Sure Hank,

First off I think your lender was referring to Title V (5). It is true that every septic system in MA is required to conform or update to the states new regulations regarding TitleV. However, I'm not sure where everyone gets this information that it is the sellers responsiblility. Since I've been in the business (for the past 8 years) the Title V is mandated but either the seller or the buyer are capable of the process. This responsibility is usually spelled out in a Purchase & Sales Agreement prior to closing.

Most lenders will allow you as the buyer to complete the work within 2 years after you take possession. Sometimes you have to set up an escrow account with the bank. This escrow balance reflects the amount $$$ to update or install a new system. And that escrow usually will satisfy most agreements.

And as far as a bank owned property...haven't seen a bank (seller) install a new system yet. Not sure who you are talking to but try another office/lender.

-Karissa

Mon Apr 14 2008, 15:24

Hank, in a nutshell, most lenders will not let you close without a passing title V period. Those lenders that do will want to hold the money for the septic and usually require a 1.5x to 2x the estimate (some lenders require more than one estimate) There is a lot of risk here for a lender. The septic is the most costly mechanical device in a home, usually more expensive then a new electric or heating/ac unit or well and are by their very nature a health and habitability issue. Be careful with septic issues. Go heavy on the inspections - getting a "passing" report is sometimes not enough. The reports are 15 pages long and should be reviewed by an inspector who specializes in septic system review.. . . Good Luck!

Sun Apr 13 2008, 19:32

Great help. Thank you for your help.

Sat Apr 12 2008, 06:20

Hi Hank,

Don provided you with great information. I just wanted to point a line of language within this:

“The property owner or facility operator is (generally responsible) for obtaining an inspection of the system. Prior to the transfer of title, however, the parties may contractually allocate responsibility for the inspection, provided that such inspection occurs within the specified timeframes.”

There is really no written law on who is technically responsible for testing the system and bringing it into compliance if necessary, however it has been more “customary” that this falls onto the seller. But, we are in very different times right now, and some sellers just can’t afford to take this on. Some are selling with a debt forgiveness from their mortgage lender because they owe more on their mortgage than what the property is worth. This is called a short sale.

Many buyers are purchasing homes and taking on the responsibility of this. They are not “eating the cost of it” though. They are of course seeing this cost reflected in their sales price.

There are some lending restrictions on these kinds of sales. Most lenders will require 1.5x the estimated amount to be placed in an escrow account at the time of closing. Typically the lenders attorney holds this money and disburses it upon the completion and inspection of the new system. In addition to short sales, this quite frequently happens with foreclosures. Your probably asking yourself, “well where do these buyers get the money”…….I recently did a sale where the property was selling for $300k and we found out that 1.5x the amount of the new system was $25k…..so, the contract read that the sale price was $300k, but the seller was to give $25k to the buyer at closing. So they essentially, the buyer paid $275k for the house and $25k for the new septic system, paying $300k total for it.

Best of luck to you!

~M

Fri Apr 11 2008, 22:51

I'm not a lawyer. But researching your question online at http://www.mass.gov/dep/water/wastewater/buysell.htm produced the following information:



Buying or Selling Property with a Septic System
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In order to ensure that septic systems (conventional septic systems, cesspools, and innovative/alternative systems) are protective of human health and the environment, Title 5 generally requires that systems be inspected when the property is sold. This information sheet provides basic details on property transfer requirements, but information provided here is not intended as legal advice to buyers or sellers.
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When is an inspection required?

In general, Title 5 requires an inspection at the time of property transfer:

When a property is sold to new owners, or there otherwise is a transfer of title to new owners, with certain exceptions.
"Title 5 does not require a system inspection if the transfer is of residential real property, and is between the following relationships: (1) between current spouses; (2) between parents and their children; (3) between full siblings; and (4) where the grantor transfers the real property to be held in a revocable or irrevocable trust, where at least one of the designated beneficiaries is of the first degree of relationship to the grantor". [REF: MGL Ch21A s. 13]
For specific guidance on exemptions, contact Ronald White at MassDEP with questions: Ronald.White@state.ma.us (617) 292-5790.
When properties are divided or combined.
Even if there is not a sale or transfer of title, Title 5 requires an inspection when there is a change in use or an expansion of the facility. For example, conversion of a retail store to a restaurant requires an inspection. See Septic System Inspections for details.
............................
Responsibility for obtaining the inspection and submitting results

The property owner or facility operator is generally responsible for obtaining an inspection of the system. Prior to the transfer of title, however, the parties may contractually allocate responsibility for the inspection, provided that such inspection occurs within the specified timeframes. An inspection must be conducted by a MassDEP-approved System Inspector. Click here for lists of System Inspectors.
The System Inspector must record the inspection results on the MassDEP-approved inspection form and submit the form, within 30 days of the inspection. In most cases, the inspection report is submitted to the local Board of Health.
In some cases, inspection reports must be submitted to authorities other than the Board of Health:
Inspection reports for State and Federal facilities must be submitted to MassDEP instead of the local Board of Health.
Reports for large systems and shared systems must be submitted to both the local Board of Health and MassDEP.

Buyers' rights in property transfers

Title 5 requires that a copy of the inspection report be provided to the buyer or other person acquiring title to the property served by the system. The inspection is intended to provide sufficient information to make a determination as to whether or not the system in its current condition is adequate to protect public health and the environment. The inspection, however, is not a guarantee that the system will continue to function adequately and is not a guarantee that the system will not fail at a later date.
If you have a complaint about the results of an inspection, contact your regional MassDEP office and speak to the staff responsible for Title 5. MassDEP will review your complaint and determine if further action is required. If you receive an inspection report that appears to have been altered or contains false or misleading information, call the Massachusetts Environmental Strike Force at (617) 556-1000 or toll free at 1-888-VIOLATE (1-888-846-5283).



I don't have enough characters left to paste the rest, but there are special provisions for properties acquired after foreclosure, deed in lieu of foreclosure, or bankruptcy.

So, check out the interpretation at the site posted. Then you might want to check out the language of the actual regulations; they, not the interpretation (even though provided by the state), would be applicable. And if you need further assistance, a Massachusetts real estate lawyer should be able to help.

Fri Apr 11 2008, 19:41