Selling a House With Termite Damage: Section 1 vs. Section 2
How California pest reports sort Section 1, Section 2 and further inspection findings, who pays, what lenders want and selling as-is with termite damage.
In California, termite damage usually comes to light in a pest report, and the report’s language can be confusing the first time you read one. If you’re selling a house in Alameda County and a report has turned up termites or rot, this guide explains what Section 1, Section 2 and “further inspection” mean, who pays for what, what a buyer’s lender looks for and how selling as-is with a pest report works.
The California pest report
The official name is the Wood Destroying Pests and Organisms Inspection Report. It’s prepared by a structural pest control company on a form set by the state’s Structural Pest Control Board, and it covers more than termites. The front page has boxes for subterranean termites, drywood termites, fungus or dry rot, other findings and further inspection, and a checked box means the inspector saw a problem in an accessible area. The form also marks whether it’s a complete, limited, supplemental or reinspection report.
A pest inspection isn’t automatic in a sale. According to the California Department of Real Estate, the purchase contract specifies whether one will be done and who will do it, and a buyer’s lender may require a pest company’s certification before it funds the loan.
The Board keeps track of reports and completion notices filed on a property. The report form itself tells readers they can get copies of any filed with the Board in the preceding two years, so an earlier report on your house isn’t private.
Section 1, Section 2 and further inspection
California’s pest control regulations define the three categories used in a “separated” report:
| Finding | What it means | Examples |
|---|---|---|
| Section 1 | Visible evidence of active infestation or infection, or conditions that resulted from it | Live termites, damaged or rotted wood |
| Section 2 | Conditions likely to lead to infestation or infection, with no visible evidence of it yet | Wood touching soil, moisture problems, debris |
| Further inspection | Areas the inspector couldn’t get into, so they can’t be called Section 1 or Section 2 | Inside walls, under floor coverings, blocked areas |
Section 1 is the active problem. Section 2 is the risk. The regulations list the kinds of conditions inspectors report as likely to lead to infestation, including soil at or above the top of the foundation, earth-wood contact, wood and other cellulose debris, moisture conditions that would let fungus damage woodwork and crawl spaces with less than 12 inches of clearance under the floor joists.
Further inspection items are recommendations to look at areas the inspector couldn’t reach. The regulations require the report to say which areas weren’t inspected and why, such as furnished rooms, the inside of hollow walls, floors beneath coverings, built-in cabinets and spaces blocked by storage. If those areas are opened later, a supplemental report can say what’s there.
Who pays for what
Who pays is set by the purchase contract, not by the report. The DRE describes the contract as specifying whether there will be an inspection and who does it, and it may also say who pays for the work needed for a pest company to issue a certification. The California Association of Realtors publishes an addendum for allocating those costs.
A certification is a pest company’s written statement that the property is free of evidence of active infestation in the accessible areas. Because Section 1 covers active infestation and the damage it caused, it’s usually the work that stands between a house and a certification. Section 2 items are about preventing future problems, and whether anyone fixes them is up to the parties.
If the contract has the seller paying for work that will be finished after closing, it may require the seller to deposit funds in escrow, paid out once the buyer receives the certification.
For a sense of scale, Fixr puts a one-time termite inspection at $150–$350 and termite treatment at $450–$2,000 nationally. Whole-house fumigation, used for drywood termites, runs $1 to $4 per square foot by its estimate, and it doesn’t work on subterranean or dampwood termites. Repairing damaged wood is a separate cost that depends entirely on what’s found.
What a buyer’s lender looks for
Lenders pay attention to pest damage. Under Fannie Mae’s rules, if an appraisal shows evidence of infestation, such as wood-boring insects, the appraiser has to comment on how it affects the home’s value and marketability. The lender then has to show the problem was corrected or get a professional report that it poses no threat of structural damage, and the appraisal is made subject to repairs or to an inspection by a qualified professional.
For a seller, that means termite damage can hold up a financed sale even when the buyer is willing to take it on.
Delivering the report to the buyer
When a pest report or certification is a condition of the contract, or a requirement of the buyer’s financing, Civil Code §1099 requires the seller or the seller’s agent to deliver a copy of the report to the buyer as soon as practical before title transfers. Any notice of work completed or certification the seller receives before then has to be passed along too.
Delivering the report is separate from the seller’s broader disclosure duty, which still applies in an as-is sale. Our page on selling a house that needs repairs covers disclosure.
Selling as-is with termite damage
Sellers with a pest report usually have three choices:
- Do the Section 1 work, and any Section 2 work you choose, then sell with a certification.
- Negotiate with the buyer, through a price reduction, a credit or an escrow holdback for work after closing.
- Sell as-is, with the report shared, and let the buyer handle the work.
The first option can widen your pool of financed buyers, but it means managing fumigation or treatment, carpentry and a reinspection before you list. If the damage is extensive, or a further inspection item could open into a bigger problem, an as-is sale can be simpler.
We buy houses as-is across Alameda County, termite damage and dry rot included, and usually make a written cash offer within 24 hours. A cash purchase doesn’t depend on a lender, so there’s no certification for a loan to wait on. We charge no fees or commissions, cover typical closing costs and can close in as little as 3 days once title is clear. A cash offer is usually below full market value, so compare it with what you’d net after paying for the work. Our guides to home inspection costs and selling a house with mold cover the other reports buyers often order.
Sources
- 16 CCR §1990: Report requirements (Structural Pest Control Board regulations) (opens in a new tab)
- Civil Code §1099 (opens in a new tab)
- Structural Pest Control Board: Wood Destroying Pests and Organisms Inspection Report form (opens in a new tab)
- California DRE Reference Book, Chapter 20: Contract provisions and disclosures (opens in a new tab)
- Fannie Mae Selling Guide B4-1.3-06: Property Condition (opens in a new tab)
- Fixr: Termite treatment and inspection cost (opens in a new tab)
General information about California rules as of October 3, 2026, not legal, tax or financial advice. Laws change and every situation is different, so check the details with an attorney, CPA or other professional.