FHA Loans and Pests Don’t Mix

 I recently received this as an email from one of my lender contacts…sent as just something to watch for in the listing/sale process…

“I just had a potential deal killer (well it was the deal killer of the moment, I seem to have more than one a day!) I have a FHA buyer, who’s agent wrote the offer with no termite report called or mentioned on the contract.  The buyer did obtain a termite report.  The termite company hung a notice in the home.  The appraiser, who went out after the termite company, saw this notice, took a picture of the notice and then stated in the appraisal “Contract did not call for termite inspection, however one was done.  Termite report and section 1 required”!  We now are going to require this and it’s on a short sale, and the seller has NO money and neither does the buyer!”

Hmmm…I guess my first question is ‘why is the buyer spreading him/herself so thin here?’  The second thing, is yes, a notice on the door warning of toxic fumes coming – beware – would constitute that some kind of bug needs to be exterminated before it continues eating away at the house.  Bugs = Section 1 remediation.  FHA lenders typically require Section 1 work be complete before funding the loan.  For homes one year or older, FHA appraisers are required to note if there is evidence of infestation in the house or within the legal boundaries of the property.  Further inspection is required if there is evidence of “suspicious damage”.  The evidence of suspicious damage in this case is the big sign on the door which probably read Occupants Fumigation Notice.

In our area of the San Mateo County coast/Northern California, drywood termites are common.  If you have not had a structural pest inspection in at least 10 years, the $300 +/- to get that peace of mind for your home is money well spent – even if you are not planning to sell any time soon.

Photo:  Drywood Termites – Flickr freely licensed.