Termites/Financing Question

18 years ago

I made an offer on a home; the offer was accepted. Then the inspection revealed extensive termite damage. The cost to fumigate will be $4500; in addition, 150 feet of sills will need replacing. Obviously, more damage may exist behind the plaster walls.

My lender packet said that termite damage must be repaired before closing, or that money to repair the termite damage must be escrowed. The seller already said he's not lowering his selling price, nor will he pay to repair the damage(the house was listed in poor condition).

I am taking out a loan to cover the sale price of the house, plus the cost of renovation. Will I need to have money in cash at closing for the termite repair, or will the renovation loan suffice? My realtor has no experience selling dilapidated houses, so she hasn't been able to answer my questions. I'll have to pass on this house if I need to come up with more cash.

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Comments (4)

logic
18 years ago
eastgate: "My realtor has no experience selling dilapidated houses, so she hasn't been able to answer my questions."

This is why a good real estate attorney should be utilized to best protect your interests...as a properly executed purchase contract would have included this possibility up front, and the outcome of who would pay for what would have been agreed upon before you spent additional money on inspections.

That said, only your lender...and/or or a RE attorney can answer the above questions meaningfully.

All else would be simply conjecture.
berniek
18 years ago
"Will I need to have money in cash at closing for the termite repair, or will the renovation loan suffice?"

Most likely, your lender will require you to escrow 1 1/2 times the $ amount needed for termite damage repairs prior to closing.
My concern would be not knowing the extend of damage behind the walls and the cost involved to fix it. You might have to go on the assumption of the worst case scenario, replacing damage behind ALL plaster walls. How much would that cost?
Talk to your lender about all possible repairs that might be needed and the funds required to fix them.
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brickeyee
18 years ago
"The seller already said he's not lowering his selling price, nor will he pay to repair the damage(the house was listed in poor condition)."

What was in the purchase contract?
The 'standard contract' n many areas REQUIRES sellers to make ALL repairs for termite damage.

Without a clean termite report (or treatment and repair) the lender cannot sell the mortgage into the secondary market.

No one wants to be stuck with a termite damaged property and having to pay for repairs, either you or the bank.

I would actually tell this seller to make the property viable by fumigating and repairing all the damage, or walk away.

Sill replacement may go smoothly, or could result in heavy wall damage from cracking when the house is jacked to insert new sills.
The ends of the joists may be damaged (they rest on the sills) or even the bottom plates of walls and the bottom of studs.

The only way to find out exactly how much damage is present is to tear open walls and check.
User
18 years ago
I would walk from this if the seller isn't willing budge.

Termites don't tell each other to just eat the sill and leave the rest of the house alone.

The fact that the seller wont move, says they know of that problem and others and are looking for a sucker to get them out of a money pit.