has the Trust as the owner on the appraiser's website. I don't know who E.H. is--it's another group of people.

As I said I did buy one another house through this group (a normal wholesale deal) and it went smoothly. But I didn't like the terms of the current deal considering how much work the house needed and my own lack of experience at quantifying how much a major rehab would cost.

Chris Martin · Answer

This "scheme" (note, I didn't say scam) sounds strikingly familiar. "Wholesaler" markets property and claims they "own" it. But they really don't... not legally at least. They operate with a "hold" period and allow you to do your due diligence. They can't turn utilities on because they have not recorded the deed (they don't legally own the property.)

Bienes, do you have have insight into the recent legal history of the property? Current legal owner, how the deed was last transferred (SWD, truatee deed, etc), deed history, etc? Is this an "E.H." promoted property by chance?

Will Barnard · Answer

You have two options, pass or figure absolute worst case on your rehab budget and make offer accordingly.

Is this common in a wholesale deal? Not by my book!

Brian K. · Answer

Do your due diligence, bring up cost of repairs to off set there being no power.

Bienes Raices · Answer

It's a nice idea,but I'd rather just have whoever is selling the house turn the utilities on (I don't think it's too much to ask)

Do you have the power on when you wholesale the property?

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