Big Change to Termite Process

By Dave Fratello | November 21st, 2014

When you buy or sell a home in California, there's almost always an inspection for termites.

In Southern California, for as long as anyone can remember, sellers have been in charge of getting rid of those bugs and any other "wood destroying pests." (Commonly dry rot or other damage from fungi.)

Sellers have typically paid for repairs to most significant damage, also.

Not anymore.

There are some big changes starting next Monday in the standard "Residential Purchase Agreement," the most commonly used offer forms for California real estate transactions. The most visible one is probably the change in termite process.

It's no longer to be assumed that the seller will pay for an inspection (about $100) and any necessary fumigation or major repairs.

If the buyer wants the seller to do an inspection and cover fumigation or repairs, the buyer will have to ask for it.

And it will be a little trickier for buyers to make that request. The old form that specifies the process, responsibility and allocation of costs for dealing with wood-destroying pests is being discontinued. You've got to use a bootleg copy or create a new addendum from scratch.

Termite inspections and repairs might become a part of the more general inspection-and-repair negotiation that is common in transactions. But this puts termite work on an equal plane with things like plumbing repairs, roofing repairs, replacement of non-working appliances and the like. Termite work will no longer exist in its own sphere where it's presumed that the seller covers the costs – it becomes just another negotiable item in the repairs process.

Here's guessing that sellers are going to quickly get accustomed to shouldering no termite responsibility. And buyers are likely to get less money and fewer repairs overall as a result of this change.

From the buyers' side, this is a most unfortunate change in the process. Termite work was one of the last bastions of consumer-friendliness in California real estate transactions. In a process that always seems to skew toward the interests of sellers, at least buyers could be assured – in most cases – that the home they buy would be delivered to them termite-free, thanks to the seller.

Now, sellers will be resistant. It's easy to imagine a case where the sellers say, "Oh, sure, we'll fumigate and replace the damaged wood, but we won't pay to replace the 25-year-old leaking roof." Or the other way around.

For sellers, this will be a welcome change, for obvious reasons. They'll typically pay for fewer repairs overall.

And you have to understand the sellers' side of this: Termite work has been an unwelcome "blank check" for all this time.

As a seller, you could control how much – if anything – to give to a buyer in terms of repairs or financial credits. But if you agreed to the typical wood-destroying pest addendum, the findings of a termite inspector could lead to a few to several thousand dollars in additional costs.

In a recent transaction, we saw not only the need for our sellers to pay for fumigation and wood repairs, but, during the wood repairs, the need for even more repairs was identified – at a cost of several hundred dollars more. The seller had no choice but to pay. It was a classic example of the blank-check problem.

They tell us that this is the way things have been with termite work in oh-so-enlightened Northern California for many years. Now, the NorCal process becomes the statewide norm.

We'll all experiment with this in 2014 and 2015, looking for ways to help our clients on whichever side of a transaction. But it's pretty easy to see that this change disproportionately harms buyers.

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