If you’ve been in the housing market lately, you may have noticed that mortgage lenders are getting tougher about termites and wood-destroying insect (WDI) inspections. Lenders often will not fund a loan for a home purchase unless they get a statement from a licensed contractor verifying that the home has been inspected for termite and wood-boring insect damage, and that any structural damage has been repaired.

The lenders say that they require this information to protect the buyer from expensive surprise repairs after settlement. That may be true to some extent, but lenders really need that wood-destroying insect inspection report to protect themselves. The buyer is not the only one with a financial investment in that new purchase.

A WDI Report Isn’t a Green Light

Buyers and sellers alike mistakenly believe that having a wood-destroying insect report in hand means the home is free of insects or damage.  Not always. A wood-destroying insect inspection is not a guarantee that structural damage does, or does not, exist behind the walls. Inspectors are only required to inspect areas that they can reasonably access without causing damage. In other words, they’re not going to pull everything out of that packed basement storeroom, and they’re not going to pull down the basement’s ceiling to get a look at the flooring above. A lot of damage can be hidden in wall or ceiling voids. As a buyer, you should ask the sellers to remove any obstructions that would prohibit a thorough inspection.

Laws vary by region as to who pays for the WDI inspection (see Real Estate Termite Inspections – Who, When, and Why?). An inspection is not required in all areas, though the lending bank may step in and make that requirement. Typically, any damage repair or any termite treatment needed is paid for by the seller prior to settlement. Homeowners’ Insurance does not generally cover wood-destroying insect damage.

[Source: “Mortgage Lenders Calling for Insect Damage Inspections in Homes,” Jill Chodorov, The Washington Post, Sept. 1, 2015]