Termites found before going to closing please help!

[Scared buyer]

Hi everyone,

I am a first time buyer and need some advice on what to do. My wife and I found our dream home home and are set to close on it next week but we have run into a problem. We put our contract in on the house and the offer was accepted. We were given 10 days to get an inspection and appraisal done and everything went fine for the most part. The inspector found a few things that needed to be fixed so we presented it to the sellers and they fixed everything without hesitation. We submitted our loan app(FHA loan) to our broker along with all documentation after after 2 days we had our approval with a few conditions. Everything was going smooth and we started packing to move and our landlord rented the house we were living in. Well now the hard part...a week went by and we haven't heard from the underwriter for the full approval. Our landlord had the new tenant set to move in and we still haven't been clear to move in our new house. The sellers were nice enough to go ahead and let us move in and pay a rent until our loan closes. So we moved all our stuff into our soon to be new house. While unpacking we found what looked like rat poop around the base boards and in the cabinets so we called an exterminator. The exterminator came out and gave us news that we didn't have rats or mice but we do have TERMITES! I wasn't aware that we needed to have a termite inspection done. The house is 30 years old so I never thought that this house didn't have a bond or some sort of termite treatment done. My agent never told me that was needed and living in the South I assumed that everyone at least did some sort of termite treatment. The termites have eaten away a main beam under the house and through the walls in the living room. We had a contractor come out to give us an estimate on how much it would cost to do repairs on the damage. Turns out to be $5k just for the beam. So now we are a couple days out from closing living in a house with $5k in repairs needed(plus $1k for the termite treatment) Problem is we don't have that money...all our money is going to the down payment. We are at a loss on what to do. Our agent should have told us to get a termite inspection and I am very upset she didn't. In the sellers disclosures they said they didn't have any termite damage also. We have asked the sellers to pay for the repairs but since we are outside our 10 day window that they are not required to pay right? So my question is, do we walk away from the house and lose our $1k in earnest money? There is no telling how much more we are going to have to pay for the other termite damage around the house. I would think that the seller would go ahead and pay for it because if we walked away and someone else wanted to buy they would have to disclose the damage and most likely pay for it anyway. Any advice on what to do? It would be greatly appreciated because we truly don't know what to do. Thanks in advance!

[Jeffrey L. Shurtliff]

I would call the seller up and tell him you will close on the home IF they pick up the bill for the termite damage. IF not do not close on the house. Some states have disclosure clauses within their laws and some are buy beware states. I would postphone the closing until an agreement can be reached. Also I would call another exterminator for a second opinion. Also the home inspector should have spotted this problem as this is what you paid for. The Inspector should also be liable.

[JustSharon]

Hi everyone,

I would think that the seller would go ahead and pay for it because if we walked away and someone else wanted to buy they would have to disclose the damage and most likely pay for it anyway.

This is an excellent point and I think you should make sure that the sellers are aware of it. In other words, they can pay for this now and you will continue to closing. Or they can start all over again to find a new buyer and pay for it then.

What happens in the meantime, do you continue to live in the house? If so, will you point out termites to prospective buyers. I would think that the sellers would be concerned about this.

What kind of a rental agreement do you have with the sellers? Is it a regular lease, or is it some kind of an informal/verbal agreement? Does your renting there depend on your buying the house? What happens if you don't buy the house because the sellers won't pay for the damage? Can you continue to rent there? Will the sellers have to go through an eviction process to get you out? How much will that cost them?

You don't have to answer those questions here, they are intended to be thought-provoking.

Some jurisdictions require a termite inspection. I would check with your lawyer on all these things.

[Scared buyer]

This is an excellent point and I think you should make sure that the sellers are aware of it. In other words, they can pay for this now and you will continue to closing. Or they can start all over again to find a new buyer and pay for it then.

What happens in the meantime, do you continue to live in the house? If so, will you point out termites to prospective buyers. I would think that the sellers would be concerned about this.

What kind of a rental agreement do you have with the sellers? Is it a regular lease, or is it some kind of an informal/verbal agreement? Does your renting there depend on your buying the house? What happens if you don't buy the house because the sellers won't pay for the damage? Can you continue to rent there? Will the sellers have to go through an eviction process to get you out? How much will that cost them?

You don't have to answer those questions here, they are intended to be thought-provoking.

Some jurisdictions require a termite inspection. I would check with your lawyer on all these things.

thanks for your response and you bring up some great points. The sellers are sending their contractor out tomorrow to see what he says. What I'm worried about now is if the sellers contractor comes out and says he can fix it for less and that is because he is just going to nail up a board to the beam and say its fixed, how do I counter that? I have a friend that is a builder telling me that what really needs to be done is to have a structural engineer give me a letter after the work is done saying the house is sound because the joist could be supporting the second floor as well and the whole house could collapse if the work done is not correct. Luckily for me now is my loan is taking FOREVER in underwriting at Fifth Third so I have time. I just pray the seller does the right thing.

[OverandDone]

I had to have radon corrected in a house I bought and I got my own estimate to present to them.

[JustSharon]

Dear Scared:

The structural engineer sounds like a good idea. Who did the inspection that found the problem, was it somebody hired by the bank? If so, they will probably want to inspect it again before committing to the mortgage.

[Scared buyer]

We actually found what we thought were rat droppings which prompted us to hire an exterminator. That was when termites were discovered.

Dear Scared:

The structural engineer sounds like a good idea. Who did the inspection that found the problem, was it somebody hired by the bank? If so, they will probably want to inspect it again before committing to the mortgage.

[JustSharon]

We actually found what we thought were rat droppings which prompted us to hire an exterminator. That was when termites were discovered.

You mean that the regular house inspector (for the bank? or for you?) didn't find the beam problem? He only found a few "minor issues"? Holy cow! He must not have even gone in the crawl space/basement. Don't know about other states, but I know that in NJ home inspectors have to take classes and be certified. They also have to complete a notebook full of forms when they do an inspection. I don't know what their liability is if the miss something big. Did you see the inspector's report? Did he inspect the beams and say they were OK?

I hope the seller makes good on this.

[Scared buyer]

We have been told by everyone now that the home inspector should have caught this. I confronted the inspector about missing this and his response was basically that it wasn't his job to find termites. I am thinking about taking legal action because the sellers have now come back saying they will only pay half or $3000. We don't feel this should be our problem so we have told the selling agent we will are willing to pay $1000 or we are moving out. Worst experience ever. Oh by the way, we live in GA.

You mean that the regular house inspector (for the bank? or for you?) didn't find the beam problem? He only found a few "minor issues"? Holy cow! He must not have even gone in the crawl space/basement. Don't know about other states, but I know that in NJ home inspectors have to take classes and be certified. They also have to complete a notebook full of forms when they do an inspection. I don't know what their liability is if the miss something big. Did you see the inspector's report? Did he inspect the beams and say they were OK?

I hope the seller makes good on this.

[Jeffrey L. Shurtliff]

The Inspector [is] responsible for missing this. He is liable. Check your contract with him. Check your state disclosure laws pertaining to property and the sellers could also be liable. See an attorney. Do not sign any loan papers or close on the home and you probably can withhold rent from the sellers until resolution of this.

[TomEason]

Scared buyer

Thanks for your post. Welcome to the wonderful world of 1-4 unit residential property buy-sell transactions. There is nothing you have encountered that is at all unusual.

You are a first time buyer and your agent sounds like a novice. He/she didn't take care of you and should have known to advise you to get a termite report on an older house. That's de rigueur, particularly in warm, moist locales.

If it were me, I'd write a letter to all parties in the transaction, to incude both agents/brokers, the seller and the home inspector. In that letter, I'd tell them all that you refuse to pay for any of the damage. And that if they don't work it out, you intend to sue them all, and that you've already met with your RE lawyer.

I would have your RE lawyer examine the contract, and the situation and advise you how to proceed. Both real estate brokers and the home inspector have E&O insurance. So it's likely their E&O insurance carriers will pay you damages should they see the likelihood of your commencing legal action.

Good luck and try to relax. This will likely turn out just fine.

[bankwhipped]

We actually found what we thought were rat droppings which prompted us to hire an exterminator. That was when termites were discovered.

I am surprised that the bank doesn't require a termite inspection, from my recollection, at least in Florida, they don't or at least didn't use to approve a loan without a satisfactory termite report, If that is also the case in GA then the loan won't pass underwriting and you would be able to get them to fix or get any deposits back if your contract was contingent on financing.

[JustSharon]

his response was basically that it wasn't his job to find termites.

Maybe not, but in my opinion it sure was his job to find a main beam that had been eaten through! If he went into the basement/crawl space he surely would have seen this. If he did not go into the basement/crawl space, he most certainly should have. So which way does he say he was negligent? Either he had his eyes closed, or the didn't do part of the inspection.

Who employed the house inspector? you? or the bank?

In my opinion, you shouldn't pay 10 cents of this damage, but of course that's up to you.

Unfortunately, no matter how it is resolved, an experience like this leaves a bad taste in your mouth for your would-be dream house. Too bad.

Good luck

[Scared buyer]

I can't thank all of you enough for you're responses and advice. After we went back to the sellers and told them that they can either pay for all the damages or we will move out, the sellers decided to do the right thing and pay for everything. We have learned a lot from this experience, like not to use a family friend as my agent and to do more research when hiring an inspector. I have filed a complaint with the BBB on the inspector and I've contacted a RE Attorney friend to assist me with going after the inspector for at least my money back. I also want to cover my butt in case the contractor we hire starts pulling away the beam and finds more damage that wasn't included in the estimate. My closing is set for tomorrow at 3:30 so wish me luck. Thanks again.

[Jeffrey L. Shurtliff]

Glad you are getting this worked out. You can take the inspector small claims and get your money back. First call him and tell him what you have to show him he is responsible and ask for your money back.

[takeninmichigan]

Now that things have went this way and you are going to purchase the house, I would recommend that you become very knowledgeable in regard to any wood boring insect/pest. We live in a log home and last year (in Michigan) we had the worst situation with leaf cutter bees. They are horrible. They burrow about 2-3 inches into the logs and then pack their "babies" in there and then make a nice crusted finish. They then die and then in the spring the new "bees" come out.
They are very difficult on the structure and one stung my daughter last year (*they aren't aggressive but do have a nasty sting).
Since this incident, we have contracted with our exterminators year round program. He takes care of everything under this program which was great when fall emerged and the mice were looking for a place to home for the winter.
Make sure you check the property and that any dead wood is gone and away from your home. What a horrible first experience. I wish you guys the best of luck.