VA & FHA Condo Termite Clearance: What California Buyers and Sellers Need to Know

Articles » Termite Control » VA & FHA Condo Termite Clearance: What California Buyers and Sellers Need to Know

Living in California has many advantages, especially in areas like San Diego where the weather is good almost all year long. Unfortunately, because the weather is so good, we are not the only ones that enjoy it. Termites, fungus, dry rot, and other wood destroying organisms also do very well in many of our communities.

For this reason, termite inspections are very common in real estate transactions, especially when the buyer is using a VA or FHA loan. In most California VA and FHA condo transactions, the lender normally wants the WDO report cleared before approving the loan. Most of the time this means Section 1 clearance. Some lenders also ask for Section 2 items to be corrected before closing.

Condos make this more complicated because the owner is not responsible for every part of the property. A condo unit inspection is not an inspection of the entire condominium building. The report covers the unit and the specific areas that were requested, accessible, and included in the inspection scope. Common areas, exterior building components, attic spaces, crawl spaces, balconies, decks, roofs, and other HOA-controlled areas are outside a unit inspection unless they are specifically requested and access is provided.

This matters because the lender may be asking for termite clearance, but the seller may not have authority to correct the item if it belongs to the HOA. When that happens, the HOA needs to be contacted early so the transaction does not get stuck at the end of escrow.

What a WDO Report Covers

A WDO report is an inspection report for wood destroying organisms. Most people call it a termite report, but it covers more than termites. In California, a WDO inspection can involve drywood termites, subterranean termites, fungus damage, dry rot, wood boring beetles, carpenter ants, moisture conditions, earth-to-wood contact, and other conditions that affect wood members.

The inspector is looking at visible and accessible areas included in the inspection request. He is not performing a home inspection, roof inspection, mold inspection, plumbing inspection, or HOA maintenance inspection. The purpose of the WDO inspection is to report wood destroying pests, organisms, damage, and related conditions.

For a condo, the scope needs to be clear from the beginning. If the inspection was requested for the unit only, then the report is for the unit only. It does not cover the full building, the exterior, the common areas, or HOA-controlled spaces. If those areas need to be inspected, they need to be requested separately and made accessible.

VA and FHA Are Usually Handled the Same

In the field, VA and FHA termite clearance requirements are usually handled very similar. If there is a VA or FHA loan and the WDO report has Section 1 items, the lender normally requires those Section 1 items to be cleared before the loan can close.

The lender may use different wording. One lender may ask for termite clearance. Another may ask for Section 1 clearance. Another may ask for a clear WDO report, completion notice, or proof that active items were corrected. The wording changes, but the request is normally pointing to the same thing: the lender does not want open active infestation, active infection, or related wood damage left unresolved before closing.

This is why the lender should be asked early if they require Section 1 clearance only, or if they are also requiring Section 2 items. Some lenders only care about Section 1. Some want certain Section 2 items corrected as well.

Section 1 Items

Section 1 items are the items that normally need to be cleared for a VA or FHA loan. These are the items where the inspector found visible evidence of active infestation, active infection, or damage caused by infestation or infection.

This can include active drywood termites, subterranean termite activity, fungus damage, dry rot damage, termite-damaged wood members, or fungus-damaged wood members.

For example, drywood termite evidence at a closet, baseboard, door frame, window trim, or another accessible wood member inside the unit would normally be Section 1. Visible fungus damage under a sink cabinet from a plumbing leak can also be Section 1.

When the lender asks for Section 1 clearance, these items normally need to be treated, repaired, reinspected, or completed before the lender will clear the condition.

Section 2 Items

Section 2 items are conditions that can lead to infestation or infection, but where the inspector did not find visible active infestation or infection at the time of the inspection.

This can include moisture conditions, plumbing leaks, earth-to-wood contact, poor ventilation, cellulose debris, missing caulking, loose toilets, or other conditions that can lead to termite or fungus problems if they are not corrected.

A small plumbing leak under a sink is a good example. The cabinet may not be damaged yet, but the moisture is there and it can eventually create fungus damage. Another example is a loose toilet. If the wax seal is failing and moisture is getting into the floor area, that can become a larger problem over time.

Some lenders do not require Section 2 items to be cleared. Some do. If Section 2 clearance is required and one of those items belongs to the HOA, the transaction can get delayed quickly.

Who Usually Requests the Report

The WDO report can be requested by different people in the transaction.

The lender may ask for it because the buyer is using a VA or FHA loan. The appraiser can also call out a condition that causes the lender to request a termite inspection or clearance. This can happen if the appraiser sees wood damage, moisture staining, fungus damage, damaged trim, damaged cabinets, or other visible conditions.

The buyer, seller, real estate agent, or escrow may also request the report because they know it will be needed for the loan. In some transactions, the report is ordered early. In others, it is not ordered until the lender or appraiser asks for it, which can create delays.

The HOA does not request the buyer’s loan clearance. The HOA becomes involved when the item is located in a common area or building component controlled by the association.

What the Inspector Checks in a Condo Unit

For a condo unit inspection, the inspector checks the visible and accessible areas included in the requested scope. This normally includes interior rooms, closets, baseboards, cabinets, plumbing areas, door jambs, window trim, and other accessible areas inside the unit.

If an attached garage, patio, balcony, storage area, or other area is included in the request and access is available, then the inspector can check those areas as well. If the area is not included in the request, blocked, locked, unsafe, or controlled by the HOA without access authorization, it is not inspected.

This is why the inspection request matters. A condo unit WDO report is not a complete report for the entire condo project. If the lender, buyer, seller, or HOA wants other areas inspected, those areas need to be included in the request and made available.

Common Items Found Inside Condo Units

Some of the most common findings inside condo units are drywood termite evidence, fungus damage, moisture conditions, damaged door jambs, damaged cabinets under sinks, loose toilets, and inaccessible areas.

Drywood termites can be found in baseboards, closets, door frames, window trim, cabinets, or other accessible wood members. Many times termites are present for a long time before the owner notices them. Finding pellets, damaged wood, or other visible evidence should be taken seriously.

Fungus or dry rot damage is also common when moisture has been present for a long period of time. This can happen under kitchen sinks, bathroom sinks, laundry areas, near toilets, at exterior doors, or near windows where water has been entering.

The report can also note areas that could not be inspected. This can happen when personal items are blocking the area, cabinets are full, access panels are not available, or the inspector cannot safely access the area. If the lender needs clearance, these items may need to be addressed before the lender accepts the report.

What Is Not Included in a Unit Inspection

A condo unit WDO inspection does not cover the entire condominium building. It covers the unit and the specific areas included in the inspection request.

Unless they are specifically requested and made accessible, the inspection does not include the roof, attic, crawl space, exterior walls, exterior framing, balconies, decks, stairways, detached garages, clubhouse, or other common areas. Those areas usually involve the HOA and require access or authorization.

A WDO inspection also does not include general pest problems like ants, spiders, cockroaches, fleas, rodents, bed bugs, or other pests that are not part of the WDO inspection. Those can still be important issues, but they are not part of termite clearance for the loan.

A WDO inspection is not a roof inspection and does not certify the roof condition. If visible wood members near the roof area are part of the requested WDO scope, the inspector can report visible WDO findings on those wood members only. This does not provide an opinion on the roofing system, roof leaks, roof life, or whether the roof is watertight.

Hidden areas are also not included. If termites are inside a wall and there is no visible evidence, the inspector may not be able to report them. If access is blocked or not provided, the inspector can only report what is visible and accessible at the time of inspection.

When the HOA May Be Responsible

This is one of the most important parts of a condo WDO inspection. Just because an item is listed on the report does not automatically mean the condo owner is responsible for correcting it.

In a condo, the owner is normally responsible for the separate interest, which is usually the inside of the unit and the items defined by the CC&Rs. The HOA is normally responsible for common areas, but the exact responsibility depends on the governing documents.

If there is termite damage on an interior baseboard, that may be the owner’s responsibility. If there is fungus damage under the kitchen sink from a plumbing leak inside the unit, that may also be the owner’s responsibility.

If the finding is related to exterior fascia, balcony framing, exterior siding, common roof framing, common attic areas, crawl spaces, exterior walls, or other shared components, the HOA may need to be involved. The seller should not approve work on HOA-controlled components without proper authorization.

This is where escrow can get stuck. The lender wants clearance, but the seller may not be the person who can approve the repair. The HOA may need to review the report, decide responsibility, approve access, use their own vendor, or schedule the work through their own process.

Why Escrow Gets Delayed

A VA or FHA condo transaction can be delayed when the WDO report is ordered too late or when the findings involve the HOA.

If the report shows Section 1 items inside the unit, the process is usually simple. The seller approves the work, the pest control company completes the treatment or repair, and the clearance or completion notice is provided to escrow and the lender.

If the Section 1 item is located in an HOA-controlled area, it usually takes longer. The HOA may need to review the report, approve the repair, provide access, or decide if the item is their responsibility. The same issue can happen with Section 2 items if the lender is requiring them to be corrected.

This is why the WDO inspection should be ordered early. Waiting until the last week of escrow can create problems, especially when the buyer is using VA or FHA financing.

What Should Be Done Early

If you are buying or selling a condo with a VA or FHA loan, ask the lender early what they need. The most important question is whether they need Section 1 clearance only, or if they are also requiring Section 2 items.

The WDO inspection should be ordered early enough to allow time for review, treatment, repairs, reinspection, completion paperwork, and HOA involvement if needed.

Access should also be handled ahead of time. If there are areas that need to be inspected, they should be unlocked, cleared, and made available. If the area belongs to the HOA, permission should be requested as soon as possible.

If the report notes items that may belong to the HOA, the HOA should be contacted right away. Do not wait until escrow is almost ready to close. Some HOAs move quickly, but many need time to review and respond.

It is also important to make sure the completion paperwork matches what the lender is asking for. Some lenders want a completion notice. Some want a clearance letter. Some want the report updated or reinspected. What matters is that the lender receives what they need to clear the condition.

Before Escrow Gets Stuck

VA and FHA condo transactions in California can close smoothly, but the WDO clearance needs to be handled correctly. In most cases, both VA and FHA loans are treated the same way in the field. The lender will normally want all Section 1 items cleared before the loan is approved. Some lenders may also require Section 2 items if the condition affects moisture, safety, habitability, value, or the long-term condition of the property.

For condo owners, the biggest thing to remember is that not every WDO finding is automatically the owner’s responsibility. Some findings belong to the unit owner, while others belong to the HOA or common area. The report, the lender condition, and the HOA documents all need to be reviewed together.

If you are involved in a VA or FHA condo transaction and need help with a WDO inspection, Section 1 clearance, termite treatment, fungus damage repair, or understanding what needs to be corrected, contact GC Termite Control. Our team can inspect the visible and accessible areas, explain the findings clearly, and help you understand what may be needed to keep the transaction moving forward.

You can call us at (619) 421 – 2101 or send us a message through our contact form.