Real Estate Talk:
Environmental tests

Is an environmental test condition required in the promise to purchase?

By Joseph Marovitch

In most single home residential transactions an environmental test is not required. However, there are cases where the environmental test should be performed. If the property the buyer is purchasing is located by a gas station, factory, highway, train track, parking lot or any other area where contaminants such as oil, gas or other chemicals may have been used then an environmental test should be performed to avoid harm to the residents. Another case where a test should be performed is in the event the property has or had an oil tank buried in the ground nearby.

To purchase a commercial property or residential income property, I would always recommend a phase 1 environmental test for two reasons. The first reason being that the buyer wants to know that there are no harmful contaminants in the land. The second reason is that a financial institution will ask for documents indicating the property is not contaminated before they will lend money to a buyer.

A phase 1 environmental test is mainly a visual inspection of a property along with a few soil samples. The test is performed by an environmental company such as Solrock or Enviro-Experts to determine if there are contaminants in the land one is purchasing, such as oil or other hazardous waste, that are harmful to people and the environment.

If the property is located by a gas station, factory, highway, train track, parking lot or any other area where contaminants such as oil, gas or other chemicals may have been used then a test should be performed…

If a phase 1 environmental test indicates possible issues, a phase 2 and possibly phase 3 are required. If it should be determined that the property has harmful contaminants, the cleanup can be very costly.

It should be noted that an owner is not supposed to sell a property that has an environmental issue. If a buyer should purchase the property for cash and finds out after possession that the property has contaminants, the previous owner can be held responsible whether they were aware of the issue or not, unless the seller sold without legal warranty and they were not aware of the issue prior to selling the property.

The cost for a phase 1 test will run around $1500 or more depending on the size of the land and building. The cost to clean up toxic waste can be in the thousands to hundred of thousands of dollars.

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Have a great week!

Next article: Why buy a duplex? Advantages and disadvantages

State of the market

We are still in a seller’s market however December tends to be a slower month in real estate than the rest of the year since people want to enjoy the holidays. However, there are distinct advantages to selling prior to the holidays and New Year.

There are fewer buyers and fewer properties for sale but those who are shopping in December are serious and for sellers, this can mean faster negotiation and a quicker sale.

When inventory drops for the holidays, this means buyers who find the right home do not want to worry that another buyer will grab the house after the holidays or that they may get into a bidding war. Therefore, while there is less competition, buyers tend to place their best offer first, thereby reducing negotiation time.

‘There are less buyers and less properties for sale but those who are shopping in December are serious and for sellers this can mean faster negotiation and a quicker sale.’

On the buyer’s side, sellers tend to be more motivated as well. Their property has been on the market for some time without a good offer. The seller then experiences the market slow down for December. All of a sudden, they receive an offer just before the holidays and have the possibility of selling before New Year’s Eve. The thought of not having to continue keeping the house clean and having strangers prance through is a relief. Another relief is being able to move forward in the New Year as opposed to remaining in a holding pattern until the house sells.

Image: Chokniti Khongchum / Pexels

Read also: Other articles by Joseph Marovitch