Under MA law when a home changes hands a Title V inspection must be performed by the Seller at seller's cost. If the septic system was inspected and passed within 2 years it is not necessary as the "pass" will still be valid. If the septic system was inspected and passed within 3 years and it has been pumped annually it will not need to be reinspected.
Under some circumstances the seller (a bank owned home, a short sale) can ask the buyer to assume responsibility for all septic inspections and repairs. This needs to be spelled out in the MLS or listing service/documents so the buyer is aware of this. Some times a seller will hold the inspection and upon failure will ask buyer to assume costs. Again this must be spelled out in MLS or listing service/documents.
If you are in the middle of a Real Estate transaction and find out your septic system has failed and it will not be able to be repaired or replaced before the closing, the bank giving the buyer the loan will require you to escrow 1.5 times the estimate to fix or replace the system. For example if the cost of replacing the septic system is $20,000 you are going to required to escrow $30,000. Please note that not every bank will allow a septic escrow. The buyer may end up having to wait until the installation is complete.
As you can see getting your Title V done and out of the way with no problems is a huge deal! If you are unfortunate enough to have to replace your septic system, there are a few programs to ease the pain. See the Loan and tax credit information below:
Homeowner Septic Loan Program
If your septic system has failed Title 5 inspection there is a loan program in place that can help you. Participating banks offer low interest rates to eligible homeowners through this Massachusetts Housing Program. For more information contact the Massachusetts Housing Finance Agency (MHFA), 617-723-0500 or go to their Web site:
MassHousing Web site Here is the PDF for the Homeowner Septic Loan Repair program.
The Commonwealth of Massachusetts provides a tax credit of up to $6,000 over 4 years to defray the cost of septic repairs to a primary residence. Forms are available from the Department of Revenue (DOR) to allow homeowners to claim up to $6,000 in tax credits for septic upgrades. The credit cannot exceed $1,500 in any year and may be spread out over 4 years. The tax credit is limited to work done on a primary residence only. Tax Form Schedule SC is the correct form for the tax credits.
MassDOR Web site