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Archive for January, 2010

I have been talking septic systems a lot lately, and I think I know a thing or two about them. Not how they work, but how to “deal” with them when negotiating a RE transaction. Septic Systems are quite a topic these days. With all the rain we’ve had lately, a number of dormant septic system problems have come to the surface, literally and figuratively. Old and new, there have been problems, and this is what you need to know.

Buyers:

If you are negotiating to purchase a property served by a septic system, make sure your special stipulations require a “clean” septic letter from the seller. What this means is that a professional septic service provider will pump the septic holding tank, inspect the system, and complete any necessary repairs prior to issuing a letter. Basic services run anywhere between 250.00-500.00 minimum, depending on the system’s size. A perfectly running system just requires a pump and inspection for a letter to be issued.

But here’s the kicker: If the seller agrees to deliver a clean letter, this means that whatever needs to be done to have the system functioning properly will be at the expense of the seller. The clean letter stipulation demands it (seller beware!). This is a very big deal, buyer, so don’t back off this stipulation unless you are willing to pay out of pocket during your due diligence period to have the system pumped and inspected. If you find concerns at that point, the contractor can’t issue a clean letter until the concerns are addressed. And if the contractor is already on site for the day, it is kind of hard to whip up right then and there an amendment to address concerns to determine if the seller will make any required repairs. See? Just have the seller deal with the whole thing.

If the seller balks at the prospect of paying for a clean letter and swears the system is just fine, one thing you could do is tell them you will pay for the basic service and the seller pays above and beyond for any required repairs. Who wants to buy a house where the plumbing ain’t workin’? And finally, the biggest component to this process is making sure you stipulate who is going to do the septic servicing. This is key! I could find you a number of septic companies who would issue a clean letter on a system that needs replacing. Your honest and well-connected realtor will help you there. DO NOT LET THE SELLER PICK THE SEPTIC COMPANY!

And for you, Sellers…

If you didn’t read above because you are a seller, not a buyer, stop now and read above. Be very cautious about agreeing to a septic letter stipulation. You may not fully understand what you are getting into. I have had seller clients say, “No problem, I’ll do a septic letter…they’re only a couple hundred bucks.” Perhaps. But if you agree to it, and the system is not properly functioning, you could be on the hook for 35 times that couple hundred bucks. No kidding. If you want to work with the buyer in this, just be careful how you approach this stipulation by writing in any counteroffer that you agree to have the system serviced up to a certain amount and no farther. If concerns are discovered during the inspection, make sure all relevant parties are available/on-call that day for a quick round of negotiating, if needed. Where do you go in that negotiation process and how do you keep the deal going? Ask your experienced, savvy realtor to dig you out. That is where we earn our money, by keeping you from spending all of yours. Finally, DO NOT JUST AGREE TO THE BUYERS SEPTIC PROVDIER CHOICE. Make sure it is a reputable firm.

Next Post: Septic Systems in the Foreclosed Home

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