Termite inspections are typically not a mortgage requirement. VA loans, however, do require a termite inspection with the exception of condos that are not on the ground floor.
For all other loan types, a termite report would not be mandatory unless the appraiser were to mention evidence of termites, or termite damage in the appraisal report.
Anytime a termite inspection is performed, (whether it’s required or not) the realtor will usually send a copy with an invoice to the title company, so that it can be paid for at closing and listed as an expense on the final CLOSING DISCLOSURE (CD). If the termite inspection is being paid at settlement and listed on the CD, the lender is required to have a copy.
This is not a big deal unless there is evidence of insects, insect damage, or both. In the case of infestation or damage, more steps are required and this is something that should be addressed immediately.
Termite report with infestation and damage
The following steps should be taken based on the results of the termite report
No Visible Evidence of wood destroying insects – Nothing additional required.
Visible Evidence of wood destroying insects – Treatment is required to be performed prior to settlement and the lender must have a paid invoice to show proof of treatment.
Visible damage from wood destroying insects – Repairs to the affected areas will be required along with an invoice, or proof of repairs from a licensed contractor. The letter or invoice should contain the contact information of the contractor, their license number (this is checked) and it must confirm the repairs were completed and the affected area is structurally sound. If the damage is merely cosmetic, a letter from a licensed contractor can be used if it states that the damage is merely cosmetic and poses no structural issues.
Clear termite report
A poor termite inspection does not have to ruin the day, however if it is uncovered at the last minute by the lender and treatment, or repairs are required, it could potentially delay settlement.
For this reason, it’s imperative that the buyers and their real estate agent inform the loan officer if a termite inspection is being performed. The lender should be able to provide the best advice and clear instructions on what to do, to insure that it will not impact settlement.
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