You’ve heard you can’t spell escrow without three T’s: Tears, Taxes, and Termites. Unless you are making an all-cash offer, chances are that a termite company will be involved at some point in your escrow transaction. Clearing the termite certification process is a major hurdle in most escrow transactions in California. There are common mistakes made repeatedly by realtors and homebuyers alike when scheduling termite work for escrow. Thankfully, these mistakes can be prevented.
In order to prevent making the mistakes most rookies make, it’s important to understand how termite work fits into the escrow process.
In all escrow transactions involving a mortgage lender, the lender sets conditions that the borrower (buyer) has to meet to get approved for the loan. At the same time, the lender will set conditions and stipulations of minimal structural integrity, building code compliance, and others, on the property for which the loan is being issued. Lenders will want to make sure that the property they are lending on is structurally sound and not at risk of future structural failures (see section I vs section II). For that reason, lenders will, at the very least, order a thorough Wood Destroying Organism (WDO) inspection on the property in addition to the general home inspection (see Most Common Termite-Related Delay in Escrow).
If the home is in California and is over 10 years old, chances are there will be some sort of WDO or termite-related finding. Of course, each property is unique and should be thoroughly inspected, but realistically speaking, properties that are around 10 years old will likely have a minor termite finding that is likely easily dealt with by local treatment ( see Termite Control Local Treatment vs Fumigation).
Nonetheless, the lender will see this termite issue as a problem that can create future structural integrity issues if deferred or improperly handled. For that reason, the lender will require the termite issue be addressed as a precondition to funding the loan.
This is where the errors begin. I should disclaim that the following mistakes I am about to describe are all rooted in one big major error: not having a termite inspection done early enough in the escrow process to give you enough time to deal with and clear any termite-related hurdles before closing escrow (see Most Common Termite-Related Delay in Escrow ).
Having said that here are some of the common rookie mistakes we see.
Termite issues are found with just a little time left to close escrow.
A realtor fears there won’t be enough time for the lender to review the termite inspection report, provide preconditions for repairs, and go through the process of scheduling and clearing before close of escrow.
What does rookie realtor do?
They try and guess what the preconditions will be or, in a more fun version of this rookie mistake, they ask the termite company to guess what items should be repaired in order to close escrow.
Each lender, each underwriter, and each loan is unique and different.
What lenders require as preconditions to providing a loan is entirely up to the lender. It’s not a good idea to try and guess what the lender will set as preconditions.
Doing so only creates chaos, confusion and, inevitably, delays. Its a better idea to have the report in the lender’s hand early in the process so that there is enough time to address any termite-related issue that may arise.
Approving work without authorization.
I wish this wasn’t common, but it is. A lender provides notice that termite issues need to be dealt with prior to funding the loan, and a realtor fears there’s not enough time for the buyer and seller to hash out who will pay the cost.
Or, the realtor fears the work is so extensive and time to close escrow is fast approaching so, in an effort to save every last minute, Rookie Realtor approves the work himself without telling anyone.
Let me tell you, we are a group of really good-looking termite control service providers, but for some reason, people don’t like us showing up and surprising people with unexpected termite work. I can only imagine how this goes when it happens to the other companies out there.
It’s not a good idea for Rookie Realtors to approve work they aren’t really authorized to approve. When a termite company shows up to do unexpected termite work on a property, what happens is a great big knee-jerk reaction.
Work is immediately halted, and all the other parties involved need to figure out why termite professionals came out of nowhere without consent and who is expected to foot the bill.
By the time all of that gets figured out, at least a day is lost and the termite work needs to be rescheduled. The new work order received by the termite company would be scheduled in the first available slot AFTER all of its current working orders from other customers are completed, losing even more time in the escrow process.
This spectacularly bad idea is especially problematic in condo or townhome communities (see Closing Escrow in HOAs).
It’s a better idea to present the lender’s termite-related preconditions as early in the process as possible so everyone involved has the opportunity to approve and schedule properly.
Failing to coordinate work and contractors
Here we are again with Rookie Realtor far into the escrow timeline and no termite completion and certification to show.
Fearing that it might upset people to know that there is termite work which must be done but was not disclosed earlier in the process, Rookie Realtor schedules termite work to be done in conjunction with other projects in hopes that the termite work will “sneak in,” or will blend in with all the other work and will go unnoticed. This doesn’t work for two reasons.
First, when either super good looking termite professionals or not-so-super looking termite dudes show up to do work on a property, people take notice. So, it doesn’t work no matter who you hire.
Second, termite work is not often conducive to allowing other work to be done. How can a painter paint when the wood is being drilled and treated for termites?
How can a roofer work when a house is being tented?
A better idea is to lay out all of the work needed on the property early enough in the escrow process to allow enough time for scheduling and work to be done as escrow unfolds.
In short, your escrow time is not just paperwork time. Escrow time is the time to get the necessary repairs and work done in order to successfully clear escrow.
Get your termite inspection done early and that alone will set you up to have enough time to clear any termite-related hurdles well before escrow is to be closed.
We continue to be Southern California’s preferred termite and pest control service