I have a 3 family under contract in Bloomfield, NJ. We just did a tank sweep as underground oil tanks are very common in this area for houses of that age. Sure enough the tank sweep turned up a massive underground oil tank. The report states that they found a 1k gallon tank with approximately 8 inches of fuel and 1 inch of water. Obviously this tank was never properly decommissioned. Normally I would happily negotiate a price for us dealing with it but given the size and water in the tank indicating a leak, we are prepared to walk if the seller refuses to remediate. This is the first time I'm dealing with an oil tank so I was curious what other investors experiences have been. How much has your worst case scenario cost you? What about your best case?
@Alex V. I had a home under contract in Willingboro, NJ a few months ago. A tank was later found and I requested the seller remove and have the soil tested before proceeding. It took them roughly 2-3 months to remove and the soil was found to be contaminated. I immediately pulled out of the deal and asked for my earnest money deposit back.
Personally, I do not like to take risks with underground tanks. I would have never made the offer if I had known there was an underground tank but unfortunately I didn't discover it until after the fact. The risks far outweigh the rewards when considering what you could potentially be liable for if the oil has leaked beyond the property lines.
I'm glad you've already come to terms with walking away because that's an incredibly expensive problem to inherit. Even decommissioning can take months between town permits and dealing with the EPA. The headaches only increase if there's contamination. If contamination is found on your neighbor's property, they can sue you too.
I walked away from a property while under contract because the seller wouldn't allow me to do an exploratory dig in an area suspected of having a tank. It was a deal breaker. He went under contract with someone else and when that fell through, he came back knocking. It turned into a more favorable position for me. I paid for the dig and it turned up nothing so the deal proceeded and closed a few weeks ago.
Good for you for doing your due diligence, and if the seller isn't willing to work with you, they're in denial because they'll run into the same issues with the next buyer.
I would personally never take possession of a property with an underground storage tank. The potential liability could run into the hundreds of thousands depending on the extent of contamination.
I would suggest first trying to get the seller to have the tank removed. If they refuse that then the next step would be offering to pay for removal yourself, prior to closing, with the contingency that you can walk from the deal if contamination is found. It may cost you a couple thousand dollars if you have to walk but that is peanuts compared to the possibilities.
Hi Alex, I really don't mind the removal of a tank, except for the time it takes to remove it and get it inspected. Some sellers will give credit and others are like Amanda said in denial. I had a deal in Roselle we tested the soil prior to purchase and it showed normal levels of contamination. We proceeded with the deal, but my Tank Guy who did the soil test guarantees the removal for an extra fee with no extra charges for contamination. So, we were covered just added the extra cost in my budget. It ended up have no contamination even though there was a small hole in the tank. Another deal we did in Union we had the same 1K Tank but didn't have the guarantee and what do you know cleanup was 20K which the seller gave a credit for and we proceeded with the deal otherwise we would have walked. Just remember in NJ if the house was built between the 1900 and the 1990's, there is a good chance the property had oil heat at some point. So make sure you do your Due Diligence on every deal. There are signs to look for with underground oil tank such as a visible vent and/or filler pipes, disconnected oil lines coming through the foundation wall which was the supply and return lines from the heating oil tank, a concrete channel may be visible in the basement floor that leads to the furnace area. Any of these physical signs is a good indication of a tank that has been removed or, there is still a tank in the ground. Hope this Helps Good Luck!!
@Alex V. I bought a 3 Family in West Orange last year. It had a tank and I let the seller deal with it. It cost them about $15k and I wouldn’t close until I had my No Further Action letter from the State indicating that the soil showed no contamination. If the seller isn’t willing to take care of ALL of it, I’d walk. Don’t put yourself in a position where you end up being responsible. Just my 2 cents. I hope it all turns out great!!!!
Thanks for all the advice everyone! Hopefully the seller will deal with remediation.
I had a similar experience to @Kelly Arthur . I purchased a 3 family in Bloomfield where we found a UST. We requested the seller remove the tank and perform any necessary remediation. It was a bank owned foreclosure.. we were not very hopeful the seller would take care of it but they agreed. We waited for the No Further Action from the state before closing.
Similar situation to us Jordan. It's currently owned by an REO company and they were less than accommodating during the attorney review process. Fingers crossed
Well good news, the seller just let us know that they are going to remediate the tank! Thanks to everyone for all the sage advice.
I've had properties under contract for almost 2 years waiting to close all because of UST. Yes, 2 years. The cleanup on those was originally estimated at more than $100K. I'm always happy to look at properties with UST. Scares away the newbies, like asbestos. Just an extra bump in the road to closing but well worth it from the decreased competition. As long as the seller is willing to take care of it, or you do a soil test to see what you're up against, I'd never rule these properties out. Once it's done you're good to go. You'll be just fine @Alex V. . If the tank isn't leaking you won't need an NFA letter from the state and you can close almost on track. If it is leaking then don't close without the NFA letter OR a large amount of $$ in escrow to cover any unforeseen costs associated with further cleanup.
Thanks @Darren Sager we are sending over a rider that says we need an NFA letter to close. Hopefully there is no leak and it's just an additional few weeks to close. We are also putting in an 8 week escape clause because this is a house hack and we can't sit around for 2 years waiting for environmental clean ups.
@Alex V. is the tank is leaking I would say it's a very safe bet that it will be longer than 8 weeks to get the NFA letter. I've never seen one sent out in that time frame. They have to do soil testing, sometimes well testing, and then on top of it you have to deal with the state after that's all been completed. 3 months MIN. So the lender may not go for your 8 week plan, just an FYI. Try to come to some equal ground and get the deal done.
@Alex V. I am buying 3 properties right now, all 3 have oil tanks in the ground, just make sure that you put in the contract that you will 100% pull the tank before closing and that is there is contamination, we are going back to the drawing board and getting another price for the property. There are a couple games you can play as well but that is another story.
You'll be fine, the second you tell a seller that she has to deal with it, IMO, it kills the deal. Chances are they don't have money, they probably will put it back on the market in today's market and get someone that will deal with for a slightly lower price. Take it, deal with it, if **** happens and there is contamination, then go from there because now you have leverage.
You know you can trust me.
Also, Lets meet for sure, it's been a while, HMU
Hi @Alex V.
I'm curious, what ended up happening? Did you receive the NFA Letter in time for the closing? Any contamination issues after receiving the NFA letter? I'm in a similar situation now unfortunately, but based on the responses I see I may have some leverage in this deal.
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