This is a warning to all Realtors who are dealing with Bank Owned/Foreclosed properties. I recently represented a client on a purchase of a Bank Owned home. The bank created an addendum to our origninal offer with a list of clauses on it. One of the clauses read:
7. Seller agrees to a termite report being ordered and if evidence of active termite infestation is found, Seller agrees to treat said termite infestation at a cost acceptable to Seller, however Seller shall not be responsible for any structural damage and or repairs.
The termite inspector checked Box "A" on the Wood-Destroying Insect Inspection Report stating that visible evidence of wood-destroying insects were found. The evidence observed were termite shelter tubes. My client was purchasing this property with a VA loan, so the termite report needed to be cleared for funding to happen and the only way to get it cleared was to treat the property for termites.
We noted on the BINSR that my client wanted the property treated for termites at cost paid by the seller. My client was not willing to pay for this treatment due to the Bank leading him to believe they would pay for it in the original contract clause No. 7 and the treatment was neccessary for my client's loan to fund. I didn't think this would be an issue, since the seller did add clause No. 7 above to the contract. Boy was I wrong!
The Asset Manager for the Seller/Bank said the Seller would not treat for termites because clause No. 7 specifically stated that the termites had to be "active" for the bank to treat the property and the only evidence of termites were shelter tubes, not visible live "ACTIVE" insects. The listing agent told me the Seller wanted the inspector to state that he saw live "active" insects for the Seller to agree to pay for the treatment. I have seen many homes with shelter tubes here in Arizona, but I have never seen the actual termite itself, so my next question was...Is it possible to see the live "ACTIVE" termite?. The answer is "Yes". I was told by a termite treatment company that winged termites can sometimes be seen swarming the shelter tubes and if you open up a shelter tube you can see a white creamy substance, which is also live "ACTIVE" termites.
The problem I faced was that there very well could have been live "ACTIVE" insects in the tubes that were observed by the inspector, but how would I prove it to get the Seller to pay for treatment. I made numerous phone calls to termite treatment companies, all of which said that if you break open the shelter tubes and see a white creamy substance that would be live "ACTIVE" termites. HOWEVER, none of the companies were willing to open the tubes unless we agreed to treat the property at the time the tubes were disturbed. The companies did not want to be liable for destroying the evidence of termites if treatment was not going to be done. I was stuck, I did not have permission from the Seller to treat and I did not have permission from my client to treat, yet we needed to see inside the tubes.
I sent the Listing Agent an email telling her that I was going to need permission from the Seller and a release from liability in writing to have a termite treatment company disturb the shelter tubes, so they could check and see if there were active termites inside the tubes. It was shortly after that email that the Listing Agent informed me that the Asset Manager agreed to the treat the property for termites.
It is a releif that my story ends there, however it may be different for you and your client. Be cautious of clauses that are being added to contracts by Asset Managers/Banks as they are not always what they seem to be in the eyes of yourself and your clients.
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