Wood destroying pest inspections, and the costs of repairs indicated in those inspections, can be one of the most difficult obstacles to overcome in a real estate transaction.

Inspections are cheap, typically about $150 in northern California.  Sellers should commission these inspections prior to putting the house on the market–whether or not they actually make those repairs.

Suppose the sellers learn that they have substantial pest damage?  Suppose they learn that they are looking at a repair bill of $20,000, and they really don’t have the money?  It is still to the sellers’ advantage to know about these issues and make them known to the buyers before an offer is made.   Imagine how the buyers will react if the pest damage becomes known after their offer has been accepted.  This knowledge will kill the deal outright, or the buyers will use it beat down the price in excess of $20,000.  Wouldn’t you?

See our article about this topic, Pre-Inspections by the Sellers.

Do pest inspections have to be made at all?  Not necessarily.  However, I am extremely  reluctant to let my buyers close a transaction without a pest inspection of their new home—even if I have to pay for it myself.   Let me embellish this last statement with a couple of points:

• The asset managers for foreclosures and shortsale often refuse to pay for pest inspections or repairs.  Some will, some won’t.  If they do refuse to inspect, the wise buyer and wise agent will pony up the $150 for their own inspection.
• VA loans, certain other federal or state loans, and even a few private lenders, will require a pest inspection and a pest clearance that certifies that the property is free of active infestations of wood destroying pests.  No ifs, ands, or buts.

What is a pest clearance?  The inspectors put their findings in two main categories, Section 1 and Section 2.  A pest clearance means that all Section 1 items are corrected.

• Section 1 refers to active infestations, most often termites, dry rot, beetles, ants and mildew.  Less often they will find rodents, bats, and
  other weird creepy crawlers.
• Section 2 refers to conditions that may lead to active infestations if not corrected.  These findings can include active water leaks, earth-to-wood contact, broken or damaged windows, problems with gutters and downspouts, drainage problems, and so on. There’s a bunch of them.

Who pays for the pest clearance?  It is customary in our area for the seller to pay for Section 1 repairs, and the buyer to pay for Section 2 repairs if those repairs are made at all.  Lenders, when they do require a clearance, are talking about Section 1 only.

A dirty little secret about pest inspections.   The inspector puts the findings in two main categories, Section 1 and Section 2, . . . and . . . one other small category, just off to the side, hardly worth talking about, you may not even notice it, so preoccupied are you with the Section 1 items and their cost.  This category is called Further Inspection, or FI,  and it hides there like a snake in the grass, a viper ready to inject your budget with its expensive venom.  Let me tell you this, when the inspector writes “further inspection”  he already knows there is more Section 1 damage back down there where it can’t be seen.  He doesn’t have to see it, he’s ripped off so many ledger boards, stair treads, and window trims that he already knows that rot has penetrated behind the visible elements that he reports in Section 1.

Here’s an equation to remember:  FI = $$$

And remember this, the pest inspectors are allowed to inspect the property and then bid on their own findings.  This is an obvious conflict of interest.  Homeowners and real estate agents have complained about this forever, but to no avail.

Often you can find someone cheaper (and better) to make the repairs.  Pest inspection companies do the minimum, down and dirty, to be able to state that the property is free and clear of active infestation.  They don’t use the best materials, they take every possible shortcut, and they don’t paint.  You’re lucky if they prime coat the raw wood.

No one is forced to use the pest inspector’s company to correct the problems, but the inspector is the only one licensed to issue the final pest clearance, so he will have to return to re-inspect someone else’s work, at least once, maybe several times, each visit costing another “re-inspect” fee.  If the inspector and the homeowner’s contractor start butting heads . . . look out.

If the work indicated by the inspector requires a permit from the Building Department, extensive deck repairs, for instance, or new windows, and your private contractor commences the work without permit, don’t be surprised when the county inspector shows up and “red flags” the un-permitted work.  I wonder who blew the whistle on you?