buried oil tank: buy or run away?

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buried oil tank: buy or run away?

Rosa Sugo-Golden
Investor · Pewaukee · Member since 2019 · 20 posts · 1 vote

I found a buried oil tank. The owner didnt say nothing about it Does someone has experience with this? what are the potential implications ? So far n0body complaint about it but is a great deal under 200

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Lawrence P. Schnapf
New York, NY · Member since 2019 · 155 posts · 58 votes
5y

I'm am environmental lawyer and while not admitted in Wisconsin, the following may be helpful: 

1. Home Heating Oil tanks are not regulated (e.g., required to have permit) 

2. Wisconsin has a real estate condition report form that is supposed to be prepared by the seller. Question C8 specifically asks about petroleum storage tanks.

3. If you are under contract, you should have tank tested to see if it has leaked. collect soil samples around tank. see if tank as water in it. you can use that as a basis to establish an escrow or holdback (usually 125% of the estimate to play it safe.) 

4.  Wisconsin requires sellers to provide property disclosure report. storage tanks are included in the form. A buyer who does not receive a fully completed copy of this report within 10 days after the acceptance of the contract of sale or option contract for the above-described real property has the right to rescind that contract.

5. If the seller did not disclose the existence of the tank, you might have a claim for misrepresentation or fraud.

The costs to address tanks depends on the extent of any contamination, if present. there can be limited surficial soil contamination from overfills or there can be subsurface contamination if the tank was leaking. Fortunately, heating oil tends to be denser than gasoline so that it will not migrate too far. 

since these tanks are not regulated, you are not REQUIRED to take the tank through formal closure. You could in theory simple fill it with sand. However,  if you plan to sell the property in the near future, you probably want to engage an environmental consultant so you can get closure letter from the state that would satisfy a future buyer. 

there are "war stories" about bad situations and some people claim that you cant get a mortgage with a UST. These generalized statements should not scare you. each situation is different. 

The foregoing is not legal advice. you should consultant with a local attorney if you want specific legal advice.  

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  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    5y

    Depends a lot on where you're at.  In OR, to remediate you need to dig it out and keep going until you get clean dirt.

    0Reply
  • Rosa Sugo-Golden
    OP
    Investor · Pewaukee · Member since 2019 · 20 posts · 1 vote
    5y

    The deal is in waukesha wisconsin. the tank is near the ouside wall of the property and I am afraid can be leaking for years or not?

    0Reply
  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    5y

    Does WI have a DEQ (Dept of Enviro Qual in OR) or someone that keeps lists of USTs (Underground Storage Tanks in OR also).

    That'd be who to ask.  Or any experienced RE broker has to have dealt with this prior.

    0Reply
  • Rosa Sugo-Golden
    OP
    Investor · Pewaukee · Member since 2019 · 20 posts · 1 vote
    5y

    Yes  it does this is one is not in that list . I wonder if someone has had that experience before and what was the outcome. thank you all!

    0Reply
  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    5y

    In NJ, sellers almost always are forced to remove tanks because no buyers can get insured with an underground tank, especially not an abandoned one. They should be doing the removal, permitting, and then any remediation if necessary. Here it's $1800 to remove a tank. If there is spillage and it is contained it's another $7500 for testing and then more if remediation is required to cure a larger spill zone. If it hits a water source, you can get up over $100,000. So I would not accept a deal with a tank. You can get a tank company to test the ground soil all around the tank to get an idea if there is leaking, but that is not 100 percent accurate.

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    2Reply
  • Rosa Sugo-Golden
    OP
    Investor · Pewaukee · Member since 2019 · 20 posts · 1 vote
    5y

    I appreciate your honest answer ... yes I will placed the contingency of the removal of the tank  lets see what happens.

    0Reply
  • Janet Behm
    Accountant · West Jordan, UT · Member since 2017 · 180 posts · 95 votes
    5y

    Walk away...

    How deep are your pockets?  The hole will likely go much further!

    0Reply
  • Greg Dickerson
    Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    5y
    Originally posted by @Rosa Sugo-Golden:

    I found a buried oil tank. The owner didnt say nothing about it Does someone has experience with this? what are the potential implications ? So far n0body complaint about it but is a great deal under 200

    Several state have programs that pay for underground oil tank removal, mitigation and monitoring. Check with your city, county and or state to find out if they offer the program. 

    1Reply
  • Ujwal Velagapudi
    Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes
    5y

    I got a property that had a similar issue, but it was removed and I still had a tough time. It was a struggle, fought through a ton of hurdles, but eventually bought it. I would say to get insurance for it, the environmental studies, etc. as needed to cover yourself and truly assess the risk. But at that price point, <$200k, that is a big decision since it can get pricey with all of these tests and the lengthy process it can potentially amount to.

    1Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    Put in an offer conditional upon them having it removed.  I bought a place (in Canada) with an above ground oil tank and told them it had to be removed before closing.  It wasn't a problem.  Get the seller to deal with it.

    0Reply
  • Rosa Sugo-Golden
    OP
    Investor · Pewaukee · Member since 2019 · 20 posts · 1 vote
    5y

    Seller will not remove it because it has a reversal mortgage on it he is trying to cash out something. He know the issue and I hope the bank knows too now because got my inspection report. Thank you everyone I really appreciate your input!  

    0Reply
  • Lawrence P. Schnapf
    New York, NY · Member since 2019 · 155 posts · 58 votes
    5y

    I'm am environmental lawyer and while not admitted in Wisconsin, the following may be helpful: 

    1. Home Heating Oil tanks are not regulated (e.g., required to have permit) 

    2. Wisconsin has a real estate condition report form that is supposed to be prepared by the seller. Question C8 specifically asks about petroleum storage tanks.

    3. If you are under contract, you should have tank tested to see if it has leaked. collect soil samples around tank. see if tank as water in it. you can use that as a basis to establish an escrow or holdback (usually 125% of the estimate to play it safe.) 

    4.  Wisconsin requires sellers to provide property disclosure report. storage tanks are included in the form. A buyer who does not receive a fully completed copy of this report within 10 days after the acceptance of the contract of sale or option contract for the above-described real property has the right to rescind that contract.

    5. If the seller did not disclose the existence of the tank, you might have a claim for misrepresentation or fraud.

    The costs to address tanks depends on the extent of any contamination, if present. there can be limited surficial soil contamination from overfills or there can be subsurface contamination if the tank was leaking. Fortunately, heating oil tends to be denser than gasoline so that it will not migrate too far. 

    since these tanks are not regulated, you are not REQUIRED to take the tank through formal closure. You could in theory simple fill it with sand. However,  if you plan to sell the property in the near future, you probably want to engage an environmental consultant so you can get closure letter from the state that would satisfy a future buyer. 

    there are "war stories" about bad situations and some people claim that you cant get a mortgage with a UST. These generalized statements should not scare you. each situation is different. 

    The foregoing is not legal advice. you should consultant with a local attorney if you want specific legal advice.  

    2Reply
  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    5y

    In our area it that is the case, property can get red tagged. I will ran away.

    0Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    5y

    @Rosa Sugo-Golden we find old UST's quite frequently in the Milwaukee area, although as home inventory is turning over and going through the sales process more and more of them have been removed. We still see a lot of in-basement tanks, usually empty and capped off. Junk guys will pick them up, many get converted into pig roasters.

    They are usually located within a few feet from the exterior wall and not very deep. Digging one up is not very difficult and a small mini excavator will do. Most of them are empty and can go to scrap. Yes you can fill it, but since it's so easy to dig one up I would absolutley opt for that solution, especially in light of future sales.

    A seller can only disclose what they are aware of and so it may not show up on the RECR, but regardless it's a solid reason to terminate a deal, if you wanted to. If am on the buyer side I prefer a blank RECR, because then everything we find during the inspection is grounds for negotiations. If it had been disclosed, we can't say we didn't know and can't negotiate it. Since you found it, this is a great opportunity to renegotiate the price.

    As investors we get paid to solve problems, this is a classic one and it's relativly simple to fix.

    1Reply
  • Jonathan R McLaughlin
    Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
    5y

    @Rosa Sugo-Golden it’s not really the tank that’s the issue it’s the environmental damage it might have caused. Removal without testing and approval doesn’t do you any good

    1Reply
  • Rosa Sugo-Golden
    OP
    Investor · Pewaukee · Member since 2019 · 20 posts · 1 vote
    5y

    thank you all! 

    My inspector guy say: RUN! because he has had one case before that ended costing 70000 in environmental repair and testing. 

    The Tank is full of liquid that was checked with a long metallic probe. Is in the limit with next neighbor property. Cant renegociate the price too much due is a property under a reverse mortgage Bank wants to recover his money.

    0Reply
  • Lawrence P. Schnapf
    New York, NY · Member since 2019 · 155 posts · 58 votes
    5y

    is the tank full of oil or water? there is a paste that can be put on the probe which will change color if there is water in the tank. if the tank is full of oil, it probably means it has not leaked....depending on when it was last used. find out when the last oil delivery was and if seller is still using the tank.  

    0Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    5y

    @Jonathan Greene

    When my ex-in laws had theirs removed In Readington Twp, Nj, it was $10k, 15 years ago.

    0Reply
  • Lawrence P. Schnapf
    New York, NY · Member since 2019 · 155 posts · 58 votes
    5y

    depends on the size of the tank, how long it has leaked and the kind of oil (e.g., no. 6 or diesel)

    0Reply
  • Rosa Sugo-Golden
    OP
    Investor · Pewaukee · Member since 2019 · 20 posts · 1 vote
    5y

    The size of the tank imposible to know is burried and I cant dig because it is not my property yet. thank you for the paste idea. Property has 40 years of deferred maintenance so I guess the tank is older than that... 

    0Reply
  • Peter Falk
    Real Estate Broker · Madison, WI · Member since 2015 · 118 posts · 60 votes
    5y

    As mentioned by others, the easy answer is just move on, but if you like the property, and seller isn't willing to do anything regarding it, could see if they'd let you at your expense do what further investigations to be comfortable there is no contamination and cost to remove.  Ideally the seller would agree to lower the price to cover that investigation and expense (not sure if lender would require it be deemed safe and removed).  I've only come across 2 underground oil tanks in Madison, WI sales and both were dug up and removed with no contamination issues.

    0Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    5y

    @Rosa Sugo-Golden Without taking on a serious risk on your part the seller is going to have to rectify this. How? Let them figure it out. They could remove it, no leaks to remediate and you are all set. Or it could be a disaster when they dig it up. Fact is you won't know until it is dug up which should not be something you should bare the burden of IMO. 

    1Reply
  • Michael Jones
    Investor · Louisville, KY · Member since 2017 · 199 posts · 253 votes
    5y

    Yes I have had experience. Run Forest Run. Don't try to out smart this as it could end up in the millions. Just move on.

    0Reply
  • Lawrence P. Schnapf
    New York, NY · Member since 2019 · 155 posts · 58 votes
    5y

    @michael Jones "millions" is a gross exaggeration for a home heating oil tank.

    0Reply
  • Michael Jones
    Investor · Louisville, KY · Member since 2017 · 199 posts · 253 votes
    5y

    @Lawrence P. Schnapf You are basing this on the one tank that she can see. Is this one heating tank that the homeowner buried 60 years ago when they changed heating systems or were they a contractor that was being paid to dispose of oil tanks properly and took short cuts by collecting the money for disposal and burying them in a backyard and there are a total of 34 tanks under the dirt?

    No one will know for sure until the first tank is dug up and ground samples are pulled surrounding the tank and submitted to the epa.

    Sounds like an exaggeration but I am sitting in an office and can look out of a window and see the asphalt cap that has to be reported to the epa every five years due to a contractor burying paint cans in the ground rather than disposing of them the proper way 60 years ago. The cost to clean out and move the contaminated dirt, refill with clean dirt, dig and monitor water wells for contaminate levels and then have those wells closed off after inspection and a lifetime asphalt cap placed and maintained is in the millions. Yes, an exaggerated millions.

    Again, too many risk for a property investor and a buried tank. Run Forest Run!!!

    0Reply
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