Buying or Selling a House with an Underground Oil Tank

Oct 20, 2022

Is there an underground oil tank in the yard? It’s a question nearly every buyer and seller in New York should ask. Even if the oil tank isn’t in use, its presence alone can lead to complications.

Buried oil tanks create unique risks, particularly if they aren’t correctly abandoned or removed. These tanks provided heating oil to properties. While they aren’t commonly utilized today, simply having one on the property can complicate things for buyers, potentially causing sellers to miss out on closing the deal.

If you’re wondering, “Should I buy a house with a buried oil tank?” or “How can I sell a home with an in-ground oil tank?” here’s what you need to know.

couple looking at a house for sale

Buying a House with an Underground Oil Tank

While not all properties in New York have underground oil tanks, a surprising number do. If you’re a buyer that’s found your dream home on the market and it has one, you may be wondering, “Should I buy a house with an underground oil tank?”

While it may seem like a simple question, the answer can be surprisingly complex. Buying a house with an oil tank is risky, even if the tank is properly abandoned. Older tanks can rust or corrode, depending on their material. In time, this can lead to holes and may even cause part of the yard to collapse if it gives way.

Additionally, since oil tanks housed hazardous materials, environmental and health risks come with the territory. In some cases, that can lead to massive cleanup fees and fines, and that burden falls on the property owner at the time the issue is detected.

Other issues relating to the presence of underground oil tanks can also occur. If you’re trying to decide if buying a house with an underground oil tank is a good idea – or if it’s even possible – here’s what you need to know.

Underground Oil Tanks and Mortgages

If you’re looking to buy a property with a residential underground oil tank, it could cause issues if you need a mortgage. Many lenders are wary of funding mortgages if an in-ground tank is present, particularly if it’s older. This is true even if the tank is small enough not to be subject to specific regulations set forth by the Environmental Protection Agency (EPA) or local governments.

In many cases, lenders hesitate to fund these mortgages due to the risks associated with the tank. Leaks can make remediation necessary, which is often costly. Additionally, homeowners may be open to lawsuits from neighbors if the leak impacts nearby properties. In either case, this creates a scenario where a homeowner may default if the resulting costs are too high.

For homeowners using a mortgage to buy a property, discuss whether underground tanks are an issue for the lender. This allows you to determine whether you should consider homes without tanks or need to make removing the tank a clause in a purchase offer to a seller.

Homeowners Insurance with an Underground Oil Tank

The vast majority of homeowners insurance companies will not cover an underground oil tank or any resulting damage or costs relating to tank collapses, removals, remediations, repairs, or decommissioning. Similarly, the policies won’t assist with costs associated with damage to neighboring properties in the case of leaks or collapse. As a result, full liability will remain squarely on the homeowner’s shoulders.

If you’re considering a property with an underground oil tank, you may need to focus on one of the few insurers that will cover them. Otherwise, having the seller handle any buried oil tank removal before closing could be essential to avoid ongoing costs or liability.

Home Inspection and an Underground Oil Tank

inspector checking out underground oil tank

Hiring a professional to conduct a home inspection is a standard part of the property purchase process. If you’re considering a house in an area where underground oil tanks aren’t uncommon, make sure to inform the inspector. They can examine the property for signs of an in-ground tank, such as fill lines or capped pipes.

Getting a separate underground oil tank inspection could be necessary, too, if a tank could be on the premises. These can check for potential leaks or determine if the oil tank was correctly abandoned. Remember that even if the outcome is seemingly positive regarding condition, a buried oil tank inspection can’t predict whether issues will arise in the coming months or years.

Costs of an Underground Oil Tank Leak

Usually, the most significant risk of buying a home with an underground oil tank is dealing with the costs associated with a leak. Even a minor heating oil leak in your garden can come with substantial remediation fees and fines, depending on the nature and extent of the contamination.

Additionally, delaying the repair and remediation isn’t typically an option. Leaking oil is a health and environmental hazard. Along with contaminating the soil, it could allow oil to leech into drinking water sources, so environmental agencies usually require immediate action on the homeowner’s part.

In some cases, a post-leak cleanup may cost as little as $4,000. However, extensive contamination may come with a price tag in excess of $100,000. As a result, it’s best not to move forward with a purchase unless the underground oil tank is removed correctly or abandoned.

Dealing with an Underground Oil Tank

digging up an underground oil tank

Buying a house with an underground oil tank means taking on all responsibility relating to it. You become liable for care, maintenance, and remediation if it leaks and there’s ground contamination. Additionally, certain environmental harm can lead to steep fines, adding to the overall cost.

The in-ground oil tank removal cost can be high. Similarly, moving forward with oil tank abandonment steps may also be costly. As a result, buyers must be aware of the potential expenses related to handling the issue themselves if they move forward with the purchase.

Underground Oil Tank Removal

Underground oil tank removal involves extracting the tank, connecting lines, and other components from the yard. It’s often a lengthy process and includes physically digging into the ground and lifting the tank out.

However, this option is usually considered the best choice for an unused tank. It ensures that future issues or ground contamination won’t be an issue, potentially saving you from remediation costs and steep fines down the road.

The underground oil tank removal cost varies depending on the size of the tank, its physical placement, your location, the tank’s current condition, the time of year, and other factors. As a result, it may run $1,000 to $5,000+.

Oil Tank Abandonment

Oil tank abandonment is a process that decommissions the tank without physically removing it. Typically, it involves cleaning the tank and clearing it of vapors. Then, an inert material – like foam, concrete, or sand – is placed inside the tank to provide structural integrity.

As with oil tank removal, the cost of oil tank abandonment does vary. However, it typically costs less than the alternative, but it could leave you vulnerable to future issues, which can come with sizeable price tags.

Negotiating with the Seller After Discovering an In-Ground Oil Tank

If you’d like to purchase a home with an in-ground oil tank, it does create opportunities to negotiate with the seller, particularly if it isn’t decommissioned. Some homebuyers will alter their offer to account for the oil tank abandonment or underground fuel tank removal cost, allowing them to set enough money aside to address the issue once the purchase is complete.

Other buyers may request that the seller handle the underground oil tank before closing. This isn’t unlike requesting other repairs based on issues identified during inspections. Additionally, it may be the only viable option for homebuyers planning to use a mortgage company that won’t fund the loan unless specific steps are taken regarding the tank.

Selling a Home with an Underground Oil Tank

selling your home with an underground oil tank

Having an oil tank buried in the yard can make your property harder to sell. Additionally, many prospective buyers would aim to pass the buried oil tank removal cost (or abandonment cost) on to the seller, either by making a lower offer or requiring the tank be addressed before closing.

If you have an in-ground oil tank, it’s usually best to take steps before listing your home. Begin by purchasing underground oil tank insurance, giving you some protection before you move forward if a leak is discovered along the way.

After that, you can explore your area’s abandonment or removal requirements. Often, removal will make your property more attractive to buyers, so it’s wise to consider that option first. Contact licensed and insured contractors in your area for quotes, allowing you to compare services and prices to find the right solution. Once you find a suitable contractor, you can ensure any required steps – such as soil testing and tank inspections – take place before work begins.

If handling the tank issue before the sale isn’t an option, you’ll need to accept that you may not get top dollar for the property. Additionally, you might need to limit your potential buyer pool to those who can make cash offers, as many lenders won’t fund mortgages if an oil tank is present and not properly abandoned.

Find the Right Realtor® When Buying or Selling a House with an Underground Oil Tank

Whether you’re searching for your dream home or want to sell, working with a Realtor® who’s familiar with oil tanks and local laws governing them makes a difference. At Global Property Systems, our team understands the nuances of the local market, including managing properties with oil tanks. Contact us to see how we can streamline your home purchase or sale today.



Get in touch for a confidential conversation with  “no strings” attached.

Translate »

Subscribe to the Global Property Systems Blog

Receive a new post by email every time it's published!

Complete the form below: