Septic Issues Can Make Selling Difficult

As an Anchorage home ages, components can fail. The septic system is a sensitive one. There may be no visible sign of a problem on the surface, or in the home. When it sells, however, the buyer’s lender requires the system be tested. That is when the owner may discover that the drain field or seepage pit doesn’t meet municipal requirements. Getting bad news now, when the owner thinks he or she has a sale, is no fun.

In some cases it is possible to remedy the problem by increasing the size of the field or by replacing it. Some alternative systems that are more expensive to install can also be approved. In the worst case, however, the engineer can find no alternative but a holding tank for the property. Installing a holding tank is a major expense. The impact on the value of the property is enormous, more than reason suggests it should be. Hearing this news, buyers often walk, no matter how much the owner tries to improve the deal to keep the buyer in the picture.

The idea of a septic system is to mimic what happens when bears do it in woods. The earth filters the bad stuff out by the time rain and snow melt reach ground water level. In moderation, the world can handle it. (The world is not doing so well in Anchorage with all the dogs in town, whose excreta makes it along the surface to our streams. That’s another story, however.)

The septic system has two components. A tank receives waste and has two chambers, where solid matter settles. In warmer climates, bacterial action eats that stuff up; in Alaska an ordinance says pump it once a year because it’s too cold for the bugs to work efficiently.

Liquid drains off from the top of the tank into a trench or pit that has rocks and liner in it that begin the filtering process. Run the garbage disposal too much, fail to pump the tank, put too much insoluble material down the drains and the trench plugs up. When the engineer looks in there, he or she discovers standing water, or proves a less than adequate absorption rate. Failure. No bank loan for the buyer until it’s fixed. Potentially a lost sale.

One can’t just put a drain field anywhere. It can’t be too close to standing water, streams or a well. It has to be in good ground. Boggy areas won’t do. Bedrock can’t be too shallow. The site has to be relatively level. When the engineer draws a map with all these obstacles, including the house itself, the size of the lot may reveal that there is no place to put a replacement system. That’s why since 1986 new lots on Hillside need at least an acre and a site for an alternative system. Still, most existing homes were built before that ordinance passed. Many are on smaller lots. Even though these “non-conforming lots of record” have the right to exist, they may still turn out to be too small to accommodate an alternative system.

This is a point for any buyer of an older home on Hillside to consider. Just because the system passed when the present owner bought the home doesn’t mean it will this time. Even if it passes this year, what condition will it be in when the new owner comes to sell? Most buyers only see the approval form that the Municipality gives the buyer’s bank. Full due diligence suggests that a buyer should obtain the actual test results, what the engineer submits to the Municipality. This is the only way to discover if one is purchasing a marginal system.

So what happens when all fails and there has to be a holding tank? The tank is as much as 4000 gallons, much bigger than the one it replaces. It has an alarm on it if the pumper dumper truck doesn’t get there before it’s about three-quarters full. It costs about $80 to pump it. Water usage is about 50 gallons per person per day, according to Flattop Technical Services, one of the engineering firms that tests septic systems. That seems like a lot to me, but if I prorate my share of the dishwasher, washing machine, showers, spaghetti water and other consumption, I suppose it’s possible.

Most owners with homes on holding tanks say they have their systems pumped about every three weeks. It’s like being on a public utility except that a service picks it up instead of underground pipes taking it to AWWU. That pumping rate works out to about $1400 per year, or about $116 per month. How much impact should this change in a waste disposal system have on value? Appraisers have debated this question for years.

Suppose a $225,000 home would sell at that price if its septic system passes. If it goes on a holding tank, the cost of home ownership goes up by $116 per month. The new owner wants to keep their cost of ownership the same. So discount that payment stream at eight percent for a 30 year loan. The solution to that equation means one would have to borrow about $16,000 less. In other words, a buyer comes out about even on a $225,000 sale if he can buy the house for $209,000 instead. By various routes appraisers come up with answers of this order of magnitude.

Unfortunately, market experience suggests that the actual discounting that happens is almost double this amount. What the mathematics of the analysis fails to consider is the prejudice against holding tanks that buyers and their agents possess. It’s almost as if life as we know it comes to an end when a property goes on a holding tank. For the owner, truly, it may be that: the cost of installation is usually unplanned, as is the hit against value.

How much buyers consciously exploit these feelings or the agents communicate their dismay in a negative manner is hard to measure. It’s irrational when you consider that the buyer benefits from never needing to worry about a system failure, its cost to cure and the effect on value. Nevertheless, the prejudice is real and enough of a factor to cause most of us never to use a garbage disposal for anything but very light duty work.