Regulations Governing Underground Home Heating Oil Tanks

[frank1492]

A friend is trying to sell her house. The house has an old steel tank (15 years) that is not leaking. Prospective buyers that come to the house say they were told a bank won't approve a mortgage and/or they can't get homeowners' insurance with the underground tank. This is in RI. The person is considering removing the tank and replacing it with an above ground tank, but this will require rerouting of the line, tearing up the driveway etc. I say the issue is not the underground tank per se but the fact that it is so old and that she should replace it with an underground fiberglass tank. She could then show the buyer, the bank and the insurance co the bill of sale and the warrranty. In your experience have you ever heard of mortgage/insurance co problems if it can be proven that the underground tank is new and non-corrosive? Thank you. Frank

[krw]

Yes. Underground tanks are *huge* liability issues. Several hundred gallons of fuel oil in the ground can easily cost six figures to clean up. AFAIK, most won't underwrite even new underground tanks.

[Evan]

Sounds like its time to dig the tank up and convert to natural gas...

Underground tanks are a huge liability because they often never get inspected when used in homes and can have been leaking for many many years when the homeowner finally starts to realize that they are running through the oil in the tank faster than they used to...

~~ Evan

[trader4]

An even better source would be to simply ask the buyers to put the seller in contact with the actual insurance company and mortgage company and ask them for their position. There is no question that having been burned, many of these companies have tough reqts regarding underground oil tanks. Even if the tank is fiberglass, that doesn't guarantee that an underground fitting won't leak. Or the lines between the tank and furnace. What one company will be OK with can be different than another company.

Alternatively, call up some insurance companies and ask their position. If you find one that says they will inure a new fiberglass tank, you may have half the problem solved. On the other hand, you have to also assess whether in this market, it's not better to just bite the bullet and put in an above ground tank or if possible, convert to gas. How much difference in cost can it be to put in an above ground tank versus a buried one? I'd think the above would actually be less expensive.

[salty]

Underground tanks are not an automatic problem. Every gas station in the US has one or more of them.

"someone told me" is not enough to go on.

[dpb]

I'd say that 15 years is not particularly old, first off...

Since probably half or more of RI residential heat is oil, it's hard to imagine there are not thousands of insured underground tanks and will be for years to come.

I'd suggest first contacting the local entity in charge of building occupancy permitting and residential real estate transfer regulations for the jurisdiction and see what actual requirements are, followed by contacting State offices if there are still uncertainties.

As someone else says, actually talking w/ the insurance underwriter (the house currently is insured, surely?) as well as a few brokers/underwriters/lenders should determine the lay of the land locally.

Remember, in most places a real estate broker even if hired by you to "list" the house may _NOT_ be actually on your side in the transaction but working for the potential buyers. The actual requirements in RI will be spelled out in the contractual legalese; be sure to first ask and then double-check what the actual requirements on the representative the friend has are. Although many look at it as unnecessary expense, I would advise legal representation to cover the bases as mandatory for any transaction of such size, particularly when there's any chance of some later claim for damages/remediation possible.

After the information-gathering, then it's a choice of whether to hold out for what is probably (if I had to guess) the stand that if the tank is inspected and shown in good shape there's no legal basis for requiring anything else/more and buyer can either accept or find another house to buy or abject capitulation to "whatever the buyer wants, buyer gets".

Then, of course, there's always the counter-offer of "split the difference witcha', ok?"

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[hallerb]

lacing it with

Underground tanks are a HUGE ISSUE. Insurance is risk adverse. espically when dealing with a possible risk that can cost 100,000s of dollars

if a tank leaks it can contaminate the aquifier and ruin water wells for miles.

just like knob and tube wiring, insurance as gotten really picky

most insurance companies dont hassle existing owners with existing policies, they are often grandfathered in.

but ownership change makes new owner get new insurance, thats either very expensive or completely unaffordable or often not available at all

[krw]

Gas station tanks are inspected on a regular basis. They were all replaced over the last couple of decades and are monitored more or less continuously. That's something the insurance and mortgage companies aren't going to like counting on the homeowner to do.

No, but if it's the prospective buyer of your home, in this market it is good enough.

[krw]

It's old enough that it may not be a double-wall fiberglass tank.

Yes, now try to get new insurance on those tanks. They'll all likely be replace (with above ground tanks) the next time the property is sold.

That's one place to go, but the final arbiters are the loan and insurance underwriters. It really doesn't matter what's "legal" if you can't get a loan or insurance.

Huh? The agent hired to *list* the house is always working for the seller. Who would be dumb enough to sign a contract otherwise? The agent the buyer uses is often/usually (almost always) working for the seller, as well, but that's a separate issue.

You're not legally required to sell. If the buyer *can't* buy the property, you're out of luck.

Not going to work if the bank or insurance company require it. It'll have to be done before the sale.

[Ed Pawlowski]

wrote

People are starting to have insurance problems even with indoor tanks more that 15 years or so old. No way I'd touch a house with an underground tank these days, not worth the risk.

[Ed Pawlowski]

wrote

Most every one of those metal tanks had been dug up and replace too, leaking or not

[hallerb]

above ground outdoor tanks in areas that freeze can have issues with frozen lines

[krw]

I believe they *all* have, by now. This is one of the reasons the "ma and pop" gas stations went the way of the buggy whip. Retanking stations cost well into the six figures.

[krw]

Generally they use kerosene or a kero mix for outdoor tanks where freezing is a problem. They'll often change the mix during the season, too, which can cause problems if you don't use as much as the delivery company expects.

[George]

Major difference. Gas station tank installations have specific requirements about allowable time in service and leak detection equipment.

[dpb]

[e-mail] wrote: ...

...

That depends on state and agency...they _can_ be a sellers' agent, buyers' agent or dual, depending. Depends on State what is allowed...

Who's paying the commission to the listing agent? Generally, the buyer...

As for who signs such contracts, those who merely assume the agent is a sellers' agent and don't carefully read the fine print or ask questions...

"Most states in the US require real estate agents to disclose who they work for, buyer or sellers or both. Some disclosures can be verbal and others must be in writing. ..."

They don't have RI listed and I didn't do any further searching for RI-specific law.

But, as in so many things, "it all depends"...

...

The offer/counter-offer period precedes the sale; it's the basis for the final contract. The point of the preceding is to find out what really is an issue and what is simply being "made up" for the convenience/benefit of the buyer to get them to make the investment.

I'm not saying one way or the other about what is/isn't the actual situation in RI; only that I'd not as seller simply take the word of prospective buyers who are looking to make the best deal for themselves they can.

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[Ed Pawlowski]

Many use kero for that reason. At work, we have a 2000 gallon tank and use an additive for the oil, but in really cold weather it can still be a problem at times. Probably similar to what goes in diesel

[clare]

I work part time for an insurance company and there is not a carrier left in the market that will cover an underground fuel tank on new business. NOT ONE. This is in Ontario Canada. Some places are even requiring (not the insurance co, but the county) either double walled vacuum monitored tanks or spill containers that will contain a full tank contents in case of a leak for ABOVE ground tanks.

[clare]

Up here there is a listing fee and a buying fee. If the same agent lists and sells, they get the whole fee. If one agent lists and another sells, the fee is split (I don't think it's 50/50 either - seems the listing agent gets the bigger chunk)

[JIMMIE]

As far as insurance goes it is difficult to get Homeowners insurance or unusually expensive. The insurance company just wont cover damaged caused by it. In the last few years there have been a lot of houses flipped that had them. Pretty much universally they got dug up mostly to be replaced with NG Jimmie