Termite report for FHA must be on ALL structures at the site !

What about that? It has always been the case - DON"T PANIC just yet. Several years ago the rule was relaxed a little which we will get into a little farther down on this post. But for now we'll discuss the requirement as it originally was imposed.

Over the years I've been to so many FHA appraisals and consultations where a termite report was presented to me that only had the main house. Typical responses were "The barn is so bad we didn't want to add that to the report - it would kill the deal for sure", or "You are kidding right? Do we really have to include the fence?", to "That is only a shed, why does it need a termite inspection?".

The answers to all their questions was the same "it is the HUD/FHA Guideline" that's all. 

What happens if the shed and house have live infestation and both have termites and you only clear the house? Oops, you have live infestation back at the house in a few weeks or days after you have treated the house because you didn't know they were at the shed too, or the barn, or the fence adjacent to the home. 

All structures on the site means just that and it doesn't mean just out buildings or fences, it is ALL STRUCTURES ON THE SITE. That means the barn(s), out buildings, fences, stables, paddocks, and any other structures on the site. 

Do we want them in the same report with the house? Not necessarily. Lets do them as "supplemental reports" to the main report. 

Do we have to cure the section 1 items found in the termite report?

What about the section II items? If the FHA appraisal calls for termite report section I items must be cured or corrected. Section II items are typically home owner maintenance and may be left for the home owner but should be corrected after the close of escrow. However on a Full or Standard 203k both section I and section II items must be cured by the contractor.

We hate to see "further inspection items"  Further inspection items merely slow the process. If your termite inspector can't have access to parts of the property it's a waste of everybody's time in your client's money. Worst-case scenario have your inspector give us his best guesstimate and then we can have them back later. The problem if he's got a dozen further inspection items is that nothing can happen with that termite report. It wastes everyone's time involved and the borrowers money because we can use the report until he makes those further inspections.

I would much rather see him give us his best guess is the problem cost and then suggest the further inspection during the course of construction. If we can get that further inspection away from right now in nailed down to during the course of construction at least we can move forward, without that, he'll have to come back out and make another inspection, the agent will have to let them in a second time, and we run the risk of it still being impossible to get to that area.

FHA Termite report requirements are more relaxed today than in the past

If there is no outward signs of infestation or dry rot an appraiser won't or shouldn't call for a termite report. I think it is a wise report to have on hand if nothing else but to inform the borrower or owner they are clear or have issues, then let them decide how to proceed. It could easily become a negotiation tool but ONLY if you were smart enough to get one. I used to get them on every property I purchased because I wanted to know the potential damages. Not so I could present it to the lender but so I was better informed and that is what I tell clients today on the FHA 203k projects.

If you don't have a termite report please get one ordered asap and show it only to me. I hate it when the agent sends it to everyone including the loan officer who may not want to see it. The consultant will review it with the borrower and may add some repairs to the scope of work. If it is clear, Yahoo !!! but if it isn't then at least the borrower is fully aware of what they are about to purchase. 

If there are a few items of dry rot observed by the appraiser they are obligated to call for a termite report, just makes good sense. If those items are in the consultant's "scope of work" to be repaired then "THEY DON'T EXIST AND SHOULD NOT BE CALLED OUT BY THE APPRAISER". Remember that the appraisal is made "subject to the repairs being complete" NOT "AS IS" therefore anything on the scope of work that is being repaired it to be seen that way - already repaired. 

If you are looking for a quick close and an informed buyer then have them get a termite and show it to ONLY the consultant and borrower. This will save you time in the long run and your project will close faster.

If you don't have a 203k lender we can recommend some really good ones that get these loans closed faster than most.