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Should Sacramento Home Sellers Pay for a Pest Report?
Now that the market is shifting in Sacramento, it’s time for sellers to obtain a pest report upfront if at all possible. Our long run of seller’s markets where homes are sold in AS IS condition are pretty much over. Of course, there are listing agents in Sacramento who have their “own way” of doing things and these guys would never take a listing without obtaining a pest report. But I see that under certain market conditions as overkill and unnecessary .
When the markets are hot and sellers rule, sellers can expect buyers to get their own pest reports and to live with the results. Pest reports are for a buyer’s edification only anyway. Unless a buyer is obtaining a VA loan or an appraiser spots suspicious items, a pest report is not required in a real estate transaction. Many unfortunate sellers in a seller’s market were forced by their agents to obtain pest reports and agreed to pay for a clearance because their agents didn’t stop to consider alternatives.
However, the times they are a changin’. We are now in a market where buyers are not as committed to buying a home. They want the best house on the best street in the best neighborhood, and in the best condition. If they can’t get that, they will remain a tenant. Inventory has increased, but only the nicest homes or underpriced homes quickly sell. It’s a bit more stable but with fewer buyers.
For that reason, my advice to sellers is now get a pest report. Whether sellers clear the work is another matter, but my suggestion is to at least pay for a pest report. Because when a buyer obtains the pest report, sellers are stuck with it. Oh, sure, one can obtain a second pest report but the second inspector will probably find more stuff that the first inspector missed. These reports are only as good as the inspector.
There is also the racket of pest companies trying to outsource the pest work at the consumer’s expense. I’ve said for years that pest companies should stick to inspections. Must be political lobbying that lets pest companies also bid on the work. Further, I’ve never read a pest report that didn’t contain padding, sometimes 30% or more. However, sellers are under zero obligation to use a pest company to clear the pest. And pest inspection reports stay on file for 2 years at the Pest Control Board.
When you hire your next Sacramento listing agent, why not hire an agent who understands pest reports and addresses market conditions? Avoid hiring an agent who works solely by rote because that’s the way it has always been done. Unless you like paying more for no good reason.
Should the Buyer or Seller Order a Sacramento Pest Inspection?
Who pays what fee in a real estate transaction is negotiable in Sacramento, but there are customary fees that the parties generally pay, and a Sacramento pest inspection is no exception. For example, most sellers would not pay for a home inspection on the buyer’s behalf. A seller might order a pre-home inspection before putting the home on the market, but the buyer will still be advised to request and pay for her own home inspection.
Like with any legal matter, there are rules and guidelines to follow. Such as the seller can’t demand that the buyer use a certain title company, because that would be a RESPA violation. Buyers are certainly free to pay for their own title insurance policy and the lender’s title policy, and then the buyer can select the title. Most buyers won’t do it because a title policy is as good as the insurance backing it, and most of the companies who have bit the dust aren’t leading others into that grave at the moment, plus, those fees can top easily $2,000.
When it comes to a Sacramento pest inspection, though, it’s a common practice for the seller to pay for it. The problem that arises is when the buyer’s lender spots a pest report inspection as a condition of the purchase contract, the lender will want to receive a copy of the inspection. If there is work suggested, again, the lender will expect the work to be completed. Who pays for the work, whether it’s the buyer or the seller, is also negotiable. More often than not, though, it’s the seller who foots that bill.
It becomes a little more complicated when the seller has agreed in the purchase contract to sign the WPA, Wood Destroying Pest Addendum. Some buyer’s agents will include this document with their contract paperwork. A seller who agrees to sign an agreement to complete pest work for which the seller has not yet received a report is a seller who could be suddenly responsible to pay thousands of dollars.
Lately, the practice has been not to include any reference to a pest report in the purchase contract. This is not to say that if the buyer’s appraiser spots a condition of dry-rot or suspects infestation, that the appraiser won’t “call it out” on the appraisal, because the appraiser might.
In the opinion of this Sacramento real estate agent, when representing the buyer as a buyer’s agent, it’s generally better to let the buyer pay for the Sacramento pest inspection report, and allow the buyer to choose his or her own pest company. Then, if repairs are noted, the buyer can negotiate for the repairs with the seller. This does not apply to a short sale, btw. Buyers are on their own in a short sale, no repairs. But with a regular transaction, the buyer has the option to ask the seller to pay for the repairs or agree to a closing credit and finish the repairs after closing, or if the seller refuses, to just suck it up and deal with it later.
Most sellers will give the buyers a closing credit because a) if the deal fell apart due to the pest repair negotiation, the next buyer would receive a copy of the pest inspection and that buyer might demand the same thing, and b) escrow won’t be delayed while everybody waits for the pest company to finish the work and c) the buyers might be able to complete some of the work themselves after closing and save a little bit.
On the other hand, if the buyer pays for the pest report and the deal falls apart, those pest inspections stay on record for two years at the Pest Control Board. The seller is now stuck with a pest inspection report from a company that the seller might not feel has done the best job possible. There is controversy around pest companies that issue reports and also accept payment for completion work.
Just stuff to think about before allowing your agent to automatically include in the purchase contract that the seller will pay for the pest report. You might want to reconsider how it has always been handled. If an agent is representing the seller, it might be a good idea for the agent to advise the seller to order the pest before receiving a purchase contract. That was the seller is in control. Likewise, if an agent is representing a buyer, the agent might recommend the buyer pay for a pest inspection as part of the inspections allowed under paragraph 14b1.
It depends on which side of the fence an agent sits.
If you take the last route, be sure to let the seller know a pest inspection is in the works. Otherwise, your pest inspector might meet that old guy out in the yard, waving his fist and screaming for the pest inspector to stop poking holes in his house.
