Operational Underground Oil Tank (Do I replace it after purchase)

3 Replies

Hi Everyone,

I'm currently in negotiations on a triplex in Monmouth County, NJ that has an operational underground oil tank. 

I have a contingency in place for the soil test to ensure there is no contamination, but as it's fully operational does it make sense to immediately remove the tank and install an alternative heating source? 

My gut says yes to avoid playing Russian roulette with this, but if anyone does have on operational underground tank on a property I would be interesting in hearing what your rational was for keeping it.

If I do remove the oil tank I have a few questions I was hoping the community could help me address:

1. What would I do with the existing oil in the tank. (Can I resell this?)

2. What is the best heating system to replace the oil based furnace. (Based on what I see it looks like gas is the way to go since it can use the existing radiators)

3. Are tank removal companies heavily insured? I want to make sure if I hire someone to remove this tank and they botch the job that I'm not stuck paying for remediation. If had good experiences with a specific NJ company please let me know the company name.

4. Are sellers typically open to removal of an operational tank prior to closing if I front the costs?

Hey @Richard Parseghian

We remove all tanks (mostly post closing) in order to resell. If you are flipping or selling down the line you will need to do this for a conventional or FHA buyer. We also do sweeps and soil tests on all our properties prior to closing. We once did a soil test that came back clean, then got hit with a contamination invoice once the company removed the tank. I won't put the company's name on here but reach out to me regarding this company so you stay clear of them and their shady actions.

If you plan on keeping it as a rental, you do not have to remove it and can operate the property with oil if you choose to.

1. The oil tank removal company usually drains it but charges you OR you can have oil drained prior to removing the tank and sell the oil.

2. Yup, you can do an oil to gas conversion. If leaving radiators, would cost you about $5-7K (roughly $1.5-2K to remove tank, $4-5K for furnace / conversion). If you were adding forced air and all new duct work would be upwards of $12K.

3. It's tough to get anyone to 100% guarantee there will be no contamination when removing but we have a good tank guy who's honest and fair. He removed about 8 oil tanks for us and we haven't run into any issue. 

4. If you're buying "As-is" / from a distressed seller, not likely. If you're getting a loan with a bank, your lender will most likely require the seller to remove it prior to closing.

Hope this helps!

Feel free to shoot me a PM directly with any questions.


I live in Monmouth County and bought my former primary home in 2011 (sold in 2019). At the time I was under contract, the seller told me and my agent the original oil tank had been removed when the house was converted to gas about 10 years prior. It turned out it had been 'removed in place', i.e., opened, cleaned and filled with sand, then reburied. My insurance company would not cover the house unless it was dug back up and removed. It was a long negotiation with the seller and many issues with the company that did the removal and took me at least an extra month to close. I was lucky and the tank had not deteriorated too badly (no holes developed that would have caused suspicion of a leak even if there were no holes years prior when it was retired) and after it was removed they took away the soil and brought in new soil. I believe I got a several hundred dollar credit for the scrap metal. Around the same time, a former coworker who lives elsewhere in NJ had an oil tank problem at her house. They were up to about $100k in insurance costs and a year of living with space heaters when I last talked with her about it. Also, my uncle had a year long battle over his tank removal (also Monmouth). After these experiences, an underground oil tank is an absolute deal-breaker for me. I have a rental with an oil tank in the basement, and even that is a pain in my rear. It's gone empty a couple times, which requires a professional restart. A new oil delivery had something in it that caused the system to trip several times during my tenant's winter break (college rental). Unfortunately that house is on a dead end that will never have gas service. After my experience with the rental, I'd be hard-pressed to even buy a house with any oil heat whatsoever. Good luck with your decision.

Check with your Insurance Agent. We represent many companies an the standard question is "are there any in ground tanks" There are a few companies that will write a property with in ground tank in place but most will exclude the Liability for it. Those that do cover that will want to know the age and construction (they will be looking for newer tanks with fiberglass construction probably).

If you are worried about the coverage of a potential removal contractor just ask them to send you a "Certificate of Insurance" which is a snapshot of their limits on their policies that day.