Dian Hymer's House Hunting Center

Imagine finding out after you purchased a new home that it's riddled with dry rot and termites. To guard against such misfortune, most homes are put through the scrutiny of a termite inspection during the course of a sale transaction.

A termite inspection is an inspection of a structure for all evidence of infestation and infection by wood destroying pests and organisms, not just termites. Other culprits might include dry rot, fungus, wood-boring beetles, mold and carpenter ants, to name a few.

After the infestation is eliminated, and related damage is repaired, a licensed pest control contractor can issue a certification stating that the property is free and clear of active infestation by wood destroying pests and organisms. This certification is loosely referred to as a termite clearance.

In this era of consumer awareness, most buyers require a current termite inspection of a home before they'll agree to buy it. However, a termite clearance is not always part of the agreement. Whether or not a termite clearance is required to close a home sale depends on the buyer's lender and on the terms of the agreement negotiated between the buyer and seller.

Buyers who purchase a home using an FHA or VA mortgage -- or a low-down payment first-time buyer mortgage program -- may be required to provide the lender with a termite clearance on the home they're buying before the lender will fund the loan. In this case, the sale can't close without a termite clearance.

Even when buyers use conventional financing, the lender is likely to require a termite clearance if the property is in a state of disrepair, particularly if hazardous conditions exist. For example, if a deck is dry rotted to the point that it's dangerous to walk on, the lender will probably want it to be repaired before they'll be willing to loan on the property.

Some buyers prefer to buy a property "as is", even if it does have damage by wood pests that needs to be corrected. If the damage isn't obvious to a lender's appraiser, and there's no reference to a termite inspection or related work in the purchase contract, the lender usually won't require a termite clearance.

For example, the master bathroom may have a failed shower pan that has led to dry rot. If you're planning to entirely redo the master bath, you may prefer that the seller not have the work done. The seller might agree to credit you the amount of the termite work, or lower the sale price by an equivalent amount. If you do accept a credit in lieu of having repairs completed by close, make sure that you follow through and have the work done.

FIRST-TIME SELLER TIP: Having termite work done during the course of a sale can be problematic if your home requires a lot of work. This is particularly true if the real estate market is active and contractors are in high demand. If you sell to a buyer whose lender requires a termite clearance, your closing could be delayed if the work can't be done quickly.

Your best bet is to order a termite inspection of your home before you put your home on the market. Review the inspection report with your real estate agent to determine what, if any, work you should complete before marketing your home. THE CLOSING: A termite clearance may not be required to sell your home, but it may enhance its salability. To a buyer, a termite clearance is like a clean bill of health.

Dian Hymer is author of "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.

Distributed by Inman News Features