Home Loans California & Arizona

Is a Termite Inspection report required when buying a house?

A termite is not required when buying a home but highly recommended. The only loan program that requires a termite inspection is the VA home loan program here in California. Let's explore in detail the overview steps of the termite inspection and clearance.
 
When buying a house, you will need to connect with your real estate agent about the termite inspection report, if needed or not and who will end up paying for the inspection and correcting any section 1 or section 2 items if any. Click HERE to learn more about section 1 and 2 items.


When is the Termite Inspection Required?

The termite inspection is not required when using the FHA, USDA or Conventional purchase programs but required in the state of California when utilizing the VA purchase home loan. 

If the Termite report was waived on the initial purchase agreement, with the expectation of the VA program (which is required in California, so cannot waive the termite inspection) which is not required, the buyer is taking a risk not having the termite inspection completed. 

If the termite inspection was waived from the start of the home buying process, but once the appraiser inspects the property and he/she notates that there may be termite activity, the underwriter will request for a termite report even if the purchase contract waived the inspection by both parties from the original purchase agreement. 

Who Pays for the Termite Report?

If the buyer wants a termite inspection completed it is up to the buyer to pay for it. But make sure to discuss that inspection with your real estate agent and you can request the seller to provide and pay for the inspection report. The seller can either agree to provide and pay for the report or decline the request. Does not hurt to ask within your initial offer. From what I have seen, the cost of the inspection report is from free to $150, do discuss with your agent about the cost. If the buyer is a Veteran and utilizing the VA home loan program to purchase the property, the Veteran cannot pay for the report, but can pay for the repairs if any noted on the report.

What if the Termite Inspection report mentions repair items?

Repair items will be a section 1 or section 2 item or the report will indicate a clear report. Click HERE to see what those items can be. Any section 1 items will need to be corrected before the close of escrow and section 2 items will be determined by the underwriter if they need to be fixed or not, but from my many years in the mortgage industry, the underwriter 99% of the time will require section 2 items to be fixed before the close of escrow.

The termite report will not just mention active termite, the report will also mention section 2 items that have to do with plumbing, water stained, roof leaks and health and safety issues.

Peeling paint and those items leading to structural unsoundness (earth to wood contact, dry rot, excessive moisture, etc. should not be waived

Any reference to water stains on the ceiling or roof will require a Roof Cert or licensed contractor certification: 1 year for conventional or 2 years for FHA and VA. Note: Review the appraisal and floor plan diagram. If the water stains on the ceiling are in a room that has no other rooms above it may be a roof issue otherwise it could be a plumbing issue.

Fascia roof damage does not require a roof cert

Patio and/or carports that share the same roof as the house must be included in the roof cert/licensed contractor cert.

Patio and/or carport that do not share the same roof as the home, a roof cert/ licensed contractor cert is not required unless it is a condition of sale or a condition of the appraisal.

If the termite company completes the work, an additional roof cert/licensed contractor cert is not required.

Any reference to water stains on the walls, baseboards, doors, under sinks, under water heaters, etc., requires a licensed contractor or tradesman to inspect and comment on whether the water stain is old and the cause has been previously remedied or if the problem needs to be corrected. 

Loose toilets need to be repaired. The work can be performed by a handyman.

If Earth to wood contact impacts the structural integrity of the structure, its correction should be conditioned for.

Faulty grade must be corrected on all FHA loans.

Cracked tile in kitchen and bathroom should be repaired due to potential of harboring mold, fungus and termites.

Cellulose debris in small amounts does not need to be cleared.

The items mentioned in section 1 as well as section 2 can be paid by the buyer or the seller, which should have been determined from the initial offer to the seller. If the buyer request that the seller must provide a termite report and any of section 1 or section 2 items are mentioned in the termite report, the seller is to pay for them to be corrected to obtain a clearance. The lender will require all sections to be fixed before the close of escrow with a clearance from the termite company.

What is a Clearance of the Termite Inspection?

The clearance report is where the termite company corrected any section 1 or section 2 items that were notated in the report. Most termite companies if mentioned in the report about water damage will not correct the issue because that will require a certified licensed plumber to correct, which is another added cost and delay. Once all items are corrected in the report, the termite company will issue the clearance and now the lender will be able to fund your purchase loan.

Overview

A termite inspection report is not required (with the expectation of the VA program) but highly recommended. 

The buyer or seller can pay for the inspection and any section 1 or section 2 items.

If there are any section 1 or 2 items mentioned, you will need a clearance before the close of escrow.

A termite report is good for 180 days from the report date on Conventional and USDA loan and 90 days from the report date with FHA and VA programs.

Looking for a detailed overview of the termite report, please click HERE for a short E-Book regarding the inspection. 

Looking to purchase a home and have questions regarding a termite inspection, please contact me via email, phone or text 

Nathan Rufty
Mortgage Loan Originator 
NMLS #292056
Cell: 909-503-5600
Office: 909-230-4395
Fax: 909-557-2303
Nathan.Rufty@mwfinc.com 
www.NathanRufty.com  
Mountain West Financial, Inc
9227 Haven Avenue #110
Rancho Cucamonga, CA 91730
Posted by Nathan Rufty on July 20th, 2018 4:45 PM

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