i have a home under contract and just had a soil test done for an underground oil tank. it turns out the oil tank is leaking. i was informed the average cost is $10-$15k to clean up, but if it came in contact with ground water it could easily be $100k.
there is a foreclosure sale date set less than a month from now. my plan was to have the homeowner fill out the grants to have this remediated. since this can take up to 4-6months it doesn’t give us enough time before the bank forecloses.
i was thinking about contacting the lender’s attorney and informing them that i am purchasing the property, however there is a leaking oil tank in which the borrower is taking care of in hopes they would postpone the sheriff sale. i don’t want to open a can of worms for the homeowner and put them in a bad position. is this a smart move or will i be putting the homeowner in a worse position than they already are?
also, what are some possible solutions that i should consider?
if it’s an underground oil tank - residential - you could have just filled the tank with a DEC certified company and that’s the end of it. ANY OIL found in the ground - ANY - that means if there was ever any kind of spill at anytime by the guy who fills the thing up…boom - you’ve got “leakage”.
there is absolutely no need to TEST soil…actually - you really screwed the owner. they MUST deal with this issue. and by owner i mean - the person occupying it right now (because they’re going to be foreclosed on) and the bank(s) that must take back possession of the property.
forget it, this goose is cooked 100%.
you’re paying 115k - and it’s “worth 220”…let me ask you a question - why doesn’t the owner just sell it for $220k (well not now because he has a “leaky” oil tank)?
this always perplexes me.
either way - say he/she owes 115k to the bank - and you’re covering that to help them get out of foreclosure…what’s keeping them from selling it for $200k?
if it’s “worth 220k” - why sell it to you for 115k? are the owners that stupid?
OR - is 220k the project value after you or someone else rehabs it?
I appreciate your feedback. I’ll address each one of your comments below.
How is filling the tank going to remove liability? What if the tank was leaking for many years and has indeed contaminated the soil and hit ground water. If this is traced back to the the tank on the property, it could mean serious liability in the future. Also it seems hard to believe that a company would fill the tank before testing for any contamination. I’ve brought this issue up with many investors (even a popular guru who is nationally known and has courses on REIclub.com) and two attorney’s. I have yet to hear a solution similar to yours.
Your questions seem logical, however i must ask…do you deal with homeowners facing foreclosure? I’ve seen many circumstances where one would say: “why didn’t they just sell their home instead of letting it go to foreclosure?”. I’ve seen a home get sold at the sale for $22k where the land alone was worth $200-$250k. Only one investor bid and nobody bid against him. The truth is, many homeowners facing foreclosure “freeze” and do nothing. I see this all the time. The problem is they are so bombarded and overwhelmed that they do nothing.
I’ll also add that a rather successful investor once told me that it’s not about the money but about the solution you provide to the homeowner. I belive this whole heartedly.
If I didn’t find this homeowner (they abandoned the propety), it would have went to sale. Would they have received more money at the sale? Maybe. But then again, perhaps nobody would bid, or like before, only one investor would bid and the homeowner would have received nothing.
I met with the homeowner and explained I was looking to purchase the home and that if the price I came to them didn’t work, no problem, we shake hands and part friends. My offer was to pocket the homeowner about $20k so it would help with medical bills. I also was going to bring furniture and personal belongings to them in a truck/van. My offer was based on my formula and a comfort level of taking on the properties problems. There as mold downstairs, the pipes may have frozen and broke over the winter, the foundation has issues that need to be address, new siding, new windows, roof etc.
I mentioned to the homeowner what I could offer and it was accepted. Upon first meeting, they did mention they should have sold it when they could have gotten around $300k. Fact is, the homeowner didn’t want to deal with it anymore, and just never came back. With a foreclosure sale date a few days away, and issues with the home, they wouldn’t be able to sell it in time. I simply made an offer that worked for me, and the homeowner was happy that he could get some money from the sale.
Moving forward, you can see by my post that I had nothing but good intentions for the homeowner. I do not want to put them in a bad situation and even said I would walk away from the deal if it would prevent them from any litigation. The feedback I’ve received from the attorney’s and investors was that the best route is to try and get the bank to postpone the foreclosure sale until we remedy the situation (the homeowner is onboard to apply for grants provided by the state). I was concerned it could put the homeowner in a bad situation and it consensus was that it not.
I’m looking into this path now and am taking precaution not to provide more hardship the homeowner.
I hope this clarifies the situation, and if there was a better way I’m all ears.
You find what you are looking for. If you are looking for a project with a large environmental remediation problem you will find it. If you are looking for a deal that can make you money (preferably with little to no work on your part) you will find it. If you don’t look for a plum deal, then you won’t find a plum deal.
I say don’t settle, hold out for the deal you actually want.
Surely there must be something else available to buy that won’t be so much trouble.
I would not have bought without testing the tank, because YOUR buyer is very likely to ask to have the tank tested-- then you are the one who gets stuck with the clean-up.
The oil contamination might get the bank to greatly reduce the price. They don’t want to get stuck with the clean-up, either. However, in my area, environmental clen-up can be ghastly expensive, so I’d walk away.
i’m not quite sure why you would walk away if the bank would postpone the sale and the homeowner obtains grants from the state to have the cleanup funded. in this scenario the purchase is delayed 6-8 months. for a good deal, i’m ok with waiting that period of time.