Termite damage discovered after offer accepted but before purchase?

Question

I made an offer on a house "For Sale By Owner" and it was readily accepted. It has been a rental property and the owner said I could move in and pay rent until the purchase date. He was in the process of having someone remodel the entire bathroom. My son, who is a union carpenter, agreed to do the remodeling and the owner would pay only for materials. When the drywall was removed, significant termite damage was discovered, and the 2X4's were like sponge. They had to be replaced on 1 1/2 walls and the entire floor. I am guessing that there is probably more damage in other walls. The owner has had the property 2 years and 3 years ago the house was professionally treated. Inspections since note the visible damage in the basement, but reports no evidence of active termites since. My question is, is there a customary or any other way to calculate what dollar amount to use for the decrease in value of the property? What would be the best way to handle it?

Answer 1

Often with FISBO’s the listing and offer process does not use a formal contract. Did you provide a formal offer? If yes then the terms for exiting the contract upon inspection deficiencies should be listed right in the text of your offer. If no contract then you just walk away. If they will not give your deposit back, take legal action.

Did the seller disclose that the property had termite damage in all the areas that they were found?

One of the reasons people do FSBO is to avoid the legitimate listing process. Basically they are trying to sell a lemon. A legitimate Real Estate Broker would not take a contract on a termite-infested property without fully disclosing the damage. The reason? If the damage is found later the Broker is also on the hook for damages related to their misrepresentation of the property.

As far as damage estimates go, 3 estimates on restoration materials and labor cost are a good start. But I’d be a little leery about that in today’s buyer’s market. Where else is there undiscovered termite damage? I would at least hold out for a full tent fumigation in addition to restoration costs. But what I’d really like is a better property.

Answer 2

THe termite issue should be addressed in the contract of sale. IT may vary from the following, this is the MD contract verbage:

TERMITE INSPECTION: Buyer, at Buyer’s expense, (if VA, then at Seller’s expense) is authorized to obtain a written report from a Maryland licensed pest control company that, based on a careful visual inspection, there is no evidence of termite or other wood-destroying insect infestation in the residence or within three (3) feet of the residence; and damage due to previous infestation has been repaired. The provisions of this paragraph also shall apply to: (1) the garage or within three (3) feet of the garage (whether attached or detached); (2) any outbuildings located within three feet of the residence or garage; and (3) a maximum of ten (10) linear feet of the nearest portion of a fence on Seller’s Property within three feet of the residence or garage. If there is evidence of present infestation as described above, or if damage caused by present or prior infestation is discovered, Seller, at Seller’s expense, shall repair any damage caused by present or prior infestation and have the present infestation treated by a licensed pest control company. If the cost of treatment and repair of such damage exceeds 2% of the purchase price, Seller may, at Seller’s option, cancel this Contract, unless Buyer, at Buyer’s option should choose to pay for the cost of treatment and repairs exceeding 2% of the purchase price, then this Contract shall remain in full force and effect. If such report reveals damage for which the cost of treatment and repair exceeds 2% of the purchase price, Seller’s decision regarding treatment and repair of damage shall be communicated in writing to Buyer within five (5) days from receipt of the report, after which Buyer shall respond to Seller in writing with Buyer’s decision within three (3) days from receipt of Seller’s notification of Seller’s decision. If Seller does not notify Buyer in writing of Seller’s decision within five (5) days from receipt of report, Buyer may, at Buyer’s option, pay for the cost of treatment and repairs exceeding 2% of the purchase price. If Buyer does not want to pay for the cost of treatment and repairs exceeding 2% of the purchase price, Buyer may terminate this Contract upon written notice delivered to Seller. In the event this Contract is terminated under the terms of this paragraph, the Deposit(s) shall be disbursed in accordance with the Deposit paragraph of this Contract.

Note it addresses past damage too. Please check your contract or have an attorney do so for you.