This is a topic that causes a significant amount of unnecessary panic with many home buyers, especially first time buyers. There are several myths out there, including that the seller is legally required to remove their underground oil tank. There are also friends and family members who have scared potential buyers by saying that leaking tanks could cost $100,000 to remediate. If you’re moving out of the city, it may be difficult to avoid houses heated by oil. Unfortunately, many of these homes will have a buried oil tank. While it is preferred that the tank be above ground, it is important to know exactly how to structure your purchase when it is buried. I wouldn’t advise giving up on what can be your perfect family home because of an underground oil tank.
First of all, sellers ARE NOT required to remove a buried oil tank, even if it has failed inspection. I’ve sold several houses that have failed the tank test. The seller is usually responsible for remediation. However, in my few cases, the sellers didn’t have the ability to cover the cost. When a tank fails, the tester is required to report his findings to the NYSDEC. It is important to note that in most cases the tank fails due to air escaping from the pipe joints. Obviously, this is not as significant as a failure caused by oil leaking from the tank. Contaminated soil is what can get rather expensive. The tester is able to specify the type of failure through his testing procedure. They start by creating an air tight vacuum in the tank. The tester then uses sophisticated audio equipment and a pressure gauge to monitor for leaks. If the tank leaks, he can usually determine if oil or air is leaking out.
Here is the proper procedure when purchasing a house with a buried tank. The first step is to test the tank. Assuming it passes, my purchase offer specifies that the owner will buy tank insurance and then transfer the insurance to my buyers at closing. Of course, the buyer will reimburse the seller on the remainder of the policy. ProGuard is the only company I’m aware of that offers the insurance. If the tank then becomes an issue after you purchase the house, you are covered. This is how you can buy a house risk free, in regards to the oil tank. However, if the tank fails, there are a few more steps. As I mentioned earlier, in most cases the seller corrects the issue by removing the tank and placing one above ground. If the seller doesn’t have the money to do so, you can still move forward. There is some risk in this scenario, but you can limit it. I would recommend doing a soil sample around the tank to check for contamination. Using those results, combined with the tester’s findings, you may determine that there is little risk. The cost of removing the tank, without contamination, and replacing it is approximately $4,000. I would recommend asking for a credit in that area. On the other hand, if there is some contamination and the sellers are not working with you at all, I would recommend finding another home. Luckily, it has been my experience that if handled correctly, a buried oil tank is not a deal breaker. It would be a shame to miss out on your perfect home because the professionals you are dealing with don’t know what they are doing.