Is it advisable to waive termite inspection contingency in a short sale?

Asked by Kalusimbu, San Diego, CA Tue Nov 20, 2012

I have waived the termite inspection contingency in the short sale addendum that was submitted. Now I am wondering without termite inspection buying a house might not be that smart. The house is around 7 years old and most likely might not have significant termite problems. Will like to hear what the experts have to say. Thank you for your response in advance.

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17
Dave Kearney, Agent, Carlsbad, CA
Tue Nov 20, 2012
BEST ANSWER
You should still get a termite inspection since your lender will likely require it and you need to know if there are termites or not. In the unlikely case there is extensive wood damage you can still cancel the agreement under one of several other existing contingencies. But chances are a house only 7 years old will not have active infestation or expensive wood damage. It is common for buyers to waive this contingency in a short sale.
1 vote
Royce Kemp, Agent, San Diego, CA
Tue Nov 20, 2012
You can still obtain a termite inspection, the results alone just aren't grounds for terminating the contract. Also, unless you're paying all cash or using hard-money loan, your lender will require a termite report. You run the risk that if the results are bad, you'd have to pay to remedy the problem yourself so that your lender will proceed with the loan. Of course, if you have a loan contingency and the lender won't lend based on the results of the termite report, you could walk away from the deal on those grounds. So the real question is, do you have a loan contingency?

Royce Kemp
Premiere Properties
858-480-5570
4 votes
Jerry Heard, Agent, San Diego, CA
Tue Nov 20, 2012
The first expert you should ask is your Realtor. That said, yes you should get an inspection. Many termite companies will do them for free for a purchase. I have used Antimite for years and they do not charge.
They also check for other problems like mold and mildew as well as pointing out potential trouble areas. Do not be surprised if they do find some infestation. Almost every home in SoCal has some termites.
If the infestation is severe you can back out of the agreement. I do not think that you waived the right to an inspection just for the seller to provide a clearance.
2 votes
Cory La Scala, Agent, San Diego, CA
Tue Nov 20, 2012
It's common to waive this in a short sale, but, this doesn't mean you shouldn't have one. An inspection is usually under $100, and if there are repairs or treatment to be done, the inspection fee is often rolled in. If you find that there is extensive work to be done or the house needs to be tented, and it could happen even on a 7-year old house, and you don't want to pay for it, you can always back out of the sale within your inspection contingency period to receive your deposit back. You never know if there is untreated wood anywhere, and all it takes is for a neighbor's termites to find your untreated wood.
2 votes
Seth Chalnick, Agent, Cardiff, CA
Tue Nov 20, 2012
When there are multiple bids on a property, or it is being sold as distressed (i.e. short sale, reo, etc.), a good way to help get your offer accepted is to keep things super clean by not asking for a termite report or work to be paid by the seller.

As a Buyer in CA, you have pretty much unlimited access to inspect the property for whatever reason, up until closing. You can get your deposit back, no questions asked, up until you remove contingencies. After contingency removal, you can still back out, though some or all of your deposit will likely be put at risk. Anyway, for $85 you can have a licensed termite specialist inspect the home and draft an official report.

If there is a standard amount of work to be done, say less than $2,000, then having you eat this expense is pretty much what you signed up for, though everything is negotiable if you are prepared to walk from the deal.

If the expense is greater than $2k, or more than you were prepared to spend, then you have the option of pushing back on the seller, saying this expense was not baked into your offer, and request them to pay for it. With agreement from all parties, you can always amend the purchase agreement after escrow started.

One reason to keep the inspections "out of the offer"... meaning, not requesting it up front in the purchase agreement... is that your lender will absolutely require the work to be done before closing, regardless of who is paying for it. This can present somewhat of a challenge if you are going to pay for work on a property you don't yet own.

Meantime, since your home is only 7 years new... it would be surprising if it sustained significant termite damage, but it is always good to know up front. $85 is a small price to pay for peace of mind.

Congrats on the purchase.
Web Reference:  http://www.sethchalnick.com
2 votes
Jill Miranda…, Agent, San Diego, CA
Tue Nov 20, 2012
In a short sale situation the bank will typically not approve having any termite repairs made. I don't know the exact details of your contract or addendum but typically you have a contingency period in which to complete any inspections of your choosing. While the seller is not required to provide you with a termite report, according to what you've explained, as long as you haven't waived your right to having inspections completed during your due diligence period you can request a termite inspection at your own expense. This would give you some peace of mind and let you know what kind of costs there would be for any necessary repairs. Hopefully you are represented by an agent who should be able to advise you in more detail according to the specific terms of your contract.

Jill Miranda
DRE #01413799
Pacific Sotheby's International Realty
619-248-1431
jillmiranda@jillmiranda.com
1 vote
Cindy Davis, Agent, San Diego, CA
Tue Nov 20, 2012
A termite clearance is not required for a conventional loan, only FHA and VA. If you are using one of these latter loans, you may have to pay for your own clearance.

The other variable not mentioned in your inquiry is what the house is made of....Newer homes tend to have more stucco and less wood, and thus less exposure to termites.

Whether or not your decision was 'smart' depends upon 1) how good your purchase price is relative to market value 2) how much of a termite problem you actually have and 3) whether you need termite clearance for your loan.

You can always have an independent termite inspector come and give you a report on what you're dealing with. Many will come free of charge if they don't need to write up a report.

Best of luck.
1 vote
Bill Hays, Agent, Cardiff, AL
Tue Nov 20, 2012
So how exactly do you feel you waived the termite contingency in the SSA? I'm not seeing it in that form.

And isn't your agent an expert?

I wouldn't be too concerned - A) you can still have your own inspection; B) if there is an issue, the fix will likely not be that big of a deal due to the age of the home; C) you should have plenty of other contingencies to choose from if you decide to walk.

Bottom line, you don't want to buy a problem you aren't aware of at the close of escrow, so get the inspection and go from there.

BeachBrokerBill
CA DRE 01775528
NMLS 980076
1 vote
Max Coates, , San Diego County, CA
Tue Nov 20, 2012
Waive it but get one. If you don't waive it the next buyer will. You always uses it to negotiate if it reveals issues. If its clean then you have peace of mind for your $200.00 report
1 vote
Michael Alex, Agent, San Diego, CA
Tue Nov 20, 2012
Hello,

You must have a cash offer or conventional loan, a termite inspection is not needed for bank approval, only for VA and FHA loans. You can always have a termite inspection completed yourself, it will cost you approximately 75 dollars. If you do have issues, you can have the repairs completed on your own after the close of escrow. Short sales are sold as is in most cases.


Michael Alex
Real Estate Consultant
“The Trustworthy Knowledgeable Choice in Real Estate”
cell. 619.581.9348
email. AskMichaelAlex@gmail.com
Pacific Sotheby's International Realty
San Diego,CA
1 vote
Robert Boern…, Agent, El Cajon, CA
Tue Nov 20, 2012
While you may have waived your right to the seller providing a termite inspection and clearance (discovered items being corrected), I would be surprised if you are waiving your right to having your own inspector look at the property.

Most, if not all, short sale lenders will not allow sale proceeds to be used for termite inspections or repairs. So, an inspection would be at the option and expense of the buyer.

If you are have any questions and are not working with an agent, give me a call. I would be happy to help.

Robert Boerner
Gecko Realty
(619) 977-2262
1 vote
Sinead McAll…, Agent, Oceanside, CA
Tue Nov 20, 2012
Hi Kalusimbu,
I would still have a termite inspection done so you know what you are getting yourself into.

Thanks!
Sinead McAllister
Broker
McAllister Homes Real Estate
858-205-5215
brokermcallister@gmail.com
http://www.McAllisterHomes.com
1 vote
Mike Hinmon, Agent, San Diego, CA
Mon May 20, 2013
There's a subtle nuance between waiving your termite contingency and not having the termite inspection incorporated into the purchase contract. Waiving your termite contingency eliminates your ability to cancel the purchase contract if termite infestation/wood damage (Section 1 items) is detected during your due diligence period. This approach does not allow you to cancel the contract, even if you identify Section 1 items. However, by simply not incorporating termite into the contract, you still reserve your right to cancel based on results of a termite inspection, but your lender will not require a termite clearance to fund your loan (VA loans are the exception here). So, you're showing the Seller that your ability to secure financing will not be impaired by results of a termite report while still allowing yourself the opportunity to cancel escrow if a report identifies excessive material defects.
What did your termite report reveal?
0 votes
Michael Ford, Agent,
Thu Dec 6, 2012
it's common to waive repair requirements of the seller, but not advisable to waive the INSPECTION right that would reveal any infestations. simply waiving that contingency DOES NOT waive your right to inspect and disapprove for general condition. We will presume for our discussion that you are buying As-Is but that does not mean you cannot give the place a good hard look and decide to kill the deal if you learn it is falling down.

an inspection can be had for less than $100 and many companies will do it free for a good client. your broker, if you have one, will know someone who can give it a look. youn are correct that a seven year old home is a better risk than a 40 year old one, but termites like new wood too, so get it inspected

if the place comes up lousy with termies just figure out the cost to cure and decide if you like the place enough to cover the cost. withput seeing the contract your using i presume you have an inspection contingency...finding excessive termite damage would be one reason to walk on the deal.

many lenders WILL loan on homes without a clearance.
0 votes
Gary Geer, Agent, Antioch, IL
Wed Nov 21, 2012
A termite inspection is not expensive and is usually a good idea. Some locations do not have issues with termites and in those areas it may not be needed although you would get piece of mind getting the inspection done. . Sometimes lenders require that the inspection be done in order to get your financing. At the very least, I would check with neighbors and find out if they have knoweldge of any termite issues in area of your potential home.

All the best,

Gary Geer

http://www.ggeer.illinoisproperty.com
0 votes
John Juarez, Agent, Fremont, CA
Wed Nov 21, 2012
When you say that you waived your termite inspection, I don’t know what you are telling us.

Did you waive your right to request repairs based on defects turned up through a termite inspection? If so, that is not unusual. Short sales are bought “as is”. The short sale lender is losing lots of money on the loan and will not pay for any repairs. The seller is losing the house and will not be making any repairs.

Did you waive your right to conduct a pest inspection? That would be unusual and ill-advised, in my opinion. You need to know what you are getting yourself into. You need to know the condition of the house. You should conduct normal inspections which you have the right to do even if you are buying the house “as is”.

Did you agree to purchase the house no matter what the inspection shows? Not a good idea, in my opinion. Although a short sale is normally purchased “as is”, the purchase is also normally made subject to the buyer’s satisfaction with the condition of the property. If the pest inspection, or other inspections, show conditions that are so horrible that you do not want to continue with the purchase you should be able to cancel as long as you have not released appropriate contingencies.

Check with your Realtor for additional information.
0 votes
Hector Gaste…, Agent, Coronado, CA
Tue Nov 20, 2012
Kalusimbu,

That is why you hire a REALTOR! You are not capable of handling the transaction on your own.

Hector R. Gastelum
Realty Executives Dillon
RE#01382940
(619) 954-2225
efax (619) 270-2516
125*142*10754
hectorgastelum@yahoo.com
0 votes
REALTOR® is a trademark and is supposed to spelled with all caps and the "®", registered sign.
Flag Mon Jun 2, 2014
And now you know why no one trusts "REALTORS" Talk about used car sales lot pressure. Who would want to call you for anything. CAPS MEANS SCREAMING DON'T YOU KNOW THAT? SO GET WITH IT !
Flag Mon Nov 26, 2012
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