A California termite report splits findings into "Section 1" and "Section 2" — and knowing the difference can save you real money in negotiations.
What a structural pest report is
A structural pest control report is prepared by a licensed pest control company that inspects the home for wood-destroying organisms and conditions — primarily termites, but also fungus/dry rot, beetles, and related issues. It's a standard part of many California transactions, and lenders sometimes require it.
The report describes findings and recommended work, and sorts them into Section 1 and Section 2.
Section 1: active infestation and damage
Section 1 items are conditions where wood-destroying organisms or their damage are currently present. Examples include:
- Live termite or other wood-destroying insect infestation.
- Active fungus / dry rot.
- Existing damage caused by these organisms.
Section 1 items are the "here and now" problems. Lenders that require a clearance most often focus on Section 1 being cleared.
Section 2: conditions likely to lead to infestation
Section 2 items are conditions that are not active infestations yet but are likely to lead to one if left alone. Examples include:
- Earth-to-wood contact.
- Excessive moisture, poor drainage, or faulty grade.
- Cellulose debris under the structure or plumbing leaks near wood.
Section 2 items are preventive — addressing them reduces the chance of future infestation but isn't always required to close.
Who pays — it's negotiable
There is no law dictating who pays for termite work in a resale. It is a negotiated term of the purchase agreement. Common patterns include:
- Seller pays for Section 1 clearance; buyer takes Section 2 (a frequent default in many markets).
- Buyer accepts the property in its condition and handles all pest work.
- The parties split costs or agree to a credit.
Whatever you negotiate should be written into the contract or an addendum. Local custom influences expectations, but the agreement controls.
How to use the report in negotiations
- Buyers: read the full report, including diagrams and "further inspection" notes (areas the inspector couldn't access). Use Section 1 findings as a basis to request seller-paid clearance.
- Sellers: consider getting a pest report before listing so there are no surprises and you control the bidding for any repairs.
- Both: confirm whether your lender requires a clearance, and get the work done by a licensed company with a clearance certificate.
Important Disclaimer
Brian Cooper is a licensed REALTOR® with eXp Realty, not an attorney or CPA. This page is general information about California real estate practice and is not legal or tax advice. Disclosure laws and the standard C.A.R. forms change, and every transaction is different. Confirm the specifics for your situation with the appropriate licensed professional (real estate attorney, CPA, or your county) and the current California law and C.A.R. forms before you act.
Frequently Asked Questions
What is the difference between Section 1 and Section 2 on a termite report?
Section 1 covers active infestation or existing damage from wood-destroying organisms. Section 2 covers conditions that are likely to lead to infestation but are not yet active, such as earth-to-wood contact or excess moisture.
Who pays for termite work in California?
It is negotiable and set by the purchase agreement, not by law. A common pattern is the seller paying for Section 1 clearance and the buyer handling Section 2, but everything is negotiable.
Does my lender require a termite clearance?
Some loans do, often focused on Section 1. Confirm with your lender early, because a required clearance can affect timelines and who completes the work before closing.
Are Section 2 items optional?
They are preventive. Addressing them lowers the risk of future infestation, but they are not always required to close. Buyers may still want them done or credited.
Should a seller order a pest report before listing?
Often yes. A pre-listing report avoids surprises and lets the seller control how repairs are handled, which can strengthen negotiating position.
What does 'further inspection recommended' mean on the report?
It means the inspector could not access certain areas (for example, behind walls or under heavy storage) and recommends opening them up to inspect. Buyers should follow up on these notes.
