Does a 203k "require a termite report"? Roseville to San Jose

Home Inspector with, covering the USA S0289

A termite report is a tool like any other tool there is a time and a place for it. As an investor I always got a termite report as I think it is just good common sense to have eyes on the purchase. The cost of a termite report makes it a "no brain-er".

There seems to be a consensus among lenders that the streamlined k may not need a termite report provided there are no outwardly signs of termite damage or dry rot that no termite is necessary. I like them on all 203k projects frankly but are they required?

How about the Full 203k. If you look at the Borrower's Acknowledgment you will see that a clearance is a requirement of the Full 203k. If a clearance is "required" is a termite report required. Not by HUD but most lenders are in agreement that if a clearance is required at the end of the project then a report is mandated by the lender. This seems universal. Again it is just good common sense to order a termite or structural pest report. 

There are many lenders who only do the streamlined k loan and if they see that a termite report has been ordered their guideline internally says "this is now a Full 203k" as someone must have seen something that was structural damage. That isn't actually true, I would order one in any case, even if there were no outward signs of damage. It is the best inspection you can get for the price they charge.

FHA also wants a report on "all structures on the site" and people miss this all the time. They get one on the house and forget the   outbuilding that is just as large in many cases and is located in close proximity, even 30 feet away is close proximity. So you fail to include the out building and it has live termite infestation or beetles and you clear the house, as you are driving away the house is reinfected from your own property. Order a "supplemental report" on the out buildings. Your buyer needs to know if there is "active infestation" in those other buildings on the site. In most cases it is the active infestation that needs to be cured along with health and safety issues to satisfy the loan requirements. No major renovation may be required though they may want some repairs.

If you are a termite or structural pest inspector you may incrase your revenue simply by knowing this requirement and offering the suplimental report when you find out it is an FHA sale. You will actually be doing all a favor and possbily helping them clsoe faster by not having to have you back out later.

Posted by

Mike Young, 203k Team Leader    Mike ready for your 203k order

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John Manuwal
Keller Williams Northwest Montana - Kalispell, MT
Kalispell Montana Agent and Photographer

I’m glad here in Western Washington we don’t have termite problems like the rest of the country. I’ve heard horror stories but in about ten years I’ve never seen any sign of them. I still have a good pest guy look over everything. Why chance it.

Mar 09, 2012 12:00 AM #1
Lloyd Binen
Certified Realty Services - Saratoga, CA
Silicon Valley Realtor since 1976; 408-373-4411

Mike, thanks for the helpful advice for financing with a FHA 203K. I've never had occassion to use it. I bought my first home FHA 203B with a $28,000 loan 8.5% + .5% MMI in 1975 in East San Jose.  I was so nervous about the $327 payment.

Mar 09, 2012 02:05 AM #2
Tom Arstingstall, General Contractor, Dry Rot, Water Damage Sacramento, El Dorado County - (916) 765-5366
Dry Rot and Water Damage Mobile - 916-765-5366 - Placerville, CA
General Contractor, Dry Rot and Water Damage

I agree Mike, it makes sense to get the termite report regardless of whether or not it is required.

The cost is well worth the peace-of-mind.

Mar 09, 2012 05:07 PM #3
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