Septic Inspections? Do you do them or waive ALL contingencies?

Real Estate Agent · Ocean View, NJ · Member since 2015 · 76 posts · 25 votes

We're putting a cash offer in on a property. It's a property that needs some work and we'll be living in it and then doing a cash out refinance to purchase another investment property. It has a septic system and has been vacant. I know we'll be in competition with other investors so we are waiving all contingencies except we want to test the septic since it could be a huge expense. I'm wondering if other investors ever waive this inspection and take the risk?

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Matt Devincenzo

Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes

Waiving the inspection contingency and not performing an inspection aren't mutually exclusive. You could choose to waive the contingency and still have it inspected during DD. If it 'fails' or would be excessively expensive to repair, you can just back out at that point and forfeit your EMD. You just have to decide if there is enough of a deal there to risk some money on the deal. You are always able to renegotiate or back out even without a contingency, you are just risking your EMD by doing it.

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Clint ShelleyPro Member
Surveyor · Dothan, AL · Member since 2014 · 425 posts · 391 votes
6y
@Kiersten Vogt
It would depend on how much is in the deal, and what it would take to replace the whole system. Last SFR I bought was vacant with septic. We were first in line with earnest money so they accepted our offer with the inspection contingency. If it is in an area with a bunch of expensive permits and replacement costs, no way I'd pass on inspection.
Clint
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Kiersten VogtPro Member
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Real Estate Agent · Ocean View, NJ · Member since 2015 · 76 posts · 25 votes
6y
Thank you @Clint Shelley...

I do believe the permits are expensive in that area and replacement would be very expensive.

I know there is going to be lots of competition on this one as it's on the MLS and both times I visited there were multiple groups there. They are now asking for best and final offers. I was just curious if anyone else would waive a septic inspection because I'm not comfortable doing that... just trying to feel out the "competition" I might be facing.
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Matt Devincenzo
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
6y
Waiving the inspection contingency and not performing an inspection aren't mutually exclusive. You could choose to waive the contingency and still have it inspected during DD. If it 'fails' or would be excessively expensive to repair, you can just back out at that point and forfeit your EMD. You just have to decide if there is enough of a deal there to risk some money on the deal. You are always able to renegotiate or back out even without a contingency, you are just risking your EMD by doing it.
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Kiersten VogtPro Member
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Real Estate Agent · Ocean View, NJ · Member since 2015 · 76 posts · 25 votes
6y
Hi @Matt Devincenzo thanks for the response! Yes that makes sense, I do realize they aren't mutually exclusive. I guess I was just curious how other investors thought patterns worked on it. Thanks!
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Matt Devincenzo
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
6y
I'd weight the options of high EMD with an inspection contingency so my money isn't at risk, and low(er) EMD with no contingency and I could lose my money. Then ask yourself how much am I willing to lose? $100, $500 or $10,000...make that your EMD with no contingency....make 2 offers, 1 full price high EMD with an inspection clause, and then a second lower with less EMD and no inspection contingency. Let the seller decide if the risk is worth it to them or not.
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Kiersten VogtPro Member
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Real Estate Agent · Ocean View, NJ · Member since 2015 · 76 posts · 25 votes
6y
@Matt Devincenzo I love hearing how the minds of other investors work, thank you so much. I love the idea of putting in two offers.

I've done some research today and found out the septic system is actually too small for the home. So now I can put my offer in already knowing I need to replace the septic system!
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Bryan Devitt
Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes
6y
@Kiersten Vogt there is 0 chance I would gamble with what around here is a $35-40k issue. The only way I would waive it is if the numbers just assumed we would replace it and if it was still good we got to pocket that money.
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Kiersten VogtPro Member
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Real Estate Agent · Ocean View, NJ · Member since 2015 · 76 posts · 25 votes
6y
@Bryan Devitt I agree! I did research and found out the system needs to replaced so I put my offer in based on that knowledge! Good to know how you feel about it!! Thanks.
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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y
I bought a place on septic and had it inspected. It was a good thing I did as the whole thing needed to be replaced. This was in a competitive market, but the owner knew that if it wasn't fixed, no one was going to buy it.
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John Teachout
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
We've purchased 4 homes with septic systems and I've never had one inspected. They're not that expensive here though. I had one replaced tank and all it it was less than $5000.00
I've spent a lot more on HVAC than septic issues. I've got a unit now that's probably going to need a full changeout.

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Kiersten VogtPro Member
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Real Estate Agent · Ocean View, NJ · Member since 2015 · 76 posts · 25 votes
6y
@Theresa Harris Good thing you had it inspected... I did some research and got a copy of the permit for the system. Turns out it was from 1958 so it will have to be replaced at some point. I then called septic companies and got a rough idea of costs for replacement and took that off my offer price and explained why I was offering that amount. I would have done an inspection too if I was unsure of the septic. Thanks for the response!
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Kiersten VogtPro Member
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Real Estate Agent · Ocean View, NJ · Member since 2015 · 76 posts · 25 votes
6y
@John Teachout WOW!! That is very cheap for septic. I spoke to three companies yesterday and they looked up soils maps and they believe our cost is going to be somewhere around $20k-$25k, possibly up to $35k if we need a special system. The cheapest systems around here are between $10k and $15k! If systems were only $5k, I would gamble on inspections too. Thanks for the input!
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John Teachout
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
Well here in the part of Georgia I live in, we have that famous red clay but unlike some clay, it will perk adequately in drain fields. So septic costs are primarily based on how many bedrooms the house has as they typically require 100' of drain field for each one. If infiltrator is used, the distance is half that. Installation of a complete system including a tank is typically done in a day. Maybe longer if there's a delay getting the inspector on site. 2 guys and one backhoe.
If I thought a system would cost $25k I'd be getting inspections done too. Septic drain field suitability can vary a lot and even in the same area of the region, one house may have easy/cheap and the neighbor may need a mound system.
Here, to get a permit for new construction, there has to be enough room to install a system twice. (in case it ever needs replacement.)
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Kiersten VogtPro Member
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Real Estate Agent · Ocean View, NJ · Member since 2015 · 76 posts · 25 votes
6y
@John Teachout That's interesting... the septic people I talked to explained it very similarly. That's nice to be in an area like that!
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Sean McKennaPro Member
Flipper/Rehabber · Goffstown, NH · Member since 2019 · 80 posts · 59 votes
6y
@Kiersten Vogt septic can be a scary thing. I used to have a lot of fear around septic systems. So much that I would never make an offer if the house had septic.
In Massachusetts with title 5 septic replacements are very expensive. Every state has there own requirements. In New Hampshire a lot of houses are on septic so I purchased the NH septic code book and learned all that I could about septic systems. I paid a septic inspector to teach me everything he looks for when evaluating a system. It is very simple and I no longer feared septic. I felt very empowered and informed about future decisions.
My biggest take away is to learn the basics. You need to know septic sizing and lot loading in your state.
For example: If you have a property that is on .23AC regardless of what you do you cannot add bedrooms. Septic tanks are cheap. If you are having a tank problem NBD, can usually be repaired $1000 or replaced around 5k very simple, easy permitting. If the drain field needs replacement that is where things get expensive. The design and permitting usually add a solid delay to everything and also needs to be budgeted. My last septic design had crazy delays and took almost 6 months. Small lot sizes is a headache for septic. Advanced systems are difficult and pricey.
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Richard Dale-Mesaros
Investor · Campton, NH · Member since 2010 · 287 posts · 144 votes
6y
Town and state DES may have records on when the system was last replaced. Inspection is only $300 so not a huge deal. Outgoing cast iron pipe is more of a concern than newer white PVC pipe. Even if on town sewer you might still want to have the line to the street inspected!
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Lien VuongBusiness Member
Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
6y
If you do waive it I would suggest you padding it renovation figures for a new septic and if it works then waive it. In circumstance that it makes your project very tight or uneconomical put in the contingency.
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Ethan Looy
Contractor · Grand Rapids, MI (Grand Rapids) · Member since 2020 · 5 posts · 2 votes
6y
@Kiersten Vogt
You said the septic system has been vacant? I learned from my Health official here in Michigan that when septic systems sit vacant for about 3-5 years it’s actually the best thing for them! The solids have time to break down and the system actually resets itself... I found that to be true when I inspected a 3 year vacant system recently and it was all water and zero solids. Of course there are other factors such as age... if it was constructed with clay or cast iron tile then most likely tree roots have destroyed it, vacant or not.
I see yours is “to small” ...is that according to the health official in your area? They will always tell you an older system is to small because newer codes have required larger systems with newer builds today. If your not adding on to the home, or more specifically, adding a bedroom, you should be just fine with the existing system (they won’t MAKE you replace it)... that is to say it should be fine as long as it’s functioning correctly. A 1950s system probably does need to be replaced though. That’s OLD! I would ask the current tenants if they have had to call a plumber to snake or maintenance the system if you are able.
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Sean McKennaPro Member
Flipper/Rehabber · Goffstown, NH · Member since 2019 · 80 posts · 59 votes
6y
@Ethan Looy
you are correct. Septic systems will reset themselves eventually. The best thing for a system in failure is to pump the tank right away and let it sit. BUT, this only works in certain situations. If biomat interference has caused the failure or solids made it to the drain field this will usually reset in 6mo to 1 year. During a septic inspection you would dig up a section of the drain field and see what is blocking it.
When we talk about older tanks. The problem is they have concrete baffles that are designed to hold back the scum layer. These baffles will deteriorate and can be replaced with a pvc outlet baffle. Or you can pull the tank and do an in-kind replacement which means the same size or bigger. If I deem it necessary to replace just the tank I always install a larger tank. The difference is generally a couple hundred.
ALL older systems are “to small”. If you are doing a major remodel or substantial development this will quite often trigger the need for a properly sized system to be installed. In much the same fashion as when we file permits for a large remodel they will quite often come back saying I want xyz additional work like adding hardwired smokes.
Kiersten it sounds like you did the right thing and proper due diligence. Good luck with your project and if you have any questions let us know.
Thanks
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Kiersten VogtPro Member
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Real Estate Agent · Ocean View, NJ · Member since 2015 · 76 posts · 25 votes
6y
@Sean McKenna Yes! I would love to learn more about septic systems. I used to not even look at homes with septic systems.

@Richard Dale-Mesaros Yes! We wound up having to replace our sewer line on our primary residence. I had never thought about that before with public sewer... now I know. Luckily it wasn't too expensive.

@Lien Vuong I agree and I got a copy of the septic tank permit and it was installed in 1958! All the companies I called said it will definitely have to be replaced soon or at least before we resell. So I built in my offer for the cost of a new system.

@Ethan Looy It's too small because the previous homeowner added a bedroom and bathroom without updating the system. Unfortunately there is no one to ask about their recent plumbing issues, it's a vacant bank owned home. That's very interesting about a septic system sort of resetting itself after years of being vacant, I never knew that!

@Sean McKenna Thanks for elaborating on Ethan's response. And thank you! We are still waiting to hear back.
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Richard Dale-Mesaros
Investor · Campton, NH · Member since 2010 · 287 posts · 144 votes
6y
@Kiersten Vogt - what did that cost, a couple of grand??
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Rochelle Thea Fabrizio
Investor · United States · Member since 2020 · 47 posts · 40 votes
6y
Septic systems can be scary. I bought a home in Florida and was told it was city sewer and water. I later learned after moving in that I had a Septic system that needed to be pumped. Before pumping the company warned me that if this particular septic (made in 1964) didn't have the appropriate bottom that they could not "certify" it and that it would have to get replaced costing over 10K. Apparently the early 60's was when they started installing the proper septic systems in Pensacola. Luckily I dodged a major bullet but will be much more diligent in asking about the septic system in the future. Great Job on doing the due diligence up front and thwarting the potential disaster!
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Kiersten VogtPro Member
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Real Estate Agent · Ocean View, NJ · Member since 2015 · 76 posts · 25 votes
6y
@Richard Dale-Mesaros It cost us an extra $1400 on top of all the other plumbing work we had to do. Had we only had to replace the sewer line they said it would have been $2000.
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Kiersten VogtPro Member
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Real Estate Agent · Ocean View, NJ · Member since 2015 · 76 posts · 25 votes
6y
@Rochelle Thea Fabrizio Yikes!! That's a scary situation, I'm so glad it worked out for you. Thanks for the additional information. I'm trying to learn all I can about septic systems as a lot of the houses near me are on septic and I used to try to avoid them but it really narrows our search for flip houses! And thank you... we try and do the best due diligence we can, especially when we waive all contingencies and our deposit is on the line!
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Sean McKennaPro Member
Flipper/Rehabber · Goffstown, NH · Member since 2019 · 80 posts · 59 votes
6y
"It's too small because the previous homeowner added a bedroom and bathroom without updating the system." I just wanted to clear something up on this for other people in similar positions. It is the bedroom count (lot loading) that dictates the septic size generally. Not bathroom count. If you come across the situation where the septic system is to small for the bedroom count. You need to make sure the lot size will support the new larger system. Have someone actually run the math. Call a septic "designer". You will find that most smaller septic companies do not have a designer on staff. Some states require this person to be an engineer. If you have a house that you want to call a 4 bedroom but the septic size can only be for a 2 bedroom because of lot restrictions, then you only have a 2 bedroom house. There is quite a bit that can restrict the septic sizing. Lot size, well radii to your well and the neighbors, surface water, boundary lines. etc.. But this is all state specific. So always check with a professional.
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