Oil tank removal: Anyone NOT get an NFA Letter? archived

I think there have been some changes to the process in the last couple of years (intended to speed it up), but the way these 'in progress' remediation situations are typical handled is with some (substantial) amount held back from the seller (in escrow) until the NFA letter is in the buyer's hands. Your attorney will typically also have the seller retain all liability associated with the leak until the letter is produced.

We closed on our current place in late 2006. The NFA letter took another year. The escrow was something north of $50k.

It is likely that your NFA letter will not be received before closing.

Mergele is correct. In most cases if the clean up is completed, and the test results are clean, the closing can proceed with money held in escrow until the NFA letter is received. Your real estate attorney should be able to guide you on this.

I fyou love the home you should continue with the purchase with whatever contingencies your lawyer recommends. The sellers will agree to whatever assurances you require.

Thanks for the responses. Woot, you don't know these sellers. They have difficulty agreeing to anything. Our attorney review process took weeks! There are many things we love about the house, but the sellers' resistance to an escrow account (they claim to be broke) makes me fear we'll have to walk away.

Speak to your attorney. You would not be able to close without funds in escrow, and I believe your down payment is held in escrow anyway, so they have those funds. (Again, I may be wrong on my details but my sister just went though a similar purchase).

housewo lucky for you that if you end up pulling out there are lots of other beautiful homes for sale around here, many whose tanks were previously pulled and whose owners are not broke!

We are in CONSTANT contact with our attorney. These poor folks are selling for $100K less than they paid. I don't know how these things work, but I imagine our down payment will go straight to the bank.

Mcgoey, we have definitely seen lots of beautiful homes in the area! This particular house is in a neighborhood we never thought we could afford. It's a "worst house in the best neighborhood" scenario. Makes it hard to fall in love with anything else.

housewo we only wish we could find anyone to fall in love with our house and work so hard to buy it. (our house is on the market) They should do whatever they can to keep you around.

Mcgoey, I'm sure you'll find someone to buy your home long before we're through sorting things out with these sellers. Good luck to you!

Posted By: housewoMcgoey, I'm sure you'll find someone to buy your home long before we're through sorting things out with these sellers. Good luck to you!

I think that you would have every right to back out. I am sorry for your difficulties. You may need to find better sellers.

Are you sure that you can even get a mortgage without the NFA letter? I pulled my tank in February, soil tests, remediation, etc. were done by mid-April and I had by letter in June.

I spoke to 4 different realtors when I was putting my house on the market & each told me not to think about putting my house on the market before I pulled the tank, remediated the soil and got the report from the remediation company. They were all pretty clear that I would have to put $$$ in escrow until the letter came.

I would not risk closing without the NFA escrow. If they are confident that the soil is truly remediated and that a letter is forthcoming, they should not have any qualms about doing this. They will get every penny back. If, OTOH, they aren't sure, then you do not want to get stuck with that bill.

The remediation company needs to dig until soil is all clear in multiple directions and ensure that it has not hit ground water, neighbor's property, etc. Also, if there was any land/hardscaping disturbed, you want that fixed.

Good luck!

Thanks for the info and advice. I'm not sure why/how the sellers put their house on the market with the oil tank still in the ground. I think our mortgage is contingent upon receiving the NFA letter, but there's a chance they'd accept the remediation report and NFA letter application.

I think the escrow account is the way to go, but I fear they'd fight any claim we made upon the money. Does anyone know of a case where the escrow money had to be used? Not just an oil tank case (which I'd love to hear about), but any case at all. Our attorney says the sellers would have to "approve" the use of the escrow money, that they could fight it and we could end up in a court battle.

I'd also love to hear about anyone's experience of pulling the tank, going through remediation, applying for NFA letter, and then not automatically getting it. Perhaps the state performed their own tests? Perhaps further remediation was required?

Thanks again, everyone!

Our next door neighbors voluntarily/proactively pulled an oil tank that turned out to be leaking and had spread onto our property. The clean up process has been going on for either two or three years (so long that I can't remember exactly!) We just found out recent testing indicated the levels are still not acceptable, further remediation will be required, the testing wells cannot be removed yet, and the landscaping cannot be restored ....

We have other neighbors down the street who also had testing wells from an oil tank cleanup in their yard for years.

So, I would not count on getting that NFA letter before your closing ...

Housewo - do you know if the sellers have tank insurance? If so, they really don't have anything to get twisted about. Unless there is major, wide-spread contamination, all costs outside the deductible and new tank are covered. They can apply to the NJ unregulated tank fund for reimbursement of those costs and any associated with restoring landscaping, etc.

If you go the escrow route, make sure that you put specific terms about how long and under what conditions funds are released. While the owners don't have to agree, they will need a reasonable basis not to release funds. Hopefully, they have a semi-competent lawyer who can guide them through it. You can't just get the escrow money for a random reason, there have to be specific terms related to the issue. For example, x dollars to be used for additional clean-up, disposal, etc. (spell it out!) if the reports do not come back completely clear. All remaining funds not used for additional clean-up are to be released to seller on receipt of NFA letter.

They are in as much of a bind as are you; they can't accept other offers while you are still tied up and the contract has not been cancelled. I'm thinking, tho, that if they refuse reasonable steps to continue the sale (i.e., refusing escrow), then you can pull out.

The main reason that I would insist on waiting for the NFA is what others have cited: if you release the hold and further contamination is found, it becomes your expense and problem. As far as I know, any insurance the seller has is likely not transferable.

They do have tank insurance, which is why they agreed to pull the tank for us. The remediation company says clean up will done by the end of the month. Test results and the report for the NFA letter application will be ready the following month. So we're set to close shortly after the NFA letter application goes in. There's no chance we'll receive the letter before our original closing date. So the question becomes, do we close without the letter? There's no way we'd close with the remediation ongoing. It would be after receiving the final report and test results from the remediation company. That's why I'm anxious to know if anyone has received that final report, submitted it to the state, and then NOT received the NFA letter.

I know of one case where the seller agreed to a $50K escrow at the time of closing - their tank had been removed, no major issues, and then the tank guy took months to do the paper work and submit the report to the state. The catch was that the escrow was good for 90 days after the closing date. NFA letter wasn't received until the 88th day! All told, from the tank being yanked and the NFA letter received, it was 10 months.

From what I gather, after 90 days the buyer can use that money to do work on their own. Can that money be used for other than issues related to oil tanks? Is it a sort of a give-back to the buyers? I think, however, that reasonable people should recognize the ridiculous backlog of submissions and the over-burdened or overwhelmed contractors dealing with bureaucratic messes .

The NJ DEP now certifies contractors for remediation. So once the contractor gives the all-clear and applies for the NFA, you have a high chance of success of getting the NFA. My remediation took place on one day, Jan 21. I received the report from the contractor Feb 10. After I got my notarized signature and sent in the check to the contractor, along with some corrections to the report, the NJ DEP received the report Feb 22. The NFA was issued Mar 10.
I think if there is any way to postpone the decision until you get the contractor report, you will know much more about this situation. Usually the "more remediation" decision is made by the contractor prior to applying for the NFA. Request a copy of the report so that you know what you are getting into.
Good luck, I know this is a very stressful time. Hopefully everything comes out okay after just one remediation.

I would absolutely not do it without the final report and most likely not without escrow.

I personally would not close without the NFA letter.

Thanks for all of the feedback. Our attorney had suggested the escrow option, but we just found out that our bank won't let us close without the NFA letter. So the decision has been made for us. We're feeling relieved.

Jpickett, your story gives me much hope! Thanks for sharing.

The upside is that they won't be able to sell the house to anyone else. So, it may still be there when the letter comes in. The downside is probably you're at the mercy of interest rates, assuming that you locked at something you liked.

What does your realtor say? It surprises me because the message last year was pretty consistent: clear remediation report and escrow were suitable for getting a mortgage. I understand that banks are tightening rules. Have things changed that much or are you with a really conservative, small bank?

OK - I was going to whisper this, but can't do it.

Anyway, while I would not proceed without the clear report and escrow, I used a brilliant mortgage guy last year who helped me in a divorce situation. I got his names from my friends who are in real estate and have used him exclusively for 20+ years.

If you want to just talk to him and see if he has any alternate financing ideas, he'll be happy to talk and won't charge. He placed me with a small community bank, which I really liked. I'll have to look up his contact info.

We're going the FHA route, which has pretty strict rules. I imagine that's why they're saying no closing without the NFA letter. The sellers' attorney has indicated that they have no money for escrow so I don't think it would be an option, even with "looser" financing. Of course, it never hurts to have a back-up plan in place so please do share his info if you come across it. Thank you!

Posted By: commutermomOur next door neighbors voluntarily/proactively pulled an oil tank that turned out to be leaking and had spread onto our property. The clean up process has been going on for either two or three years (so long that I can't remember exactly!) We just found out recent testing indicated the levels are still not acceptable, further remediation will be required, the testing wells cannot be removed yet, and the landscaping cannot be restored ....

We have other neighbors down the street who also had testing wells from an oil tank cleanup in their yard for years.

So, I would not count on getting that NFA letter before your closing ...

Read the above posting carefully. A leaking UST (underground storage tank) can be a problem costing over $100,000 and wasting years of time. Never should you sign a contract binding you to purchase a property with an UST.

Any UST should be removed and certified (with an NFA latter if the tank leaked) by the existing owner, not you.

A buyer should immediately walk away from any seller not willing to properly remove an UST, with all associated paperwork and certifications.

Do not sign up for someone else's problem.