Underground Oil Storage Tank - Charlotte, North Carolina

Buying & Selling Real Estate
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Underground Oil Storage Tank - Charlotte, North Carolina

Sean Boyle
Charlotte, NC · Member since 2013 · 10 posts · 3 votes

So I just finished my first flip in Charlotte, North Carolina...took a little longer than expected, but it's finally under contract.  The buyers had their inspection last week and I had a nice little surprise that there is an old underground oil storage tank next to the house that hasn't been used for a while.  In North Carolina, residential oil storage tanks are exempt from all technical requirements.  The state and county (Mecklenburg) does not require soil testing and there is not a procedure that must be followed to "close" out the oil tank.

The only problem is that the buyers are strongly pushing for a soil test and proper closure of the tank even though there is not a defined requirement for this.  There are no signs that the tank has any issues (no visible oil in the soil at the surface and no smell of residual oil in the area), and I'm worried that a soil test is only going to cause unnecessary costs.  

My question is: Has anyone else out there dealt with a similar issue and what was the end result?  Did you do a soil test?  Did you close out the tank yourself by filling with sand? Or, did you have to get a company to do it?  The companies that I've talked to are asking either ~$1300 to pump out any old oil (if there is any) and fill it with foam or ~$2500 to completely remove the tank.

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Curtis WatersBusiness Member
Rental Property Investor · Charlotte, NC · Member since 2013 · 291 posts · 176 votes
9y

Those costs seem reasonable.  Also consider some mortgage companies are afraid of the liability & require this to be solved prior to closing.  Even if you remove the tank make sure you get a soil test to ensure no leakage.  NC has a grant program for underground tanks but it is poorly funded.

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  • Anthony Jenkins
    Wholesaler · Philadelphia, PA · Member since 2016 · 34 posts · 13 votes
    9y

    I haven't come across this problem yet.  I've talked to a few investor with more experience than myself that have said most buyers will what the tank removed and a soil test done before agreeing to purchase the home.  I don't want to be too negative but the price they said to remove the tank and test the soil was more than $2500.  This is one of those major items to double check for when calculating repairs and making an offer.  Good Luck.

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  • Curtis WatersBusiness Member
    Rental Property Investor · Charlotte, NC · Member since 2013 · 291 posts · 176 votes
    9y

    Those costs seem reasonable.  Also consider some mortgage companies are afraid of the liability & require this to be solved prior to closing.  Even if you remove the tank make sure you get a soil test to ensure no leakage.  NC has a grant program for underground tanks but it is poorly funded.

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  • Christine Mwai
    Investor · Alabaster, AL · Member since 2016 · 280 posts · 88 votes
    9y

    No answers but following and learning... more familiar with underground gas  storage tanks on the commercial side. Best wishes.

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  • Scott Patterson
    Flipper/Rehabber · Charlotte, NC · Member since 2016 · 112 posts · 66 votes
    9y

    You should agree to pump and fill the tank, which 1300 is the right number.  No need to remove.  I would not test the soil.  You have no obligation and neither does the environmental company have, unless it is obvious that there is the scent and oily appearance, then I think the company has the obligation to report.  (not completely sure).  If you test, most likely the test will be fine, but if for some small chance it comes back bad, then it becomes a material fact and now you are sol to sell the house without remediation, which will cost you 5k to 25k depending.   I think you can apply to recoup the money from a state run fund, but there could be significant time to recover the money.  

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  • Mike ReynoldsPro Member
    construction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes
    9y

    @Sean Boyle I worked for a company recently that had to do this on a monthly basis because they had  a lot of properties that had fuel tanks that were converted to offices instead of convenience stores. They did everything in house as the son was certified to do this. Those prices seem very cheap to me. If they do find contaminates there it will cost a lot more. The bad part is the contamination doesn't usually come from a leaky tank. Its from spills as they fill it over the years.

    Try and talk them into the foam fill and leave it at that. That way you can meet them in the middle so to speak. Also if it does have oil in it you can find your local oil recycler and he will pump it out for you for free probably.

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  • Christian Jones
    Developer · Charlotte, NC · Member since 2016 · 19 posts · 12 votes
    9y

    We conduct Phase I ESAs during due diligence which are supposed to uncover these. They run about $2k each, so it doesn't always make sense when purchasing a single family house to flip. If an UST is found, the Environmental Consultant will recommend a Phase II ESA, which can cost anywhere from $2-5k and doesn't necessarily get you to the finish line. As part of the Phase II, they can drill borings beside the tank (if it's not too close to the house or under power lines) to better understand if fuel is or was present in the surrounding soil, but they cannot test the soil under the tank itself. Contaminated soil can leach out chemicals every time the water table gets high or even when stormwater travels thru the soil on its way down to the water table. Long story short; we typically hold $30k from Owners at Closing for potential mitigation costs.  Or you could just wait around for Trump to abolish the EPA.

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  • Sean Boyle
    OP
    Charlotte, NC · Member since 2013 · 10 posts · 3 votes
    9y

    Thanks for the responses everyone.  First thing I'm going to do is have an inspection done on the tank to determine the condition of the tank and to see if the previous owner did anything to close it out.  I'll keep you all posted on what happens.

    @Christian Jones - Do you perform Phase 1 ESAs on residential properties or commercial? I am not familiar with this process when purchasing a single family home.

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  • Patrick Squires
    Investor · Oxford, MI · Member since 2016 · 110 posts · 41 votes
    9y
    Is the house priced right? Are you in a sellers market? If it were me and I felt I could get another offer... I would consider a counter of 1500 bucks off the house and say take it or leave it. Your RE agent may not agree but me - thats what I would do. If I was proceeding with the work I would talk to my RE agent about a contract agreement that locks them into buying before proceeding. Maybe that you and the seller have a set amount escrow for the work at closing and not to exceed that amount. And they can do the work from the escrow account funds once the closing is complete and they only get 90 days to draw the funds from escrow. Something like that possibly. You could waste time and money and they may never actually buy the house.
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  • Christian Jones
    Developer · Charlotte, NC · Member since 2016 · 19 posts · 12 votes
    9y

    @Sean Boyle  We mainly buy raw land with an eye toward higher density residential. But I will say commercial due diligence follows much the same routine. The idea is to minimize risk wherever possible and we civil engineers specialize in recognizing risk because we've been screwed by every rule you can imagine. On our scale, we check all the boxes. For a flip property you should do whatever you feel is necessary to close the deal and transfer all liability.

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