Oil tank risk on Sheriff's sale property

17 Replies

I am considering a bid on a sheriff's sale property.  I have determined my max bid, but have reservations because of the unknown oil tank risk. I have gone to the town building department to see if there is any record of a tank installation, removal or decommission (none), and have reviewed NJDEP data to see if there has been prior remediation on the property (none).  There are NJDEP records of nearby (same block) properties that had leaking tanks.

The MLS listing for the prior sale of this property in 1996 says the house has natural gas, baseboard hot water heat and central air, which is consistent with the information I was able to get from the town. But none of this confirms the lack of an in-ground tank.

I am not sure what else I can do to evaluate oil tank risk.  I cannot access the property for a sweep.

I know that my entire investment thesis goes out the window and that this could become a liability if there is a leaking tank.  Any thoughts?  Investors take this risk every week when they buy NJ auction properties, right?  Is there any further investigation I can do on whether there is a tank short of getting access to the property.

Thank you in advance for your replies.

Hey there @Ryan W. I'm in the middle of closing on a multi-family in West Orange that ended up having a tank. I was able to do a tank sweep and filed an OPRA with West Orange to see if there were any permits taken out to do any work on the tank (removal,fill, etc.).  Once I got the report back, it confirmed that the tank was filled with sand in 2002. Was  the town able to tell you anything without filing an OPRA to get permit records? 

My concern was that I wanted the tank to be dealt with completely by the seller prior to close. I did not want to take on the risk of dealing with a leaking tank because the cost could be significant.  I'm sure investors take risks every day but are you prepared to take on the liability if there turns out to be a leak???

Just something to think about. I wish you lots of luck.  

Thanks for your thoughts @Kelly Arthur .  The town went back through 45+ years of permits for me while I was standing there and nothing relating to a tank came up.  The fact that other homes on the block and surrounding blocks have had leaking tanks may be enough to keep me away.  I just was not sure if there is some other resource or avenue of investigation I am missing that could give me some level of comfort on this issue (again, short of sweeping the property since I do not have access).  Thanks again!

I've been told by tank removal companies that if there is a high water table or a lot of ground water in the area and the tank was not properly decommissioned your chance of having a leak could be high.  I am currently in the process of having a tank removed from one of my properties.  Hopefully, it has not leaked but there were also no papers showing it was properly decommissioned.  Costs without a leak will be about 5000.00 but with a leak could be 30,000 to 150,000 or more depending on the extent of it.  I wouldn't take a chance on it unless you really think the property is worth it that risk.

I wonder if there are any insurance companies that offer oil tank policies? You pay a one-time premium, then after close, you do a sweep, and if there's an in-ground tank and is leaking/has leaked, insurance covers the remediation. This is just me typing out loud, I don't really know if any insurance companies offer this protection.

I buy at auctions, there are a few trade secrets when it comes to dealing with tanks that mitigate the risk but don't cut it out completely.  There is a risk with a tank but if you get it at the right price you can make up for most damage caused by  the leaking.   If tanks where so bad all the time no one would bid. As long as there isn't a high water table you should be good not because it causes the tank to leak but because it causes the leak to travel.  

I wouldn't purchase a property this way unless you were able to do soil testing to make sure the tank wasn't leaking.  I've seen clean up costs approach 6 figures for some of my clients.  You need to know what you're getting into ahead of time before you make such a move. 

What did you end up doing @Ryan W.

I'm in a similar situation in Red Bank (oil tank risk) where I'm bidding on a SFH with no records on OPRA or NJDEP. I really want the house, but obviously not if there's an underground tank!

However, there was a refinance done in 2009 by Wells Fargo Bank.  I know this doesn't eliminate the risk entirely...., but my understanding is that by 2009, most big 'money center banks' were requiring an oil tank sweep??  

Any help would greatly be appreciated!  @Darren Sager @Jeffrey Carusotto 

@Mark Gee suggest you call the local oil companies and see if they can tell you if they've done an oil delivery or tank sweep at that address. There are only a couple colonies that do it around there, the worst they can say is no.

Lawes was the company I used to do a tank sweep in that area.

Also, assuming you have access to the interior of the house, you'll usually see the old copper tuning coming in and crimped off, or a hole patched over. A good indication that there was a tank at some point.

Good luck!

thanks @Mike McCarthy !!

Lawes is going to be my first call tomorrow. They definitely get most of the business around here. 

Because this is an auction property, I have no access to the inside.  

The permit department only has a record for 3 permits, all done in the last couple years: electric, new roof, radon system. They have nothing prior to 2011. 

 Does it mean anything that they were able to refinance with Wells Fargo in 2009?

@Mark Gee as far as I know, the mortgage companies don't require a sweep, at least not the ones I've worked with.

That's a tough one... I'd love to hear how it turns out for you. Good luck!

@Mark Gee I decided not to bid on the property because of the unknown, uninsurable risk of a leaking tank, particularly since there were NJDEP records of leaking tanks on several lots on the same and neighboring streets.  Like @Mike McCarthy suggested, I would not take comfort in the 2009 refi in terms of oil tank risk.