Underground Storage Tank

[Vikram C.]

We just finished negotiating the price and the seller has revealed at the last moment that there is an underground storage tank in the property. Our offer price did not take into consideration the cost of dealing with that issue and we are debating whether to reduce the offer price, walk away from the deal or sign it as it is.

Has any of you dealt with a UST before? I am concerned about the following:

1. The cost of finding and fixing a leak if there is one that can be detected without removing the tank,

2. The cost of filling the tank with sand, cement, foam, etc.

3. Whether a buyer would be put off by the very existence of the tank even if there is no leak that we find and we fill the tank.

4. Whether banks are reluctant to lend on such properties (which would reduce our pool of buyers).

5. Worst case, how much would it cost to remove the whole thing? When we remove it, if we discover a leak at the bottom of the tank, could it result in much higher expenses than a surface leak because the oil could have seeped into the ground and be very expensive to fix?

6. Does it take a lot of time and money to deal with leaks - reporting to some government bureaucracy, etc?

I have never flipped an older property before so I have not encountered these types of issues until now. Any advice / guidance would be much appreciated. Thanks!

[Matt Kearney]

We've removed three of these in houses that we've rehabbed. It's always a gamble to me and I would definitely negotiate with the seller and get the price way down.

The cost to remove the tank isn't that much, $1,400 - $2,000 is what I usually pay, but if it's leaking the costs can escalate quickly. In my experience the only way to tell if it's leaking is to start digging it out.

We'll buy them, but it's gotta be a real good deal to make up for the can of worms you can open if the tank is leaking.

My suggestions; ask the seller to remove the tank before closing, that way if it's leaking they will bear the expense. If the seller won't do that get the price way down to offset the risk you're taking.
What we did on the last deal was have the closing attorney hold back $10k in escrow to be released after we removed the tank. If the tank was leaking we could use the $10k to do the clean up.

These can be good deals if handled properly