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This one would be a tough sell in our area. I've never had to deal with a oil tank situation.
John McCormack, CRS
Whether the lender will allow or not, I would caution my buyer to keep this on the seller side. We use attorneys for the closing process and if I let it slip by, I'm quite sure the attorney would do the same. Unless the buyer has specific experience with oil tanks below ground, I think the risk too great.
Yes, lenders will approve. Is the tank in use? If not, there could be a problem with FHA, but houses around here sell with underground oil and propane tanks all the time. Either buyer or seller could test soil around tank to se if tank has been leaking which would be a different story, becasue it could contaminate nearby creeks or wells. if the buyer doesn't like oil heat, then buyers can swith to electric, gas, or propane after they buy the property. If seller has oil furnace, then it makes no sense to remove the oil tank.
There are certainly lenders who will finance properties with underground oil tanks. Oil heat is still common in many older homes.
I haven't had lenders make an issue of it, but I've heard of insurance companies refuse to insure, which could make it a lending issue.
I am assuming this house has updated its heat source to some other system?
do you have an estimate of the cost to remove if this is the only source of heat then I can see why the seller does not want to remove . It seems you are asking two things to occur remove and replace with alternative heating system and tgat can be expensive.