- Hey, how's it going?
This is Seth from REtipster.com,
and in this video, we're going to talk about an issue
that has the potential to make or break a land deal,
and that is the perc test.
(upbeat instrumental music)
So what exactly is a perc test?
Well, the word perc is actually short
for the word percolation, and percolation is what happens
when water hits the soil and then drains through the soil,
and the reason this is important
is because a lot of properties out there
do not have access to a nearby sewer system.
If you ever want to build a house, or a building,
or a dwelling of any kind
on one of these types of properties,
if you want to be able to flush the toilet
and have the wastewater go to an appropriate place,
you need to have a septic system in place,
and a septic system is essentially
just this giant underground tank
where all this wastewater goes, and in time,
a lot of the wastewater will overflow
out of the septic system into the soil,
and then the soil will clean the water
before it gets back into the natural system underground.
Septic tanks are actually a brilliant invention,
and as important and as gross as septic tanks are,
in order for them to work properly, the soil that it's in,
it needs to be able to pass a perc test,
which means that when this waste water goes into the soil,
it needs to be able to drain properly through that soil,
and there's a lot of places around the country
where the water simply doesn't drain fast enough,
or it doesn't drain at all.
This can happen whenever the soil has a lot of clay
or silt in it because that soil is very very dense,
and it takes a long time for water to drain through it.
Then when you've got a septic tank in place
and that wastewater isn't draining properly,
that's a massive problem.
That means the septic tank basically doesn't work
and you can't flush the toilets,
which means you can't have a house there,
so that's why it's very very important to understand
if you are going to build something there,
and if yuu're not going to use a sewer system,
can that soil pass the perc test?
Now in most jurisdictions around the country,
the way a perc test works
is you'll have to call the county health department
or somebody at the county level,
and they will come out on the property
and perform this perc test for you,
usually at the cost that's anywhere from $150 to $1,500,
somewhere in that range,
and the cost usually depends
on what the county feels like charging
and also how many people are involved in this test.
Sometimes the person from the county
will simply go out to the property and just dig a hole,
and pour water into it, and time how fast it drains.
Other times, you'll have to get contractors out there
with there heavy equipment to dig a much much larger hole
and do it that way,
so it kind of depends on what's involved in the process,
but essentially all that's happening here
is they're digging a hole in the ground,
they're pouring the water in it,
and then timing how long it takes
for that water to drain through the soil,
and if it doesn't drain fast enough,
or if it doesn't drain at all,
then it's going to fail its perc test,
which can be a huge problem and have a major major impact
on the value of the property.
As you can imagine, if the highest and best use
of a property is to simply build a house,
and all of a sudden you can't build a house anymore,
then that kind of does a bad thing
to the value of that land,
so how important is a perc test to your specific situation?
Well, I think you gotta ask yourself a few questions.
First of all, how much are you paying for the property?
I know a lot of the vacant lots that I have bought,
I've been paying well under $1,000 to buy the property
free and clear, which is very very cheap,
and in cases like that, you kind of have to weigh
the benefit of paying more for a perc test
than for the price of the property outright,
and especially if speed is an issue,
if you have to get that deal closed this week,
then honestly, it may be worth rolling the dice
and taking a risk, not necessarily knowing
if the property is going to pass that perc test.
I'm not necessarily telling you that you need to do that,
but I'm telling you my experience
when I have come up against this situation,
that's how I've handled it,
and to date, I've never gotten burnt by it.
I can't tell you that's never going to happen
because it could, but I've never had this
come back to bite me,
so just take that for what it's worth.
I think you also have to ask yourself,
are there any alternative uses for this property
if I can't build a dwelling on this land?
For example, there's a lot of properties
that may fail a perc test,
but that's not necessarily the end of the world.
You could also use this property for farming,
or simply using it for outdoor storage,
using it for camping, or hunting, or any number of things
that does not require having a house or a building
on the property, so it still has value.
It may be much less value, but it doesn't necessarily mean
the property is worthless
just because it happened to fail its perc test,
so that's another thing to keep in mind.
If you're working on a deal, and you're in a hurry,
and you're not paying a lot of money for it,
and you're willing to take some risk
with this perc test situation,
one thing you can look at just to give yourself
some vague idea of what's going on
is to look at the adjoining parcels of the property
and see are there any other houses or buildings
built on those parcels?
Because if there are,
and if they've clearly resolved that issue
to the point where they could build something,
then there's at least a chance
that you'll be able to do that too,
just based on the fact that others in the area
have been able to do that.
And keep in mind, this is very important,
just because neighbors were able to do it does not mean
that you will be able to do it,
but in the absence of any other information,
it is definitely an important thing to consider.
Another thing you'll want to keep in mind
is that if you've got a property that's large in size,
it's entirely possible that the property
could fail the perc test in one area
but pass the perc test in another area.
I once had a 12 acre parcel of land that actually
failed the perc test in several spots around the property,
but they were able to find one section of it in the corner
that did pass the perc test,
so if you happen to test one spot
and find that it does not perc,
it's not necessarily the end of the world.
You'll want to make sure you're testing other areas
just to make sure you exhausted all your other options
and that you truly are sure
that the property really does fail that test
because in a lot of cases, the soil can differ
based on where you're at on the property,
so be sure to check that out if you're doing this.
Another thing to keep in mind is that it is possible
in some areas to build what's called
a modified septic system.
This kind of thing is not always feasible,
and it can get very expensive very fast,
so in a lot of cases, it's like really not worth it,
but if you've got a property where the feasibility
of a septic system has all the impact in the world
on the value of that property,
then it could be an avenue worth considering.
It's also worth noting that in some cases,
if you have time, and you're willing to wait long enough,
just because there's not a sewer system
available to your property today
doesn't mean there won't be one in 10 years
or 20 or 30 years.
As the population continues to grow in a lot of areas,
it's entirely possible that developments
could extend out from the city,
and at some point in the future,
there will be a sewer system available, and at that point,
then you can build a house on the property,
but you simply can't do it
if you're going to rely on the septic system.
This one is definitely a long shot.
I would never purchase a property with the assumption
that someday there will be a sewer system there.
However, if you find yourself
with a property that you already own,
and you're in this situation, you never know.
At some point, there could be a sewer system available,
and you can pursue it at that point,
so it's just a little glimmer of hope to keep in mind
if you're in that situation.
If you want to learn more about all of this
and see a lot more detailed information,
definitely go check out the blog post
where I cover all these details and a lot more
over at REtispter.com.
I'll be sure to link to it beneath this video
if you want to check it out.
Whatever your situation is, I hope this was helpful.
I hope it gives you more confidence and information
as you're pursuing the due diligence process
on the properties you're looking at,
and I wish you all the best in your next land deal.
Talk to you later.