Are you planning on buying or selling property with a structure on it (i.e. a home, condo, townhouse) in Santa Cruz County? If so, do you know what a pest inspection is and how it is used in the sale of property? Read on to learn why these inspections are important, and how it may impact your home purchase or sale. 

What is the Pest Inspection?


A Wood Destroying Pest & Organism Inspection Report (pest inspection report) contains findings as to the presence of evidence of wood destroying pests and organisms in visible and accessible areas. This means, even if no termites are seen, evidence of their presence will be included in the findings. The report also contains recommendations for correcting any infestations and infections found. 

“Wood destroying organisms” include, but are not limited to, subterranean termites, dry wood termites, damp wood termites, and some types of beetles. Additionally, homes can also have infections of fungi that destroy wood such as white rot and dry rot. 

Section I vs Section II Work   


Issues that are categorized as “Section I” on a pest inspection report are those in which there is visible evidence of active infestation by termites or other wood destroying organisms. In some situations, the buyer’s lender will require all Section I work be completed before they will finance the purchase. Additionally, some lenders stipulate that the seller must pay for the work. 

The “Section II” category is reserved for situations in which there is no evidence of an active infestation, but present conditions in an area are conducive to infestation or deterioration by wood destroying organisms. Typically, these are issues that may not need immediate attention. However, buyers should keep in mind that these issues will likely need to be addressed in the near future. 

Loans That Require Section I Work to Be Completed


Some loans require that all Section I work be completed before the close of escrow (before you sell the property). Two well known lenders that enforce this requirement are the Departments of Veterans Affairs (VA) and the Federal Housing Administration (FHA). 

Buyers: when speaking to your lender, be sure to ask them about your loan, and whether or not it stipulates that all Section I work be finished before the close of escrow. 

Sellers: keep an eye out for “contingencies” in an offer – some contracts will include a stipulation that you pay for all Section I work. This is one reason it is wise to get a pest inspection done before putting your property on the market – you’ll be equipped with more information if faced  with terms like this in an offer. 

VA Loans


In California, the Department of Veteran Affairs (VA) requires that buyers using their loan-products have a termite inspection performed on any home they wish to purchase in the state. According to this site, California is one of the nine states where the buyer is allowed to pay for the pest inspection. Typically, all Section I work will need to be completed before the property is sold. For more information, be sure to ask your lender what the rules are with your specific loan product if you are using a VA loan to purchase a property. 

FHA Loans


When a buyer uses an FHA loan, the property will need to undergo an appraisal to ensure that it meets FHA-standards. If the appraiser sees evidence of termites or other wood destroying organisms he or she may require that a pest inspection be performed on the property. Before the deal closes, all work Section I work must be done, and the property will need to be free of wood destroying insects and organisms. Typically, the buyer and seller can negotiate the cost of the treatment and repairs. 

How to Order a Pest Inspection


Your Realtor® will be familiar with the prominent pest inspection companies in your local area. You can reach out to her or him and ask for their help when ordering a pest inspection. If you don’t have a Realtor®, feel free to contact us. 

Once you receive the results, the summary of Section I items on the report may or may not include estimates of the cost to fix these issues. If not, your Realtor® can help you get contractors to the property and provide bids so that you have a better understanding of the cost to repair and to get rid of wood destroying organisms. 

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