Sunday, March 29, 2009
REO - Utility Liability
The real estate industry transactional sales requirements and protocols in particular are changing frequently. REO's have become the predominate transaction in many areas across the country. The buyer and agent preview dozens or maybe even hundreds of properties. The buyer with assistance from their agent make an offer to purchase and are successful with bank approval. Now the fun begins. You need to perform your due diligence, including, but not limited to appraisal, physical inspection, termite inspection, geology review and or environmental inspection. You need the utilities to be active for many of the inspections to be performed correctly. But wait! the listing agent refuses to activate the electric, gas and or water services. You or your agent decide to put the services in your names and activate the utilities.
Property liability jumps to the forefront of the issues to consider. Are there known or unknown plumbing leaks, gas leaks or electrical safety issues within the vacant REO property? You're about to find out! It gets better, if the property is damaged by any of these services being activated, who do you think the bank or property owner is going to pursue damages against? You don't own the property quite yet, so your existing homeowners policy isn't going to help you.
Over the past year or so, I've been deposed as an expert witness on more than one occasion involving these issues and or scenarios. It never ends well. The party who has activated the services ends up having full or shared responsibility with regard to property damage, repair and or remediation.
On your next real estate purchase, request and insist the owner or listing agent make the property available for proper inspection including, but not limited to all utilities being active at time of inspection.