Termite Cert

[ROBERT JONES]

I am getting questioned by a good and extremely reputable client about calling for a wood boring/termite certification.

They are asking me "Did I see any visible damage...." My answer is of course no, I am not a termite inspector.

I explained that it was my interpretation that if termites are common to the area, then yes I should call for a termite. They said nobody else is.

I know who my competition is in this company and they are good, highly respected appraisers with just as much if not more experience then me.

They asked me to check it out with the Philly HOC, but I wanted to check here first.


Thanks

Bob

 

[Marcia Langley]

Robert,

FHA's new guidelines do not automatically call for a termite inspection even if they are common in the area. They do require check box 4 if there is evidence (damage, tunnels) of infestation. There is a further remark about local/state laws that require inspections.

If your local/state does not require it, you shouldn't check box 4 for a termite inspection unless you have seen evidence.

 

[CANative]

Foundation protocol per revised Appendix D to 4150.2

Do no require a pest inspection based solely on the age of the property. Inspections are necessary whenever there is evidence of decay, pest infestation, suspicious damage or when it is customary to the area or required by law.

After doing a jillion purchase appraisals and reading the contracts as well as scouring MLS agent comments, you should be able to tell if pest inspections are customery or not.

 

[Damon Pedersen]

Ditto what Greg said, FHA no longer requires termite inspections unless there is obvious signs of damage, tunnels, etc.

Even in states where FHA used to require termite inspections, they don't anymore. Part of the new FHA changes. You should be familiar as there are other issues no longer relevant in the appraisal. Termite inspections are still requires if the state has laws regarding such or if any city/county requirements state they are needed.

 

[ROBERT JONES]

My concern is over the word - customary. It was customary before- but it was also a requirement (most areas).

I did call the Philly HOC - the female on the phone said - No you don't have to call for a termite unless you see evidence of damage, infestation etc.

So, I am not going to call for them anymore unless I see something. And when I don't see anything I am going to cover myself with alot of I am not this and not that.


Bob

 

[Terry Frierson]

Termite

I just attended the FHA update seminar in Little Rock on the 26th. The reps from the Denver office when pinned down said basically that if your state has termite problems, and it is "customary" that most individuals get inspections when purchasing a property, then make all appraisals "subject to" inspection regardless if you seen potential infestation or not. The majority of sales contracts I see have the buyer requiring termite inspection. So I have continued requiring them.

But, I continue to get calls from lenders saying their underwriters want the requirment removed because it is no longer a FHA requirment. They have asked FHA reps supposedly and are told that on refi or if it is not in the sales contract than do not require it period.

Sounds like FHA reps may be giving out different answers. Anyone else had any recent information on this?

 

[Marcia Langley]

In my state a non treated house is in danger of disintegrating. But we have never called for termite inspections on conventional loans so I'm not concerned about doing it on FHA loans.

FHA written guidelines say it's not required absent some sort of evidence. If they change their mind, they will revise their guideline or issue a policy letter/announcement.

Just making statements to a few and not all does not change the guideline. They are pulling a "Fannie Mae".

 

[spittman]

...they ARE required if your state is on HUD's list of TIP zones.

I've had issues with this as well among others. No one seems to be on the same page; it's no wonder people don't want to fool with FHA loans/appraisals.

I usually comment that (my state) is a mandate state for termite inspections. If a client is still confused on whether or not HUD still requires the termite inspection I refer them directly to the mortgagee letter or HUD's website; there's no disputing an actual insert or quote from either of those sources. Here's my statement:
According to HUD Mortagee Letter 2005-ML-48 dated December 19, 2005, FHA no longer requires "automatic" inspections for wood destroying insects in existing properties, however, FHA does require inspections if ... (1) there is evidence of active infestation, (2) if it is mandated by the state or local jurisdiction, (3) if it is customary to the area, or (4) at the lender's discretion. Although the appraiser did not observe any evidence of active infestation, (my state) has been identified by HUD as a mandate state for termite inspections. See HUD's Reference Guide for Appraisal & Property Requirements Chapter 1, Page 1-23, Pest Contol, Termite Infestation Zones, a.ka. TIP Zones. This usually shuts them up.

The mortgagee letter clearly states that if one of those four conditions is true then YES a termite inspection is required. I'm not reallly sure what make of condition (4) "at the lender's discretion". It sounds to me as if the lender has the power to waive the inspection. Now I could be wrong, but maybe they are to scared of the liability and would rather have you remove the comment that way it would be your fault for not calling for the inspection.

Greg is right, you can usually tell if it is mandatory in your state since purchase agreements typically have some type of verbage or addendum for termites. You can easily also check the list of states that HUD identifies as mandate states here:

http://www.HUD.gov/offices/hsg/sfh/ref/sfh1-23a.cfm


Robert, don't take my word for it. Look up this information yourself. Get the info straight from the horse's mouth. And remember, some of the biggest clients no matter how reputable, can be the most sneakiest or just dead wrong.

 

[Brad Pack]

This may help

FAQs Valuation Protocol

Wood Destroying Insects / Termites

1. Are termite reports for homes located in southern states still automatically required?

FHA no longer mandates automatic inspections for wood destroying insects or organisms in existing properties. However, pest inspections are required if, there is evidence of active infestation, it is mandated by the state or local jurisdiction, it is customary to area, or at the lender’s discretion. Prudent underwriting would dictate an inspection in termite prone areas.

2. Many areas of the country are termite prone. Does the appraiser address it on a form or does the underwriter call it out on the conditional commitment?

The appraiser is instructed report any evidence of infestation in the “improvements section” of the appraisal report under “foundation” by simply marking the evidence of infestation box. The box is checked only if there is evidence of infestation which may include the appraiser noting a
prior treatment. FHA requires a clear pest inspection report on Wood Destroying Insects/Organisms only if there is evidence of active infestation, it is mandated by the state or local jurisdiction, is customary to the area, or at the lender’s discretion.

3. Mortgagee Letter 2005-48 states that a termite inspection is no longer automatically required unless there is evidence of active infestation, it is mandated by the state or local jurisdiction, is customary to the area, or at the lender’s discretion. Can you provide more clarification of exactly how lenders should apply "customary to the area?"

“Customary to the area” would be driven by local market practices such as incorporating provisions addressing termite or wood destroying organisms in the standard real estate sales contract in termite prone areas or where the potential of infestation exists, or local requirements such as states requiring the use of their own wood destroying insects/organism form. Lender discretion and prudent underwriting is key to properly evaluating the risk associated with a property’s condition including its geographic location. Lenders MAY refer to the TIPS (termite infestation probability) zone and use that information as one of the tools in their determination of whether or not to require a pest inspection. The Termite Infestation Probability (TIP) Zones (available on-line at the following URL: http://www.npmapestworld.org/HUD.asp ) provide a valuable resource for lenders to have familiarity with the geographic areas in which they process and underwrite loans. The TIP zones are based on a copy of the International Residential Code map showing areas of termite infestation, prepared by the US Forest Service.

 

[Marcia Langley]

Note that these are instructions to lenders, not appraisers. The appraiser's job is to report what they see. If the appraiser sees a possible indication of infestation, they must make their report subject to an inspection.