1. regular sale- usually ask seller to pay and pay for section 1
2. short sale- buyer
3. Bank owned REO- some already have pest report completed, others require buyer to pay for it if wanted. Same with repairs, if repair is a condition of buyers loan/appraisal seller may (or may not) pay
4. Probate: buyer pays usually
5. VA buyer- seller has to pay
Of course each deal is different and who pays what is a negotiable point in purchase agreement.
Lyon Real Estate
You know I had a client ask me the same thing today earlier and like Paula says... it's really a negotiable item. In fact all the closing costs associated with a purchase can be negotiated.. Transfer taxes, escrow and title, pest reports and repairs.
In a normal market up here in the Sacramento area, the Seller would pay. When I sold property in the Bay Area, the buyer would pay for the report and ask the seller to make the repairs. I don't know what the "custom" in So Cal is.
However in this market the Sellers are now in control and have been for a while. As Paula says if you are working on Financing...? you don't want to include a pest inspection because they will ask for a copy. And.. If there are some "section I" items, they might want a clearance and make that a Funding condition of your loan.
So if a Pest Report is mentioned, what happens then..? What happens is a whole can of worms comes up. You the buyer will either have to come up with the costs to repair or back out of the deal if you don't have the funds to fix it and you can't get the Seller to make the repair.
Even when you don't include a pest in your offer, if the appraiser goes out and sees dry rot or other damage...? they will make a note of that on their appraisal report.
It then becomes a "condition", sometimes to be completed "prior to loan approval", which is exactly what is going on in one of the deals I have now pending.
That Buyer is actually bringing one side of a duplex up to an "average condition" just to get the appraisal approved..! He's had to pour about $2,000 into the property and doesn't even own it yet. The appraiser has to go out and re-inspect it to make sure it's in "average condition".
The Appraiser will then issue an updated report which then allows my Buyer to get his loan approved and the Lender will send final documents to Escrow for signature.
But....then we still have to get a "roof certification" and a "pest clearance" as a "prior to funding condition" to finally get the deal closed.
In this case the roof has to be replaced and there's about $1,000-$2,000 in dry rot repairs.
I've got the roofer to issue his certification before he's completed the work to help move the loan forward as a favor to me. However he requires my client pay the 10% deposit up front and he has to sign the contract.
After reading all this you are probably thinking...."What a hassle...!"
You ask "why would a buyer do all that...?"
It's because he got this property at the right time and the prices have been going up. When he closes it he'll have a place fixed up nicely with one tenant already in place and both units in great condition and a new roof.
He will have spent about $15,000 to do all that, but the value has increased by $25,000
HOWEVER... The bottom line is that he would really have preferred to close the deal AND THEN do the fix up. This is an unusual situation brought about by the properties poor condition and in our contract we didn't mention a Pest Report.
To solve all this as I'm doing now is the "art in real estate".
This is something pretty typical in our market now and I bet there are other broker and agents with stories more complex than this one they've navigated through recently.
I hope this helps...
Make it a Great Day.
However, national lenders involved in a short sale will not agree to pay for a home warranty or pest inspection so, no matter where the property is, it's normally not a good idea to have it in the contract for a buyer asking for a seller to pay for. It creates another step to counter it out when the seller's lender denies covering so...just not even mentioning it makes it a 'cleaner offer'.
National lenders involved in a foreclosure sale (REO) will often agree to a home warranty and pest inspection as part of a seller's cost. However, as Paula mentioned, if you specify anyone paying for a pest inspection at all on a contract will often have the buyer's lender asking for a copy of it, and inserting themselves in the middle of the negotiations. This would then often require repairs as a condition to loan on the property.
I can't imagine that it matters whether this is a property being sold in any part of California.
Nancy S Bergman
Lyon Short Sale Specialist
DRE # 01893550
Lyon RE Downtown
2801 J Street
Sacramento, CA 95816