Termites are a fact of life in California. Nearly every home I sell, when inspected, shows evidence of some form of termite damage or active infestation – no matter how new the home might be.
In a traditional sale, the buyer generally requests that the seller pay for the inspection and any necessary repairs. In a short sale however, the seller, who doesn’t have enough money to pay his mortgage, is generally not in a position to pay for any repairs, and I have yet to see a bank pick-up the cost. So who pays?
Generally, it is the buyer who is responsible for paying for any termite damage, which could mean thousands of dollars. The cost to tent and fumigate a 3 bdrm/2 bath home is roughly $1300, plus the cost to repair or replace any damaged wood. It is not uncommon for total costs to exceed $5000. This unexpected expense can cause a real problem in the transaction, and often the buyer simply has no choice but to walk away.
So how can a seller avoid losing buyers over termite issues? Start by selecting an experienced short sale agent to list your home! An experienced agent will have the inspection done prior to putting the home on the MLS and will make the report available to any agent and buyer writing an offer. The agent should also make it clear in the listing that any repair costs will be the responsibility of the buyer. In this way, the buyer knows what costs will be involved, and the offer price can reflect the anticipated expenses. The report should also be submitted to the lender so that they understand the costs that the buyer will incur to purchase the property and will (hopefully) take that into consideration in the approval process.
Buying or selling a home “As Is”, whether it’s a short sale or foreclosure raises many disclosure issues. If you have questions, please don’t hesitate to contact me.
Inside San Diego Short Sales 
February 27, 2012 at 3:48 pm
Out of curiosity… when you have a non-experienced short sale realtor who lists prior to a termite inspection… gets several offers on a home… and then does an inspection and finds 4-5k termite damage… what can be done?
I am a buyer who is in that position. There are multi. offers without one being accepted. We received the termite inspection and are curious how this can go forward (a lot of loans require the termite clearance first).
February 27, 2012 at 4:22 pm
Hi Jen,
That is a tough situation. If you are getting a VA or an FHA loan the lender will require a termite clearance. However, if you are getting a conventional loan, and DID NOT ask for a termite inspection in your original offer, your chances are good that they will not require it as a condition of approval.
However, that doesn’t solve the problem as there is 4-5K in damage that you’ll want to have repaired, whether or not your lender requires it. It is unlikely the bank will pay it on a short sale, and it is even less likely that the current owner will pay….so that leaves you. The only thing you can do is try to negotiate for a lower price to cover some or all of your expenses.
hope this helps! Please let m eknow if you have any other questions.
best,
marti