Selling a House With Termite History or Active Termites

You can sell a house with termite history, and the path forward depends on what the report says and how much of the repair scope you want to handle before listing.

We’ve worked through a lot of deals across Los Angeles, Riverside, San Diego, San Bernardino, and Orange counties where a pest report was already in the file when we got the call. The situations range from a single Section 2 notation that barely moved the conversation to properties with structural damage that hadn’t been touched in years.

What California Disclosure Law Requires

My wife Andrea Van Soest, CA DRE #01505854, walks sellers through the Transfer Disclosure Statement on a regular basis, and the item she sees sellers try to minimize most often is prior termite treatment.

That item ends up on the TDS because of California Civil Code § 1102, which sets a material fact standard that reaches anything affecting a property’s value or desirability. Prior termite damage and prior infestation both fall in that category, and that’s what Andrea explains to sellers who are wondering whether to include old treatment paperwork.

Andrea has watched sellers hold back on disclosing old treatment paperwork thinking it would hurt their sale, and what that creates is worse than the disclosure itself. A buyer who finds out about undisclosed termite history after closing has real grounds to come back at the seller for what they didn’t reveal.

Buyers tend to react differently to a treated and cleared history than sellers are usually expecting. A seller who can hand over a completion certificate from a treating company and show the work is done tends to get a shorter conversation at the inspection table than one who can’t document what was done.

Section 1 vs. Section 2 on the Pest Report

California pest inspection reports are standardized into two sections by the California Structural Pest Control Board, and which section your findings fall into matters more than the specific item itself. I spent seven years as a certified residential appraiser starting in 2003, and Section 1 vs. Section 2 was the dividing line in nearly every pest conversation I saw on those transactions.

Section 1 findings are active infestation or existing damage, and they’re the ones that can hold up a transaction when lenders or buyers require clearance before closing. Section 2 conditions are things the inspector flagged as potential problems down the road rather than active damage, and those usually end at a price adjustment or a credit rather than a hold on the file.

How Buyers and Lenders Respond to Termite History

On the conventional side, buyer’s agents rarely raise the pest report with the lender unless the appraisal surfaces something. A lot of those offers move forward with the termite history on the disclosure and the price adjusted for it.

Buyers who see termite history on the disclosure tend to focus on the specific repair scope, not the history as a whole. Most sellers expect a 20 to 30 percent hit, and what I saw from the appraisal work is that the price discussion usually landed around what the repair work actually cost, not the broader history.

A buyer’s agent who sees termite history on the disclosure almost always calls for their own pest inspection, and the first question after the report comes in is usually about the completion certificate from the treating company and any structural repair documentation. The seller’s paperwork determines how fast the buyer’s agent can close that question out, and the contingency timeline follows from there.

Your Options When Selling a House With Termite History

Treat the Problem and List at Full Price

For sellers with contained damage and a timeline that allows it, the practical case for treating before listing is often about FHA and VA buyers, since those programs tie loan funding to pest clearance when Section 1 items are on the report. On some of the deals I’ve watched where a government-loan buyer was in the mix, whether the seller had the clearance done before listing was what determined which offer actually closed.

Spot treatments on contained infestations in Southern California run anywhere from a few hundred dollars to a few thousand on something more widespread. Full-structure tenting on a smaller home typically starts around $1,200 to $1,500 and scales up based on structure size.

Whether treating pencils out against what you’re trying to protect on the margin depends on the scope, and on deals with limited damage the math has usually worked in the seller’s favor when we run it. The full breakdown of what repairs are worth doing before selling covers how to think about the cost-to-value decision before committing to any scope.

Sell As-Is With Full Disclosure

Most of the as-is deals we’ve closed where termite history was part of the picture came from sellers whose repair scope didn’t make sense to take on before listing or whose timeline didn’t allow for the treat-and-relist cycle. When we ran the numbers, the as-is offer usually landed closer to their net than they’d expected.

Andrea walks every seller through the TDS before anything gets signed on an as-is deal, and the point she comes back to every time is that leaving a known material fact off the disclosure creates liability that survives closing regardless of what the contract terms say. The sellers who’ve had the worst outcomes after the fact are usually the ones who thought the as-is language covered something it didn’t.

The buyers we deal with on as-is properties are generally pricing in both the repair cost they can see and some cushion for what a full inspection might turn up after they own it. For sellers trying to sort out what falls under mandatory disclosure, what falls under mandatory disclosure on as-is sales covers those requirements in detail, including what agents and buyers typically expect.

A Deal We Closed on Avenue L in Calimesa

In October 2017, we closed on a house on Avenue L in Calimesa for $235,000.

The family had been aware of a pest situation for a while and had been managing around it, and the deferred maintenance covered more than just that. Moving the mother was the goal, and getting the house ready for a buyer wasn’t something any of them were positioned to run from wherever they were located.

The inspector doing a full walkthrough was going to find more than just the pest items, and getting the property market-ready would have meant coordinating contractors from out of the area on a timeline the family wasn’t set up to manage.

They closed in late October 2017 and the family handled the paperwork remotely. How condition gets priced into as-is offers is what drives the as-is vs. repair-and-list numbers, and how that math lands depends on the property and the market.

What to Have Ready Before You List

The sellers who came in with their prior pest inspection reports and completion certificate ready moved through the inspection contingency fast, and the conversation was usually over before the second call with the buyer’s agent. In most of those calls the buyer’s agent asked to see whatever pest documentation was in the file, including reports that were a few years old, before putting their client’s position together on the disclosure.

On deals where structural damage was part of the repair history, the buyer’s agent asked for contractor documentation right after the completion certificate, and the sellers who had photos of the completed repair work were usually done with that contingency question after one call. The sellers who were still pulling paperwork together at that stage were fielding follow-up requests from the buyer’s agent well into escrow.

Working With a Cash Buyer on a Termite-History Property

Sellers with open Section 1 items who’ve called us instead of going through the treat-and-relist cycle have generally moved faster to close than they were expecting, since there’s no lender waiting on pest clearance documentation before the loan can fund. Most of them mentioned the timeline as the part they hadn’t expected, and a few brought it up again before we’d finished going through the paperwork.

We price out a property with active Section 1 items from what we walked through during the inspection, including the pest scope and anything else the walkthrough turned up. The number a seller sees reflects the condition we walked. In most of the deals where the seller called for a second inspection after accepting, the inspector’s findings matched the condition we’d already walked and priced in, and we didn’t come back asking to renegotiate.

On most of those conversations where sellers ran both numbers, I’d find they hadn’t factored in commission and carrying time on the repair-and-list side, and once those were in the same column the conversation about the as-is offer usually shifted. The overview of how an investor calculates an offer covers where condition pricing comes from, including where deferred maintenance tends to show up in the number.

Getting the Right Help

For questions specific to your disclosure requirements, an attorney who handles California real estate transactions can give you a clearer read on the obligations for your property, and a licensed pest control company can do a current inspection and give you a read on the scope before you commit to a price.

I’m Doug Van Soest, co-founder of SoCal Home Buyers with my wife Andrea Van Soest, CA DRE #01505854. We’ve been buying residential real estate together since 2008, and together we’ve closed over 400 transactions across Southern California.

If you want to talk through your situation or get a cash offer number on your property, you can call or text us at (951) 331-3844.