Most Termite Inspections Triggered by Sales : Pest Reports: Although not required by state law, most lenders and buyers want them. Paying for required work can be negotiated.
If you’re buying or selling a house, you’re probably going to need a termite report. Although state law doesn’t require it, lenders and buyers do.
Before they lend money on a house, bankers want to make sure termites and other pests haven’t caused serious damage to the property and lowered its value. If there is damage, lenders usually want it repaired before the sale closes.
“We need to know the collateral is sound,” said David Kepper, vice president/manager of Bank of America’s Riverside Main Office. Buyers also want the protection, he said.
It’s a practice that almost has the force of law.
At Bank of America, 98% of home loans are processed with a termite report, but it’s usually already agreed upon by the buyer and seller, Kepper said. The bank no longer asks for a termite report in every case, especially if it’s a relatively new house and the appraiser sees no obvious signs of damage.
He said the bank stopped requiring inspections for home-equity loans about 18 months ago, because customers didn’t think it was necessary and most reports didn’t find any problems.
In California, 75% of termite inspections are triggered by real estate sales, according to the Pest Control Operators of California Inc. The California Assn. of Realtors estimates that the average house changes hands every eight years.
While the state doesn’t require inspections, it does regulate how they are done. The Structural Pest Control Board oversees the state’s 1,510 pest control companies.
The board licenses operators and handles complaints. It doesn’t recommend companies, methods or prices.
Those decisions are up to the buyer and seller. They can negotiate which treatment to use, and who will pay for the termite inspection and repair.
While there is no standard practice, it’s more common for the seller to pay, said Steven Sokol, managing senior counsel for the California Assn. of Realtors. “But maybe the seller will throw in a chandelier if you pay for the pest control work,” Sokol said, or lower his asking price. The buyer and seller could also split the cost.
Sometimes there’s a conflict between the buyer, who wants top-of-the-line treatment, and the seller, who wants the low bid. One solution is to have the seller pay the lower amount, and the buyer pay the rest.
A state law that took effect July 1 requires that a structural pest report be separated into two sections if requested. A separated report notes the difference between active infestation and potential infestation. Exterminators must inform consumers that a two-part report is available.
Sokol said the new rule provides more information to consumers. That information can be misleading, contends Harvey Logan, executive vice president of the Pest Control Operators of California Inc.
Dividing recommendations into two parts makes it seem as though “section two” repairs--to avoid future problems--can be done later, Logan said. The buyer may postpone the work, figuring there’s no rush, and “two years later a $1,500 problem is a $10,000 or $15,000 problem,” he said. Or the buyer may have good intentions, but be short of cash after purchasing the house.
CAR lobbyist Ron Kingston said realtors do not play down the importance of preventive work, but let the buyer and seller decide how to handle it.
Since the change, realtors are reporting fewer complaints from buyers and sellers dividing termite costs, Kingston said.
So far, most consumers aren’t taking advantage of the new option, according to several exterminators. That doesn’t surprise Logan. Without a separate report, the seller is more likely to pay for all termite repairs, and many real estate brokers like it that way, he said. “They want all the problems taken care of so the buyer is a happy camper.”
But Pasadena realtor Arlene Vella said she finds most buyers and sellers want the extra information in a two-part report once the concept is explained to them. She said the seller will then usually only pay for present damage, and the buyer might put off the other work for a while.
Although typically sellers arrange termite inspections, buyers may want to get their own reports so they know as much as possible about the property, said Maureen Sharp, SPCB deputy registrar.
One record of past inspections is the dated tags that exterminators have to post in the attic, garage or under the house. Another tag is posted after a treatment and lists the pesticide used. Tags should not be removed because they provide a history of work done on the house, she said.
Also, for a $2 search fee, the board will provide copies of all reports and work completion notices filed on a property in the last two years. That way the buyer can find out about recent repairs, or if the other pest control companies recommended different types of treatment than what was eventually done.
It’s perfectly legal for the seller to get several estimates and take the one that recommends the least amount of work, at the lowest price. The company that performs the work has to certify that termites are not present, problems have been corrected or, if buyer and seller agree--that termites are present but work will be taken care of later.
However, if other pest control reports recommended that additional work be done, the seller should tell the buyer, Sokol said. The state’s disclosure law requires a seller to reveal any facts about the property that might affect its value or desirability.
Inspection fees vary. In 1986, the average cost of a Los Angeles County inspection was $23, while the average Bay Area homeowner had to hand over $92.50, according to a 1988 PCOC study. Southern California is more competitive, said John Munro, PCOC director of education. The study also found the average 1986 cost in Los Angeles County for termite treatment and repair was $640.
When should you get the termite report--when you put your house on the market or just before escrow closes?
Logan suggests homeowners get a report as soon as they decide to sell. That way they know how much, if any work is needed and can figure their selling price accordingly.
But many brokers advise clients not to get a termite report until they have a buyer, Logan said. If the house doesn’t sell quickly, a seller might have to get another report because conditions could have changed.
From the buyer’s point of view, a report just before escrow closes is ideal, because it’s as up-to-date as possible.
Whether you’re buying, selling or staying in your home, you might want to contact the pest control board for a sample inspection form and information on how to read a report.
The inspection report lists any termites or other wood-destroying organisms found in the building, and their location. It should describe which areas have been inspected, and which haven’t been because they were to difficult to reach. Also, it should contain recommendations to correct any problems, and estimates of how much the treatment will cost.
Make sure you understand the extent of the problem and how the treatment will be performed. For example, most exterminators now subcontract with several commercial companies that specialize in doing the actual fumigation and work only for pest-control companies, not the public.
A new report form that’s easier for consumers will be available next January, Sharp said. On the new form, people should be able to understand the findings by looking at a drawing, instead of the present written explanation which many people don’t read, she said. For more information contact:
* Structural Pest Control Board, 1430 Howe Ave., Sacramento, Calif. 95825 (916) 920-6323 or (213) 620-2255. Provides free brochures on termite inspections and treatment.
* California Assn. of Realtors, 525 S. Virgil Ave., Los Angeles, 90020 (213) 739-8227. Offers “Structural Pest Control Handbook” for $7.87 (includes tax and shipping).
* Companies that are members of the Pest Control Operators of California distribute free copies of “So, You’ve Just Had A Structural Pest Control Inspection,” a booklet that explains the procedure.
