Real Estate Agent and Trainer, Robert Rico, explains the importance of a Termite Inspection report and goes into detail explaining what it all means. Do you want to see more video blogs? Subscribe here!

     

Welcome back to Keeping it REal, CA Realty Training’s weekly Real Estate blog! This week we’re covering one of the make-or-break points in the escrow process, the termite report. What is a termite report? Well, read on!

Back up a bit first… let’s say the house is on the market, your buyers want it, and they offer a list price – great! However, they make it contingent on a “wood destroying pest report”, aka the Termite Report, because they’re smart and don’t want to jump into a big deal right away. What’s involved in this, and why do we say it’s a make-or-break inspection?

The termite inspection is an extremely thorough home inspection that’s done by an unbiased third-party termite inspection company. They often use sensors, cameras on extendable arms, and the experienced eye of a termite inspector. This way, they can see/smell/detect any termites or other issues that might affect the structural integrity of the house/beams.

Tented House

Now hypothetically, let’s say the termite inspector goes through, and finds a couple minor problems. He or she will categorize them in two different boxes: Section 1 items, and Section 2 items.

  • Section 1 Items

  • Section 1 Items mean that there is actual evidence of termites, dry rot, or fungus – today. This means that the inspector went in, touched it, smelled it, or what have you. The problem currently exists in the dwelling, so it has to be addressed right away. Therefore, it will go on the report under Section 1.

    Is that a big deal when you’re buying a house? Well, depending on the extent of the damage, it might not be a good idea to proceed. That’s something to discuss with your buyers for sure — are they comfortable with hypothetical major repairs in the future? Termite damage can be very expensive, time-consuming, and difficult to repair. If they are first time homebuyers who always having rented before, it might be too much for them to contemplate. If they are experienced investors, however, it might just be a speed bump for them — or even a negotiating chip!

  • Section 2 Items

  • Now… onto Section 2 items! The inspector looks around, inspects, and notices a couple things – not dry rot yet, not termites yet, but it can change into that in the future. Therefore, not today, but it looks like it may change in the future – that’s why it’s on the report. For example: there’s a sprinkler head, that pops up every morning, and hits the wood siding of the house. If this isn’t addressed, it would become dry rot/damaged wood – so it would become a Section 1 item. Therefore, Section 2 is really about the items where adjustments need to be made, not problems that would (hypothetically) hold up a deal.

    Section 2 items are usually ones that are minor adjustments, so the seller can just make them before the sale. Or, a lot of buyers ignore that part of the report – it’s so minor that there’s not much needed to fix the situation.

    Is it reasonable to hold the deal up for Section 2 items though? Not really, unless your seller is incredibly motivated.

To recap: Termite Inspections (Dry Rot/Wood Destroying Pest Inspections) are key for the progression of an escrow, especially here in Southern California where most houses are built with wood. Section 2 items are the minor items – that could cause a problem in the future, but are fixable at the moment. Section 1 items are the ones that get you in trouble – active, current damage from termites or dry rot.

Be sure that your buyers are well informed, that the inspections are done, and that you take every possible course of action before lifting any contingencies or going back to the seller with repair requests.

See Blog: What Is An Appraisal?

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  1. […] seen during the transaction process. Service companies (e.g. escrow companies, title companies, and termite companies) will often incentivize real estate agents to use their services in exchange for generous […]

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