Oil Tank Troubles on an REO

[Hannah Krebs]

I'm currently in negotiations on a house that has an oil tank buried beneath the screen porch. It's an REO and the bank has had previous deals fall through due to this seemingly minor issue.

The bank initially offered the escrow the cost of the tank abandonment, but asked us to switch to a rehab-type loan. We obliged but still asked them to escrow the oil tank cost. They then asked why we would expect them to escrow the cost. It seems they no longer want to escrow any repairs.

In order to keep things moving we have decided to lower our offer to reflect the cost of the tank repair. My choices are to have the tank abandoned in place and hope that this does not negatively affect resale. On the flip side, I could tear down the screen porch, which was a poorly-done addition anyway and have the tank removed.

The cost of the abandonment is $2500 + soil testing which may be up to $4,000 out of pocket costs for a state-mandated site test. This option does not require me to tear down the screen porch.

The cost of removal is the cost of demoing the screen porch + $1500 + $4,000 if the soil is contaminated. The downside of this option is that I lose some square footage and sitting space that I could make functional.

Has anyone dealt with selling a home that has had an abandoned oil tank? If you were in my situation, would you opt for removing the oil tank or abandoning it? Should I ask the bank for an extra amount (maybe 1.5x my estimated repair costs) to cover for incidentals? 

Thank you so much for your advice in advance.