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  • Termite work and your lender

    Posted on August 21st, 2013 acimetta No comments

    When you buy a home, your lender requires a copy of the purchase contract. They want to make sure that all the terms are met and their investment is protected. One of the sticking points is often the termite work. Once you include the Wood Destroying Pest Addendum in your contract, the lender requires that the work is done prior to close, and in some cases, prior to funding the loan. Without the termite clearance – proof that the property is clean – the lender will not approve your loan.

    Typically, in southern California, the seller agrees to pay Section 1 items and the Buyer will be responsible for Section 2 items. Section 1 items are those that must be fixed, i.e., dry rot, termite infestation, etc. Section 2 items are things that are not a problem now, but may lead to a problem later. These are preventative measures. The lender normally is not concerned with Section 2 items, however I have heard of some lenders requiring Section 2 items to be repaired as well. Consequently, I advise my buyers not to agree to Section 2 items so that the lender doesn’t require they be completed. This is as simple as not checking the Section 2 box on the WPA form.

    South Bay – Redondo Beach, Manhattan Beach, Hermosa Beach
    In the South Bay, we do come across some challenges from time to time. Due to the fact that we have many properties that have 2 or 3 attached town homes, but no active HOA, a problem arises when the seller of one of the units has termites and needs to tent for fumigation. In order to tent, they have to tent the whole structure which includes his attached neighbor(s). But what if the neighbor doesn’t agree to tenting? You are forced to do secondary local treatment to eradicate the termites, but the lender might not accept this alternative treatment and the loan, and ultimately the deal, could be in jeopardy.

    This can also be the case with two detached units that share the same gas line. Because you have to shut off the gas during fumigation, the neighboring unit must agree to this. It can make for a very sticky situation.

    If there is no way to convince the neighbor to cooperate with the fumigation, the other option is to remove the WPA from the contract. Once the WPA is not part of the contract, the lender will not require the work. However, as a buyer, you must be comfortable with he fact that the termite work will not be completed and you may need to tent in the future if and when your neighbor is cooperative. You may want to negotiate a credit from the seller for the cost of the fumigation in exchange for removing it from the contract in order to close the deal.