Termite woes need not prevent home purchase

STARTING OUT

February 27, 1994|By Dian Hymer

Should I buy a house that needs a lot of termite work?

Buyers often shy away from making offers on houses with large termite bills. But just because a house requires a lot of termite work doesn't mean there's anything inherently wrong with the building.

A termite inspection is usually ordered during the course of a home sale. The inspection covers damage and infestation from termites as well as from other wood-destroying pests and organisms. Most wood-pest problems are correctable. When corrected, future problems can often be avoided by following a good regime of home maintenance.

A house shouldn't be ruled out just because the termite bill is large. But you should find out the condition of the systems that weren't inspected by the termite inspector such as the roof, foundation, plumbing, heating and electrical.

Also make sure the termite report is a current one and that all recommendations for further inspections are completed so that you know the full extent of the damage.

There are several ways to buy a house with a hefty termite bill. One is to ask the seller to pay for the work and have it completed by closing. This can present a scheduling problem if you want to close quickly and the work can't be done in time.

Another alternative is to buy the house "as is" with respect to the termite work. Then it's your responsibility to have the work completed after closing. This could present a problem if you're short of cash. If you have the cash, however, you might come out ahead with an "as is" purchase if you can hire contractors to do the work for less than the seller's contractors will charge.

FIRST-TIME TIP: Another strategy is to ask the seller to credit money to you at closing to cover the cost of termite repairs. This can work to both the buyer's and seller's advantage since it relieves the seller of the responsibility of doing the work before closing and the buyer can oversee the work after closing. This also gives the buyer the option to make changes such as remodeling a bath.

To complete a transaction without the lender requiring that termite work be done before closing, the house will need to pass muster with the appraiser. If the appraiser sees conditions needing repair and notes this in the appraisal, the lender may require that the work be done before the loan is funded.

Lenders put limits on how much money a seller can credit a buyer -- usually 3 percent to 6 percent of the purchase price. The lender may also want the credit to be called a credit for buyer's nonrecurring closing costs. In this case, the amount of the credit can't exceed the actual amount of your nonrecurring costs. If the amount of the termite bill exceeds the amount of your nonrecurring closing costs, have the seller complete some of the repairs before closing and credit you for the rest.

THE CLOSING: Portfolio lenders (lenders who make loans to hold in their own loan portfolio rather than to sell to investors) may be more lenient regarding repairs. Some will permit completion of work after closing.

Dian Hymer's column is syndicated through Inman News Features. Send questions and comments care of Inman News Features, 5335 College Avenue, No. 25, Oakland, Calif., 94618.

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