Buying or Selling a Home With an Underground Oil Tank

Buying or selling a home with an underground oil tank

So you find a house you want to live in, but it has an underground oil tank and the seller is adamant about removing it because they heard of the horror stories and have this fear. Now it’s your time to play on that same fear to get your price.

Most buyers walk away from the house with an underground oil tank since they are afraid of the liability. Underground oil tanks are hidden hazards that could end up costing a homeowner big-time.

How Do I Know if The Underground Oil Tank Is Leaking?

You can have the soil tested around the tank to see if there is an issue or not. If there is some oil in the soil – you might look at this as a negotiation tool to get your price point or walk away.

Should You Remove an Underground Oil Tank?

When and if you purchase the house, and not before you own it and get your lower price, have the underground tank removed (should cost about $1500) and have an above-ground tank installed (about $1000). Now you have a house at a lower price and a new oil tank. It gets better, if the tank is deemed to have leaked, guess what, you can apply to the state for a reimbursement of your cost (contact us for details). Conditions apply like income level less than $250,000 taxable and net worth $500,000. You can convert to a natural gas system or keep oil. Oil allows you to select your supplier and purchase when the price is low, gas does not. Both have their advantages and disadvantages.

Some Underground Tanks May Not Need to Be Removed Right Away!

Another option is to have the tank insured by ProGuard and after a year, remove the tank. ProGuard has such a program as long as the tank is not leaking.

This same program has been effective in negotiations with a bank-owned property if you are going to use the house as your primary residence.

Most Often Asked Questions By Realtors About Underground Tanks

We have compiled questions from both realtors as well as buyers and sellers alike, they all have very similar questions – we have put together some of the more commonly asked questions which may be helpful to you.

I understand that you cannot sell a home in NJ with an underground oil tank, is that true?

There is currently no regulation prohibiting anyone from selling or buying a home with an underground oil tank in NJ. The fact of the matter is homes with underground oil tanks are less likely to sell as quickly as those with above-ground tanks or gas. Your time is your money – are you going to show a home with an underground tank or gas! The other thing is that when the attorney does his review, he tends to talk about an unknown liability with the underground tank.

My client wants to buy a house with an underground tank. What do you think?

You are buying an unknown liability – also everything you are going through now to buy that house, you will revisit when you are ready to sell – if the regulations remain the same. Insurance is higher, mortgage may be more difficult to acquire.

I have a client who had the underground tank foam-filled some time ago. They have the permit, the inspection ticket, and the C.A. from the town. The buyer is asking them to remove the tank if they want to sell it to them. What should we do?

While it is within the regulations to abandon an underground tank in place, it is also undesirable to purchase a house with that tank in the ground. The real solution would be to remove the tank – short of that soil sampling below and around the tank would yield some important information. Once again, remember what you are going through now will come around again when the house is ready for sale.

I have a client who has an underground tank, and needs to sell but cannot afford the removal cost – is there some program available? And what if the tank is a leaker?

Depending on the situation, we have done the work for both non-leaking and leaking tanks and had our invoice paid at closing on the HUD. We can apply to the leaking tank fund for reimbursement for a leaker. The process is out five years at the present time, but they will pay.

My client has no money and must sell the house, they need the underground oil tank removed — Can my client pay for your services at closing?

We have made arrangements like that depending on the circumstances. We want to be on the HUD statement, BUT what happens if the house does not close?

What is going on with the NJDEP funds for leaking tanks?

The last election had a vote to fund open space and take some of the money for the underground tank fund for open space – the vote was for open space and it then caused the underground tank fund to lose some funding, therefore there is not as much money available.

What can we do if the seller refuses to remove the underground tank and my clients are really interested in the house?

You can suggest that you share the cost of the tank removal ($1400) or pay for it yourself – another option would be to sample around the tank to find any impacted soil – sampling is about 90% accurate, but it may be the best alternative. Also if the seller is refusing to remove the tank, there must be a reason!!

What percentage of the tanks you remove are leakers?

It has been our experience after removing hundreds of underground tanks that about 20% of all the tanks we remove are leakers. – of that 20 percent number less than 2% have been really expensive projects like over $100k

How much does a leaking tank cost to cure?

The average leaking tank cost about $6500 with no groundwater impact – With groundwater impacted, the cost gets around $22,000 assuming that the impact did not advance below the footprint of the house.

My client has ProGuard and they want to transfer the warranty with the house – is that a good idea?

Yes, if they are staying with oil heat – if they are planning to switch to gas you should look at the ProGuard charges so you understand. There is a $500 service fee to remove the tank and a $2500 deductible fee. Also, you must use oil for 12 more months after the underground tank is removed.

What is the process to get a No Further Action Letter?

When a tank has leaked it must be called into the NJDEP Hotline – Now, the DEP wants to know that there is nothing remaining in the soil and or water above the state criteria (state criteria is published) – So samples are collected and analyzed at a certified laboratory – The result is compiled into a report and that is sent to NJDEP asking for the No Further Action Letter – This entire process starting from tank removal to getting the No Further Action Letter will require about 2-3 months

The buyer’s lawyer wants to have an electronic scan of the property to look for any underground tanks – Is that something you can do?

Yes, we like to go inside the house if possible to see the basement first, then we electronically scan the exterior of the house with a specialized metal detector. We then provide a written report of findings.

My client needs the tank tested – is that something you can do and what is the difference between a pressure test and soil sampling?

We do soil sampling – soil sampling looks at the soil below the tank sides, the soil is collected and then delivered to an NJDEP certified laboratory for analysis – we then provide a written report of findings ——- -since the Vacuum testing is normally done when the tanks are going to be left in service, this is not the most advisable method to determine the impact to the soil and is generally used at gasoline stations.

We can take either side of the tank removal argument:

Buyer: My lawyer tells me don’t buy a house with an underground tank

Seller: We did everything correctly – we got a licensed contractor, the tank is decommissioned in place, got the permit had the inspection, and have the C.A – we are done!

Buyer: We’ll pay for the cost of the tank removal – we just don’t want to buy an unknown liability – we want to remove the tank before we purchase – the current owner has been in the house for a while they may have some third party insurance which we cannot access once we own the house.

Seller: Remove it when you own the house – if it leaks apply to the fund — you’ll get your money back in 5 years.

Seller: I have Proguard warranty on the tank and its transferable use that

Buyer: Not interested in ProGuard warranty – cost $500 service and $2500 deductible if it leaked – who pays that expense. We are just purchasing the house and do not really need any extra expenses.

Are You Having an Issue Convincing Your Clients to Remove the Underground Tank?

You know that trying to sell a property with an underground tank is difficult at best and consumes quite a bit of your time – SO your best move is to just get the tank out sooner than later.

Do You or Your Clients Have More Questions About Underground Tanks?

You can call us and we will give you all the information you need to make a completely informed decision. You and your client will be speaking to an NJDEP licensed person knowledgeable and experienced in underground oil tank work. Certified Environmental is available to discuss your needs so please contact us online or call us at 732 534 4892.

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Jason Elliott

Jason is an environmental scientist with 11+ years of experience working on environmental projects in New Jersey.