Property under contract- Oil Tank found during inspection

[Account Closed]

Hi Everyone, 

I have a property under contract in the south side suburbs of Chicago. The inspector found an oil tank and he told me this could be a serious issue. We couldn't look at the tank because it was underground and there was not enough space to go under. 

Has anyone been in this situation before? What are the potential costs/downsides? How should I handle this problem? 

[Travis Lloyd]

We purchased 3 properties with inground oil tanks last year, and pulled all of them. The actual removal is inexpensive (about 1500-2000, plus the cost of a new tank if there isn't already a new one). Depending on the area, the city/county health inspector may actually choose to be there for the removal (not fun), but in our cases there was no leakage. The issue really is the remediation. I've heard of soil remediations for single family houses exceeding 100k. We actually tried to purchase a bank owned property last fall where there was an oil tank, and the bank became aware of it through another buyer's inspection - just like you, but the buyer walked and the bank chose to remove the tank. Well it leaked, and it had been leaking for a long time. I happened to know the asset manager, so he was more forthcoming with me than he would be otherwise: the bank went through three rounds of remediation, spending a total of $87,000 to remediate the soil.

There was a company in CT that removed oil tanks for a flat fee of $18,000 and that included an "insurance policy" that if it leaked, they would remediate at no additional cost. Now if it did not leak, you just paid them $18,000 for an otherwise $1,500-2,000 job, but perhaps someone near you offers such a service.

I would notify the bank - IN WRITING. Once they know, they will happily concede to a few thousand off the previously agreed upon price. You could also try to get them to remove it - but I've never seen that work. Alternatively, perhaps its best to notify them and withdraw your offer. One of two things will happen, because they will now have to disclose the presence of the tank to all future bidders. Either someone like me will come along who doesn't mind the tank, or the house will sit on the market for a while. Then the bank may decide to try to pull the tank themselves and then put it back on the market.

Anyone who tries to tell you that they can test and determine if the tank is leaking with CERTAINTY before pulling it out is lying. I have an amazing guy whom I trust very well, and he is very good at giving me a "more than likely" yes or no, but even he can never say with certainty. You will never know until you see the soil right below the tank. Good luck! Keep us posted on what you do!