It was a simple question -- at least so it seemed. The correspondent wanted to know if a seller must give a copy of the termite inspection to the buyer.
My response was yes because the report is a material piece of information. I also said "in a typical real estate transaction there is a mortgage. As a condition of obtaining a loan, the lender will require evidence that the property is free and clear of wood-boring insects and thus require an inspection by a qualified pest controller."
It's the second comment that raised an interesting response.
Rick VanDermyden with the Sacramento firm of Pacific Coast Realty said not so fast: Conventional lenders do not universally require termite inspections.
"The point that I felt should be made clear for consumers is the inspection and repairs are both negotiable items and their agent should be advising them on this issue. The lender is not the stop gap to insure they buy a home that is inspected and has been cleared."
A conventional lender, says Rick "does not typically 'require evidence that the home is free and clear of wood-boring insects and thus require an inspection by a qualified pest controller.' In addition, if there is a problem the lender will not necessarily stop the loan from going through 'without appropriate treatment and/or repairs.'"
Could Rick be right?
Termites can be a problem -- no one doubts that. According to the National Park Service the little scamps produce damage worth $1.5 billion annually.
As it happens, I live in one of those areas where termite inspections are the norm -- the only questions are when the inspection takes place and who pays.
However, it turns out that the inspection norm in my community is not the norm nationwide, so Rick is right: Lenders do not always require a termite inspection or repairs.
"Freddie Mac," says spokesperson Eileen Fitzpatrick, "only buys the loan from lenders and I think most lenders require a termite inspection."
Sandra Cutts at Fannie Mae explains that her organization does not require a termite inspection. "However, we expect a lender to obtain an inspection if the appraisal indicates evidence of infestation (to show that the condition doesn't pose a threat of structural damage) and/or when it is common and customary in the area to obtain one."
I asked brokers and salespeople if termite inspections were required around the country and received several interesting answers from the Real Talk listserve operated by the Internet Crusade.
"Truth be known, here in St. Louis, lenders will not fund any frame structure without termite inspection or maintenance agreements -- and the overwhelming majority of our housing is stick- built. It is possible for a cash buyer to waive their (termite) inspection rights, however, the buyer's broker would be at high risk for the transaction. If I were brokering such a transaction as a buyer's representative, I would volunteer to pay for the inspection myself, if the buyer didn't want to."
It's apparent that some portion of all homes are sold without termite inspections. It may be that termites and other wood-boring insects are just not that much of a hazard -- or a hazard at all -- in certain geographic areas or with specific forms of construction. That would explain the different inspection traditions and customs seen around the country. Also, in a hot market where non-contingent offers can be a real-world necessity, a purchase offer without a termite inspection requirement could have one less barrier in the chase for a successful offer.
From my perspective, I think many buyers, sellers and lenders are well-served by termite checks. Here's why:
To Rick and all who wrote, a hearty "thank you" for your views, ideas and experiences.