Amy Parker - Appraise it Today Blog

January 15, 2009

Are the utilities on at the home?

Why do appraisers as this question?

An appraiser is hired to perform valuation services competently and in a manner that is independent, impartial, and objective. For purchases and refinance transactions and appraiser is further required to comply with Fannie Mae/Freddie Mac guidelines. These entities require appraiser to confirm home is livable. If the appraiser is completing a FHA appraisal inspection then the appraiser will be required to do additional inspections and make comments to meet HUD guidelines. Guidelines are of course left to lending interpretation and many lenders are now asking appraisers to specifically indicate on their reports whether all utilities were functional during the inspection.

So the appraiser has to check the utilities, don’t view this as an obstacle to a smooth escrow but think of it as additional protection for your buyer. New and old homes sometimes have issues that we are unaware of. That’s why it is always a good idea for buyers to get a home inspection. Unfortunately I cannot tell you how many buyers I find that do no want to pay the extra for this service.

If the utilities are not on, what will the appraiser do?

The appraiser will most likely make the report “subject to repair or reinspection” with the assumption that no additional repairs are needed. Typically the lender receiving this report will ask for some proof that the utilities are operational (a copy of a home inspection report) or have the appraiser revisit the property to retest the utilities. This can delay an escrow so a little bit of investigative work by a realtor can help ensure a smooth escrow.

So here are a few realtor tips:

Water

The water main should be on and water should be running from the faucets in the house. Appraisers will find homes with the water main off, the foot valves under sinks off, or the water utilities off at time of inspection. Most appraisers will not take on the liability to turn these items on because not all plumbing systems are the same. I did this one time and flooded a kitchen. Another time I turned on a sink and much to my surprise water starting running out the bottom of the cabinet because someone had removed the piping below the drain. There is nothing like moping up a floor in a REO home that has not been cleaned in months.

Recommendation: If your buyer is interested in a home, check the water on a faucet before you leave or have a home inspector check out the house.

Natural Gas Utilities

The main reason lenders want to know if the gas utilities are on is because they want to be sure there is no safety hazards related to this utility. They also want to be sure there is hot water. It’s not unusual for gas bills to not be paid or gas utilities to be turned off when not used for extended periods of time. Gas leaks and explosions have been in the news papers recently, heightening the awareness of this potential hazard. When natural gas utilities are turned off the public utility companies will put a plug inside the gas meter to turn off the utility which requires the utility company (PG &E) to visit the property. The good news is PG & E will also turn on heater and water heater pilot lights on and confirm the gas stove is working also. They will also tell you if there are safety problems.

An appraiser will turn on the water to check for gas utilities, check the pilot light on a water heater, or turn on a gas stove top. Buyers want hot water when they buy a home and many of the vacant properties out there have faulty water heaters.

Recommendation: Check for hot water, confirm with listing agent that gas bill is being paid, or have home inspector check.

Electricity

Appraiser will turn on a random sample of lights or try electric outlets with a night light to make sure the electricity is.

Recommendation: Turn on a few lights in the house, check to see if the digital display on the microwave is working, or have home inspector check home.