Can the presence of termites screw up a home loan? You betcha they can.
Dian Hymer, an author on Inman News, writes this about termite clearances in her column :
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.
So, what are your options as the potential buyer of a home in Long Beach, CA?
1- First, talk to a local real estate expert about a strategy before you buy.
2- Have that expert negotiate treatment for the termite infestation.
3- Waive the termite clearance clause in your contract. This can be very dangerous so you should consider defaulting to tip #1.
Government lenders require termite clearance, period. Conventional lenders allow for the termite inspection to be waived with acceptance of a contract NOT as an addendum to the contract. This means that if you want to waive the clearance post facto (because an infestation might screw up your loan), it ain't gonna work.
I agree with Laurie, I do not believe it is ever a good idea to wave inspections.
Hi Brian,
I always tell a buyer never to waive the inspections as it is their right to inspect whether or not they are responsible for amking it right.
I recommend all inspections include a clear termite even if I am told the lender does not require it.
I would rather it be addressed just in case the underwritters come back at the end and request the certificate.
It is relatively one of the cheapest items in the inspection so why not do it?
I even tell my sellers that no matter what.... the buyer will most likely need one and that if there are termites or live wood destroying organisms that they should be prepared to remove and replace.
Sometimes they can negotiate it but even on an AS-IS deal I always mention clear roof and termites are going to be a requirement.
Most sellers are aware of it because they needed it when they purchased it and i just tell them the loan might not get approved.
We buy investment property also and every home we purchase has termites...we pay cash so we just have it treated either before by negotiating with the sellers or after we purchase.
Better safe then sorry.