pest-control

Section 1 vs Section 2: Termite Reports in California Home Sales and Who Pays for What

Section 1 vs Section 2 termite reports in California home sales: what each covers, typical repair costs, who pays by region and loan type, and more.

Section 1 vs Section 2: Termite Reports in California Home Sales and Who Pays for What

Nearly every California home sale comes with a termite report, and nearly every termite report splits its findings into two sections. Section 1 lists active infestations and damage found now, and Section 2 lists conditions that are likely to lead to infestation or damage later. The difference decides who pays, what the lender cares about, and whether escrow closes on time.

The report itself is called a Wood Destroying Pest and Organism Inspection Report, and it is issued by a company licensed by the California Structural Pest Control Board. The inspector walks the accessible parts of the house, probes wood, checks for subterranean and drywood termites, fungus, dry rot, and beetles, and files the report with the state, where anyone can look it up for two years.

Section 1 items cost sellers money in most parts of the state, and Section 2 items usually do not. That is the short version, and the rest of this article covers the longer one, because who pays for what in California depends on the county, the contract, and the negotiation.

What Goes in Section 1

Section 1 covers evidence of active infestation and existing damage. Live drywood termites in the attic framing of a San Diego bungalow, subterranean termite tubes on a foundation in Sacramento, fungus damage on a deck ledger in Marin, and wood rot at a window sill in San Jose all land in Section 1.

The inspector reports what is visible and accessible. Damage inside a wall, under a slab, or behind a finished ceiling does not appear unless there is a sign of it on the outside, and that is why the report includes a list of areas that were inaccessible.

Each Section 1 finding comes with a recommendation and, in most reports, a price. A drywood termite fumigation on a 2,000 square foot house in Los Angeles or Orange County runs $1,800 to $3,500, local treatment of a single area runs $400 to $1,200, and replacing damaged wood runs from $300 for a fascia board to $5,000 or more for a deck or a subfloor section.

Section 1 clearance is what lenders and buyers want. Once the recommended work is done, the pest company issues a Notice of Work Completed, and the property is considered clear of Section 1 items as of that date.

What Goes in Section 2

Section 2 covers conditions that could lead to infestation or damage but have not yet. Earth-to-wood contact where a fence post or a deck touches soil, excessive moisture under a house, a cellulose debris pile in a crawlspace, a shower pan that showed moisture on the meter, and faulty grade where soil sits above the foundation line are typical Section 2 items.

Nothing is wrong yet in a Section 2 item, and that is the legal distinction. The wood is sound and the pests are absent, but the conditions are set for a Section 1 problem within a few years.

Section 2 findings also come with recommendations and prices. Lowering the grade along a foundation runs $300 to $1,500, fixing a shower pan runs $1,500 to $4,000, and installing a vapor barrier in a damp Bay Area crawlspace runs $1,000 to $3,000.

Most California purchase contracts and most lenders treat Section 2 as informational. A buyer can ask the seller to fix it, and the seller can decline, and escrow usually closes either way.

The Further Inspection Category

Some reports include a third bucket for areas the inspector could not access or where a problem is suspected but not confirmed. Recommendations for a further inspection of a locked garage, a covered subarea, or a stucco wall with staining fall here, and they carry a separate fee if the buyer wants them done.

A further inspection can move an item into Section 1. If the inspector opens the wall and finds termites, the seller is now dealing with a Section 1 repair that was not in the original report.

Who Pays in a California Sale

California has no law assigning termite costs to either party. The standard purchase agreement leaves it to negotiation, and the practice varies by region, by market conditions, and by what the local agents consider normal.

In much of Southern California, the tradition is that the seller pays for Section 1 work and the buyer takes Section 2 as information. Los Angeles, Orange, San Diego, and Riverside counties generally follow that pattern, with sellers budgeting for a fumigation or a few wood repairs before listing.

The Bay Area and much of Northern California have moved toward as-is sales in recent years, where the seller provides the report and the buyer accepts the property with all findings. In Santa Clara, San Mateo, and Alameda counties, buyers in competitive bids often waive the termite contingency entirely.

Market conditions change the answer. In a seller's market, buyers absorb Section 1 costs to win the house, and in a buyer's market, sellers pay for Section 1 and sometimes throw in Section 2 to keep the deal together.

What the Lender Requires

Conventional lenders in California rarely require a termite clearance, though an appraiser who notes visible damage can trigger a repair condition. FHA and VA loans are different, and VA loans in particular require a clear Section 1 before closing, with the seller traditionally paying for the work on VA transactions.

That requirement matters most in Sacramento, the Inland Empire, and the Central Valley, where VA and FHA loans are a larger share of purchases. A seller in Fresno or Riverside listing a house with visible termite damage should plan on a Section 1 repair regardless of what the contract says.

Reading the Report Before You Sign

Every report has a diagram of the house with numbered findings keyed to the text, and each finding is coded 1, 2, or further inspection. Start with the Section 1 items and their prices, because that is the money conversation.

Check the inaccessible areas list. A report that could not access the attic, the subarea, or the garage is a report with gaps, and in a 1920s Spanish house in Pasadena or a 1950s ranch in San Mateo those are exactly where the termites live.

Look up the report on the Structural Pest Control Board site. Every report filed on a California property in the past two years is searchable by address, and a seller who had a report done last year and did not disclose it has a problem.

Get a second report if the findings are large. A Section 1 total over $10,000 is worth a second opinion from a different company, and a buyer can hire their own inspector for $75 to $200 in most of the state.

Getting the Work Done Before Close

The company that wrote the report is the default to do the repairs, and it will issue the Notice of Work Completed that clears Section 1. Any licensed pest company can do the work, but the clearance has to come from a company that inspects the completed work.

Fumigation takes three days including the tenting and the aeration, and the house has to be empty of people, pets, and plants. Scheduling one during a 30-day escrow in Los Angeles or San Diego is routine as long as it is booked in the first week.

Wood repairs by a pest company are priced for speed rather than finish. A Section 1 fascia replacement will be structurally sound and primed, and a seller who wants it painted to match should expect to hire a painter separately.

Get the completion notice in hand before funding. Escrow officers across California hold the seller's proceeds until the Notice of Work Completed is filed when the contract makes Section 1 clearance a seller obligation, and the notice is what the buyer's file needs. You can find more California home selling guides on our blog, and the licensed pest control companies listed in your county can provide both the inspection and the clearance.

Frequently Asked Questions

What is the difference between Section 1 and Section 2 on a termite report?

Section 1 lists active infestations and existing damage that need repair now. Section 2 lists conditions like earth-to-wood contact or moisture that could lead to damage later but have not caused any yet.

Who pays for Section 1 termite work in California?

There is no law assigning it. Sellers traditionally pay in much of Southern California, buyers often accept it in as-is Bay Area sales, and VA loans require a clear Section 1 before closing, with sellers usually covering the cost.

How much does a termite inspection cost in California?

Most companies charge $75 to $200 for a full Wood Destroying Pest inspection, and some offer it free when they expect to do the repairs. The report is filed with the state and is valid for the transaction for 30 to 90 days depending on the lender.

Does a buyer have to fix Section 2 items?

No. Section 2 items are informational, and no lender or law requires them to be corrected before closing. Fixing them after purchase is still a good idea, since a Section 2 condition tends to become a Section 1 repair within a few years.

Can I look up a termite report on a California house?

Yes. The Structural Pest Control Board keeps every report filed in the past two years searchable by address, and a buyer can order copies for a small fee.