Who Pays for Pest Inspections for FHA Loans?

Evidence of termites and other wood-destroying pests can bring a home sale transaction to an abrupt halt. These pests typically go undetected for long periods of time and can undermine the structure of a house, so homebuyers are justifiably anxious to have the home inspected before closing on the purchase.

Common Wood Destroying Pests

What is common is region-specific, but may include not only termites, but dry rot fungi, powder post beetles and carpenter ants.

The pest inspection in most regions across the country will break the report into two sections. Items listed as Section 1 include existing damage from wood-destroying pests. Those listed as Section 2 items are conditions that are conducive to creating an infestation in the near future. The latter might include faulty grade conditions, deterioration of the exterior of the dwelling, inadequate attic ventilation, and others.

Who Pays for the Inspection?

The Federal Housing Administration (FHA), the HUD agency that insures home loans, mandates that a pest inspection must be performed only if there are signs of an active infestation. These signs include:

• Mud tubes: Muddy-looking tubes the width of a pencil that extend from the soil to the infested wood. Look around concrete foundations. Sometimes the tubes are hidden under floors and behind baseboards and not easily discernible.

• Winged termites: Often the initial sign of a termite infestation, winged termites gather around light sources. You may also find their wings on windowsills or in cobwebs.

• Damage: Look for blisters or darkened areas on wood surfaces, especially floors. Rap your knuckles on the wood in various places. If it’s met with a hollow sound, suspect termites.

FHA will ask that a professional pest inspection be performed if the appraiser finds such evidence of a termite infestation.

If the lender requests a pest inspection, the buyer typically pays for it. However, this varies by region, and it is a negotiable item in the purchase agreement. Many homebuyers, if concerned about pest damage, make a pest inspection a contract contingency and request the seller pay for it.