Home Buying in Springfield>Question Details

Sasa25, Home Buyer in 01028

If a property failed Title V, what does that mean to the buyer?

Asked by Sasa25, 01028 Tue Aug 18, 2009

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It means that the system will need to have some sort of repair, or full replacement. Who pays for the repair/replacement and how that payment is structured depends on buyer, seller, nature of the problem, and the lender. If a property was sold with no disclosure about a bad septic system, and without clear knowledge that any and all issues are the buyers responsibility (such as a foreclosure auction), then legally, the responsibility will fall on the sellers to replace and pay for a clean Title V.

It has become customary for sellers to be responsible for Title V for a simple reason; most banks won't lend on a property with a failed system. So when we see "buyer responsibility" what it really means is "hard to borrow money against". As you can imagine, that significantly reduces the number of people who can purchase the property, so I often find that these properties sell for 30-50K below market. Most people who purchase have done a septic replacement before, and understand the in and outs, and that's a good thing - the process, while not overly complicated, is confusing to newbies, and is time consuming, expensive, and often involves a great deal of red tape.
Web Reference: http://www.bjheisler.com
0 votes Thank Flag Link Mon Apr 5, 2010
Be careful if you, the buyer, get it done yourself pre-closing. There are many things that can go wrong re: the mortgage for your new home. You may not get the final committment, and then what- if you have spent $15K on a repaired or new system?? You'd be out of luck in general.
Whatever you decide, make sure that a lawyer that represents YOU helps you and reviews any agreement between buyer and seller that is anything more complicated than the basic P&S agreement.

Thanks, and good luck,
Ken L.
0 votes Thank Flag Link Wed Aug 19, 2009
There are several ways a failed septic can be handled. A septic must be in compliance with Title V at the time of closing. No where does the law say it is the sellers responsibility to repair or replace the system. With that said.... it would be very difficult for the seller to sell the house with a failed septic sytem.

Some banks will allow a seller to escrow the repair money for the septic to be repaired or replaced in a predetermined amount of time after the closing. The bank will require that 1.5% times the repair/ replacement cost be held in escrow.

Secondly, the seller can complete the repair/replacement before the closing.

As a buyer, I must warn you to know exactly what you are getting into before you sign a contract with out the septic in place. Sometimes the system can be built up quite a bit and change the total landscape around the house and potentially making some of the yard unuseable.... an increased height of a 1 1/2 feet might not sound like much but can make a drastic change in the landscape appearance.
Web Reference: http://www.thehousewiz.com
0 votes Thank Flag Link Wed Aug 19, 2009
Sasa25,

Rob is absolutely correct and I will add only one thing. Do it yourself and reduce purchase price.

You may be able to negotiate the price down to lower than the cost of replacing the system. Reduce the purchase price by the cost of the replacement plus a sum for the inconvience (say 2x). This will mean work on your part and money out of pocket to get it done, but you can save overall and control the process.

I have been involved in deals that have gone both ways. It is up to you if you can handle the project or not. Some want to have it done by the Seller and others will take the reduction and get it done themselves.

Good luck
0 votes Thank Flag Link Wed Aug 19, 2009
Good morning Sasa25:

If it is handled correctly on the offer , it should mean that the buyer will have a repaired or new septic system. Either the repair or replacement is done prior to closing or monies are withheld, typically 1.5 times the highest bid from the proceeds for the work to be done after closing.

The seller is traditionally responsible for the cost, however, the regulation does not specifically address that so it is important to put seller to provide Title V certification in your offer.

Regards,

Rob
0 votes Thank Flag Link Wed Aug 19, 2009
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