In 2015, CAR forms eliminated the previously required wood pest inspection reports from the residential purchase agreement.
Now, buyers & sellers, have 1 more issue to argue about right up to COE. Here are the “hard & fast rules” as per each investor group.
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VA Loans
All properties must have a termite inspection and all repairs must be completed before COE! Period no exceptions!
FHA and Fannie/Freddie are a little more nuanced:
a) If an appraiser “notes termite issues” OR if the appraiser “doesn’t comment” about termite issues (which is usually the case since appraisers are neither licensed, bonded, or indemnified against any future legal action) then an inspection will be required by the investor before COE.
The portion of the standard appraisal format where termite issues are addressed are contained in either the comment section at bottom of page 1, or at the bottom of page 2 which continues on to the top of page 3.
b) If by chance the appraiser does inspect the property and concludes (i.e. “goes out on a limb”) there is no termite damage” then no termite will be needed.
c) Then the buyer and seller must agree to waive the termite inspection and complete a “termite inspection waiver“.
One last note: Have the loan officer submit “the waiver” to the investor when a loan is 1st sent over, better to remove any doubt the issue has been addressed.
In Conclusion
We live in a lawsuit-happy culture. To limit your liability (either as a buying or selling agent) somebody needs to pay for the termite inspection.
If termites are found after COE, it’s just too easy for the new homeowner to sue both agents (even if it’s just small claims court) for a lack of due diligence!
That’s time lost, gas wasted but most importantly a future referral source lost which can mean tens of thousands of dollars over a real estate professionals career.
At the very least, this is another issue for the buyers and sellers to squabble over (at the very last minute) and stress everyone out (starting with the agents)!
If neither buyer or seller won’t agree to pay for the repairs it probably becomes a deal killer or the clients may decide you should to pay…just so you can get a commission!
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Daniel Dobbs (.org)
Managing Broker
Mutual Home Mortgage
500 S. Kraemer #165
Brea, Ca. 92821
Cell: 949 250-3981
Dandobbs6@gmail.com
DRE # 00986886 …..NMLS# 307631
Copywrite © August, 2018 Daniel Dobbs MHM Mortgage /// All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to the publisher, addressed “Attention: Daniel Dobbs, Author- VP-Broker Mutual Home Mortgage 265 S. Randolph #120 Brea, Ca. 92821 Cell: 949 250-3981 Dandobbs6@gmail.com NMLS #307631 BRE #00986886