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Always Check Service Entrances For Electricity And Water When Inspecting Foreclosed Properties!

I just realized something when I inspected a foreclosed property recently and I would like to share it here. While doing inspections of foreclosed properties as part of due diligence, you should always check the condition of the service entrances for utilities like the electricity and water.

I failed to do this twice for foreclosed properties I have acquired recently, and only learned about these after I had already acquired those properties. I would like to spare all beginning real estate investors out there from the potential problems that may happen if you overlook this, just learn from my mistake so you don’t have to do the same.  Let me try to run through the potential problems below.

No signs of the Meralco meter…

If the Meralco meter does not exist, you will have to apply for a new connection and you need to consider the lead-time for this along with the actual installation time.

Yes, you will need to spend time and money applying for a new connection and all the hassles associated with it, like visiting the concerned Meralco branch to apply for the connection, waiting for the inspection, securing the electrical inspection certificate at the city hall, submission of the final electrical inspection certification to the concerned Meralco branch,  paying for a new deposit, waiting for the installation of the meter base, etc. This may sound intimidating for some but I enjoyed doing it, because I like learning new things and getting out of my comfort zone.

Imagine this scenario: you bought a foreclosed property, started fixing it up, found a tenant, and closed the deal with a lease contract that they will move in once the repairs are finished – BUT, there was no electricity.

Do you think the buyer will move in? I don’t think so.

Do you think this can be a deal breaker? Maybe.

This almost happened to me, but thankfully, the electricity was installed just in time because it just so happens that the Meralco Branch that covers the area where the property was located gave very fast service (Kudos to the Meralco Cainta branch where I applied for a new connection and the Masinag branch where the inspector was based!).

It helped that when I applied for the new connection, I had with me one of the billing statements that I found on the floor of the foreclosed property.

I gave it along with other requirements to the person handling my application and he said that since the house was already in the system, they will just update the records to reflect that I was the new owner and I should expect their inspector to visit the property the next day. Yes, they were that fast as the inspector really did come the next day. I was very glad that electricity was up and running in less than three weeks unlike in my friend Dinah’s case where it took 122 days.

If the Meralco meter is intact…

meralco meter
This property had its MERALCO meter intact, perfect!

In contrast, if the Meralco meter does exist, then there is a high probability that all you have to do is just settle the arrears left by the previous owner.

Before, I used to depend on the bank to find out just how much exactly the arrears would be, but I realized that an alternative source for this information was literally under my nose, lying on the floor to be exact.

If you have inspected a foreclosed property before, one of the first things you would notice are the bills and mails that are scattered all over the place. If you are just like me, you would often just stay clear from them and would not even consider looking at them.

I realized that these bills can actually give you a wealth of information such as: who was the previous owner, how long have the bills been left unpaid based on the earliest notice of disconnection you may find, and most importantly, how much are the arrears which are sometimes for the account of the buyer.

Sure, the bills lying around might not be up to the current month but you can always bring it to the Meralco branch covering the area and ask for an updated statement of account (SOA).

In fact, this was exactly what I did a few days ago, with the help of my broker. She picked up a bill lying on the floor, gave it to me and told me to just pay the arrears. I was very lucky because I no longer had to apply for a new connection. I then went to the nearest Meralco branch and asked for an updated SOA. Lo and behold, it was higher than I anticipated but was still just about the same amount I would need to pay as a non-refundable deposit if I was to apply for a new connection. Not bad!

On a lighter note, when I gave the bill to the cashier, she said:

Ah sir, check ko lang ulit kasi mukhang disconnected na kayo… oo nga disconnected na kayo, hindi ho bagay sa inyo”

In english: “Ah sir, I’ll just double check as it seems your account has been disconnected… yes I have confirmed that it has been disconnected, you don’t seem to look like someone who would have his electricity disconnected”

I couldn’t help but smile (I was wearing long sleeves and a tie). I just said that “I have just purchased the property and as the new owner, I just want to settle the arrears”. So I paid, and with electricity intact, the renovation can proceed anytime.

I wish I can say the same for the water connection but that’s another story. 🙂

—–

Happy Real Estate Investing!

To our financial freedom!

Jay Castillo
Real Estate Investor
REBL#: 20056
Blog:https://www.foreclosurephilippines.com

Text by Jay Castillo.Copyright © 2009 All rights reserved.

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19 thoughts on “Always Check Service Entrances For Electricity And Water When Inspecting Foreclosed Properties!”

  1. Hi Mr. Jay Castillo. Thank you so much for this helpful tips…

    I just want to seek an advice from u Sir, I recently acquired a foreclosed property from the bank, but i was shock and surprise that the previous owner of the said property has still a pending case with the Meralco (the previous owner where told to pay the amount of 1.2M) The said property was still on the Bank name. What am i going to do? They do not allow us to apply for another electric installation, do i really have to shoulder that amount sir?

    Your earliest answer will be highly appreciated…

    Reply
    • Hi Nico. In a way I know how you feel right now because I often see properties with huge arrears, although I just move on to the next property. Since you already purchased the property, I suggest you check your contract/agreement with the bank and confirm who will shoulder such arrears (some banks specifically state that they will shoulder arrears up to the date of purchase). If it turns out the bank will not shoulder it, then I guess you have to decide if you should just cut your losses and let go of the property, but you also need to check if the bank can return your money and then weigh your options.

      Reply
  2. Very Educating! You are right, at least check the meter or water and all the unpaid balances by getting the SOA. OO Nga nu? Bills that are on the floor might only be the tip of the iceberg. More should be expected

    Reply
  3. Nice blog, Jay. Thanks for sharing up to date, realistic details in real estate investing. As a newbie, this is a great help for us so we will not repeat the same mistakes you have gotten into. Best of all, its free! :)). Please post more real life experiences you have and I will keep on sharing this wonderful site you have with my friends. God bless, Bro Jay.

    PS. I have read Bro.Bo Sanchez message on Pain, it re-focused my motivation not on greed but to serve Him more.

    Reply
    • Hi Lito,

      You’re welcome and thanks for the feedback. Actually I have a lot of mistakes I have not yet shared, although I did share them when I spoke in a Think Rich Pinoy Seminar earlier this year. I will post them here, stay tuned. 🙂

      It was nice to meet you during the RCBC auction, thanks for sharing this to your friends!

      God Bless!

      Reply
  4. Thanks for the tip and the linklove Jay! It was indeed a nightmare to apply for the Meralco connection because in my case, it was the developer who was supposed to take care of it and my hands were tied. Hay, sakit ulo, pramis!

    Reply
    • Hi Dinah, you’re welcome. Naku, mahirap pala pag sa developer nakasalalay ang pag asikaso ng Meralco… tsk, tsk. I’m glad okay na ang connection niyo!

      Reply
  5. Hi mr castillo, again thanks for all the informative topics you have been posting. I would just like to share to you one of my discoveries about meralco arrears..as new buyer we are protected with the unpaid bills of the former owner as manifested in the meralco magna carta ..you may check it out with meralco website.
    Thanks.

    Reply
    • Hi Ces, you’re welcome and thank you also for the very valuable information! I’ll check it out and see if I’m entitled to a refund. 🙂

      Reply
  6. Hi Jay,

    After reading your recent topic titled “Always check service entrances when inspecting foreclosed properties! “. I could not help but to ask you first that what you did on the last part of your blog, where the Meralco meter is intact, is correct and that you really paid the previous owner’s electricity arrears after pruchasing the foreclosed property?

    Is it really the buyer’s responsibility to settle previous owner’s utility bills arrears? What if you tell Meralco or water companies that you are a new owner, will they not just take the responsbility of clearing the arrears and start fresh? Because after all that is seems to be the fair thing to do?

    Your reply to my question is greatly appreciated!

    Many Thanks,

    Jason

    Reply
    • Hi Jason, for this particular bank where I got the foreclosed property, their policy currently in place is that the buyer shall shoulder all the arrears. Since the arrears(3.3K) is about the same as the deposit for a new meter(3.2K), I believe it was a good deal for me.

      As for asking Meralco and water service providers to wave the arrears, I believe they would still insist that someone has to pay the arrears. It’s possible to ask for them to wave the arrears but it would surely take time to get approved. However, as a general rule, the property should be fixed-up and be made ready for occupancy as soon as possible so it can be sold or rented out quickly and likewise, renovation must also start quickly. This requires water and electricity and paying the arrears would be the fastest solution.

      I hope I have answered your questions. Thanks for visiting!

      Reply
      • Hi Jay, thanks a lot for your swift reply to my questions! I really appreciate you taking time in explaining things more clearly.

        I guess, in regards to arrears on previous owner’s utility bills, it is really a matter of case-by-case basis and it depends on individual bank’s terms and conditions on every real estate transactions.

        Many Thanks,

        Jason

        Reply

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