Category: Real Estate

One of the most frustrating issues we’ve dealt with over the past few years is the confusion over private mortgage insurance (PMI). Folks on the internet aren’t helping clear the confusion; instead, many are feeding it with misinformation.

The truth is, the average down payment on a mortgage is around 11 percent, according to the National Association of Realtors. That’s a whole lot of homebuyers who are required to purchase PMI. Because of that, we’ve decided to help smash the prevailing myths about this despised yet necessary program.

What is PMI?

Private mortgage insurance protects the lender if the buyer defaults on the loan and it is generally required of borrowers who pay less than 20 percent as a down payment.

There are exceptions to this that we’ll explore, below.

PMI typically costs between 0.5 percent to 1 percent of the loan amount, each year. “At 5 percent down, private mortgage insurance (PMI) costs $150 per month on a $250,000 home,” according to the U.S. Department of Veterans Affairs.

 

Myth Number 1: “Government-backed loans don’t require PMI”

This one is partially true. The VA loan doesn’t require PMI. However, the loan does require most borrowers to pay what is known as a “funding fee” which helps mitigate the burden on the taxpayer should the borrower default on the loan.

FHA does require that borrowers purchase mortgage insurance, although theirs is called MIP, for Mortgage Insurance Premium. There is both an upfront fee and a monthly premium payment required.

The former is typically the same for all borrowers (1.75% of the base loan amount), while the latter depends on a number of factors, including the loan amount, the term and the loan-to-value ratio. The premium amount changes annually, so check with your lender to learn about current MIP rates.

Myth Number 2: “You cancel PMI when you reach 20% loan-to-value”

This myth is partially true. If you have a conventional loan you can cancel the PMI premium when you reach the 20 percent equity level.

By law (Homeowners Protection Act of 1998), however, your lender must cancel the policy when you accumulate 22 percent of the home’s original purchase price in equity.

If, on the other hand, you have an FHA-backed loan, you can’t cancel the MIP unless you sell or refinance the loan.

Myth Number 3: “PMI is tax deductible”

This was true a year ago, but for 2018 tax returns, at least as of September 2018, this deduction is no longer available.

The ability to deduct PMI is one of those tax code provisions that expire every December 31^st. Since its inception in 2007, Congress has renewed the deduction every year, sometimes at the last minute.

Hopefully, it will be again, but most tax specialists aren’t holding out hope. So, for now at least, “PMI is tax deductible” is a myth.

We aren’t mortgage professionals so we urge you to contact your lender or financial advisor if you have questions about private mortgage insurance.

OK, so you don’t have a warehouse full of designer furniture, accessories and home décor items or a degree from an interior design school. Don’t let that stop you from fashionably staging your home before you put it on the market.

Staging isn’t merely the act of decorating a home; it is primarily an appeal to emotions. A lot of psychology goes into determining colors, textures and furniture arrangement.

You can see this psychology in action in model homes. Every element of each room is thoughtfully chosen to evoke an emotional response from the potential homebuyer.

Overall, the designers hope to create desire – they want to create a sense of longing for the home. How they get there is by making homebuyers see themselves living in the home.

The first rule of home staging

There’s a reason that most articles you read about home staging start with the admonishment to “clean the home.” Studies show that clean homes sell faster and for more money than dirty homes.

And, by “dirty,” we don’t necessarily mean slovenly. Something as everyday as a pile of laundry, dishes in the sink or children’s toys scattered about can turn off a potential buyer.

“You’re asking people to forgive the mess and still pay top dollar,” stager and interior decorator Darrow Samberg tells Lena Katz at forbes.com.

By “clean,” we mean from-the-ceilings-to-the-baseboards immaculate. Yes, it’s challenging to keep it that way while the home is on the market. But, it will help the home sell quicker than it would if you don’t take the time to clean.

Another hot topic among those who write about staging is “depersonalizing” the home. Most will advise you to remove family photos, certificates, diplomas, kids’ artwork, collections and anything else of a personal nature from the shelves, walls and surfaces of every room.

By doing so, you not only allow potential buyers to more readily see themselves living in the space, but you’ll also be taking steps toward decluttering the home (the third step in the pre-staging process).

Get rid of clutter. This includes the aforementioned collection of items on countertops in the kitchen and bathroom, stacks of newspapers and magazines and anything else that isn’t decorative. 

DIY staging on the cheap: Start with your furniture

The best way to make a small room appear larger is to remove overly-large furniture. Then, rearrange what’s left so that it advertises the purpose of each room.

In other words, move the baby’s changing table out of the master bedroom and ditch that exercise equipment that clutters the family room.

Next, arrange the furniture that’s left to maximize space and create a cozy feeling. Pull the living room and family room furniture away from the walls and reposition chairs, sofas and coffee tables to create a conversation area.

The pros at Better Homes & Gardens suggest “arranging the seating pieces to face each other over a shared coffee table …”

Spiff up kitchens and bathrooms

For years, surveys of homebuyers have shown that the most important rooms in a home are the kitchen and the bathroom. It only makes sense, then, that your attention should be focused on these two rooms.

Thankfully, there are easy, inexpensive DIY projects that require nothing more than a bit of energy. Start by removing everything from the drawers and cupboards, thoroughly cleaning the interior of all of them and then returning to them only what is absolutely necessary.

Arranging the contents neatly gives the impression of roominess and storage space is a hot button for many buyers.

“Turn all coffee cup handles facing the same direction,” suggests Elizabeth Weintraub at the balance.com. “Buyers will notice and think you are meticulous about the rest of the home, too.”

Speaking of cupboards and drawers, consider purchasing new hardware for them if yours are dated.

Bathrooms are easy to update on the cheap. A fresh coat of paint (even on the cabinets, if needed), new lighting and fresh, matching linens will help add a wow factor to a dated bathroom.

Additional ideas

Here are some inexpensive ideas to get your creative juices flowing:

• Tour model homes to get staging ideas. Don’t forget to take your camera to snap photos so you can copy the décor.
• Go through the attic, basement and garage, looking for anything you can use in staging.
• Shop for decorative pieces, if necessary. Craigslist.org, flea markets, garage sales and second-hand stores are great places to find inexpensive decorative items. Look for art work, vases, baskets, rugs, mirrors, pillows and any other items you need to stage the home.
• Create focal points by adding colorful accents.

Some additional tricks of the trade include painting, which gives every room and instant makeover,  and replacing faucets in the kitchen and bathrooms.

Use the internet for more ideas: HGTV’s “Designed to Sell,” Better Homes and Gardens and A&E’s “Sell this House.”

The best part of moving to a new town or city is the newness of the whole thing. Getting to know the amenities, finding a new favorite eatery, new parks, new people and a new lifestyle is exciting stuff.

The most challenging aspect of relocating to a new area is finding a place to live, especially if your new town is a significant distance from where you now live. It is a challenge that is, thankfully, not insurmountable.

Secure the Services of a Real Estate Agent

Your number one source of neighborhood information should be your real estate agent. Have you chosen one yet? Let’s take a look at some quick tips for finding an agent in a new area.

Check real estate agents’ websites

Be aware that when you do an online search for “real estate agents in” whatever city you’ll be moving to, the first page of results may be filled with the big real estate aggregator sites, which are useless for your purposes.

Scroll down until the actual agents’ sites start appearing in the search results. You may have to view several pages of search engine results to find a handful of agents to consider.

Take a deep dive into the websites, looking for someone who offers lots of local and neighborhood information. Since you’re new in town, this information is vital in helping you find your ideal neighborhood.

Call the agents

Calling the agent for the first time is an important step in the process as it presents the first “test” of whether or not to work with the agent. You’ll find that most of the time you’ll get an agent’s voicemail.

Very few of them answer their phones and if you find one that does, give him or her extra points. Leave a concise voicemail telling the agent that you will be relocating to his or her area and need help finding a house. Don’t forget to leave your phone number and the best time to reach you.

Deduct points for any agent that takes over three hours to return your call and disregard any agent that doesn’t get back to you within 24 hours of your initial call.

Get to Know the Area

The problem with being an “outsider” is that it’s difficult to know which neighborhoods suit your lifestyle.

Sure, you can go online, do a Google Earth search and check out the surrounding areas, but that really tells you little about what it’s like to actually live in the different areas of any town or city. That type of information is best obtained by asking folks who actually live in the area.

Visits to the area before moving present the best opportunity to get a feel for what it will be like to live there. Even if you can’t visit, however, you should use the Internet and your real estate agent to research the following items, if they are important to you:

• Cost of living
• Home prices
• Schools
• Transportation
• Crime rates

Don’t forget to determine commute times from the neighborhoods you’re interested in and the cost of parking if you’ll work in a downtown building. These outlays can add significantly to the cost of living in a new area.

While most people will tell you that finding a house when relocating to a new area is stressful, don’t believe it. With the right real estate agent to guide you, it should be adventurous and exciting.

Call us if you’d like a referral to an agent in your new hometown. We’re happy to help.

Sure, the results of an appraisal and the home inspection can stop a real estate deal dead in its tracks, but what if you never get that far in the process?

What if the lender turns down your loan application – is there anything you can do to buy a home?

That depends on why the lender denied your application, and there are several possible reasons.

Let’s take a look at them and see if we can’t get you back on track to buying a home.

Low or insufficient credit score

Pulling your credit report will be one of the lender’s first tasks and low or spotty credit records are the most common reason that someone is denied a mortgage.

If you applied for a conventional loan and were turned down for this reason, consider applying for a loan using an FHA-backed mortgage.

The score requirements are a lot more relaxed and lenders are more likely to take a chance on you when the government is promising to repay them should you default on the loan.

Another way to approach the credit score problem is by paying a larger down payment, if you can afford it. Lenders take large down payments quite seriously and are willing to overlook other problems with the application when the borrower has some “skin” in the game.

Plus, the larger down payment will bring down the amount you need to borrow.

If none of these alternatives work, take a break from house hunting while you work on your credit score.

The experts at Fair, Isaac and Company, or FICO as they are known, remind consumers that “repairing bad credit is a bit like losing weight: It takes time and there is no quick way to fix a credit score.”

Get current on any bills you’re behind on and pay all bills on time going forward. Reduce your debt as much as possible and keep the balances low on your credit cards.

Lower your ratios

One of the aspects of your finances that the lender’s underwriter scrutinizes is your debt-to-income ratio (DTI). If they turned you down because yours is too high, get to work lowering it. There are three ways to do this:

• Increase your income
• Lower your debt
• Do a combination of both

Unacceptable employment history

The days of the so-called “liar loans” are long gone and today, lenders look for at least two years of consistent job history, either with the same employer or in the same industry. Even the self-employed applicant will need to meet this two-year benchmark.

If your loan denial is the result of unacceptable work history, consider waiting until you have the required amount of time on the job before reapplying.

Otherwise, keep shopping around for a loan but chances are, most lenders will deny your application for this reason.

Last minute denial

Just when the purchase seems to have overcome the most common obstacles and you’re mentally moving in to the home, the lender sends you a message that your loan has been denied.

How can this happen?

Two reasons come to mind: the appraiser said the home isn’t worth the amount of money you want to borrow or your financial situation has changed since you first applied for the loan.

Lenders will perform one last pull of your credit information just before closing, so it’s important that your financial situation remains consistent from the time escrow opens until it closes.

Don’t make major purchases on credit, don’t apply for new credit, don’t switch jobs or banks

We aren’t mortgage professionals but are happy to refer you to one should you have any questions about getting a loan, or about the mortgage process in general.

“What’s the crime rate in this area?”

It’s a common question and we understand completely why homebuyers want the answer. Unfortunately, real estate professionals are forbidden from answering it.

So, when your question is met with silence, or you’re directed to the local police station or a website or two, please don’t think we’re brushing you off.

The Fair Housing Act

Passed into law in the late 1960s, the Fair Housing Act’s aim was to end housing discrimination. In our case, it prevents us from answering certain questions because our answers may be construed as “steering.”

Steering is when a real estate agent tries to discourage a client from buying a home in a certain area. Even if we don’t intend to steer you, crime statistics, racial demographics and even which churches are in the area are topics that are off-limits to us.

The law applies to listing agents as well. For instance, advertising a home as “within walking distance,” could be a violation of the law in that it appears we are discriminating against the handicapped.

Agents get around this by saying that a home is “within close proximity to” or “near” an amenity.

Back to safe neighborhoods

There are several ways to check crime statistics or the general safety of a community.

Crime mapping services

Crime mapping services collect data from police. In addition to gathering data from the local sheriff and police departments, some, such as crimereports.com, enlist the help of homeowners with security cameras, allowing them to register their cameras with the site.

My local police department uses crimemapping.com to get the word out. Other sites to visit include spotcrime.com and mylocalcrime.com.

City review sites

Other sites, such as areavibes.com, encourage residents to give a general overview of their cities and these reviews will often contain community-level crime information.

Neighborhoodscout.com’s Crime Risk Reports “provide an instant, objective assessment of property and violent crime risks and rates for every U.S. address and neighborhood,” according to its website. They also offer lots of informative lists, such as Murder Capitals of America, Most Dangerous Cities, Most Dangerous Neighborhoods, Safest Cities in America and more.

Social networks

NextDoor.com is growing in popularity, which please us to no end. NextDoor is a social network at the neighborhood level. It’s neighbors talking to other neighbors, sharing information on local service people, lost and found pets and, yes, crime.

You’ll get a deeper insight into a particular neighborhood here than you will on a national site.

Nextdoor is a private platform so ask your agent if he or she knows anyone who lives in the neighborhood who may be a member. Perhaps the home seller is and you can log in with his credentials.

Sex offender databases

Familywatchdog.us is probably the most popular database of the nation’s sexual predators. The site also offers a list of state registries, facts and statistics and safety tips.

The U.S. Department of Justice offers the National Sex Offender Public Website with a “regularly updated database that allows you to enter an address and map sex offenders nearby.”

Talk to the neighbors

Nobody is more in touch with local crime than residents of the community. Drive the neighborhood at different times of the day and when you see neighbors outside, stop and chat with them.

Not only will you most likely get information on how safe the neighborhood is but you may learn other valuable things about it as well. So, open your ears and soak up the gossip.

Look at three or four resale homes during your house hunt and you’ll start getting the feeling that, should you purchase one of them, you will be buying someone else’s poor design ideas, lousy home maintenance and lack of cleanliness. Yuck.

It’s for this reason that many homebuyers choose a newly constructed home instead. Yes, they typically sell for more per square foot, but the extra money is worth the extras that come along with a new house. Let’s take a look at three reasons you may want to choose a new home over a resale.

1. Energy Efficiency

It’s a fact that energy efficient features lower your monthly utility bills. Many of today’s new homes are rated by the Residential Energy Services Network (RESNET), which assigns each home a score. This score is readily available to homebuyers to use when comparing the energy efficiency of homes.

In addition to the money-saving aspect an energy-efficient home provides, resale values are higher. According to Zillow’s Housing Trends Report, nearly half of homebuyers say that energy efficiency is a desirable feature in a home.

In fact, according to another major real estate conglomerate’s studies, homes with energy efficient features sell for 7 percent more than homes that lack these features.

2. Fewer Headaches

Why purchase a home that needs new paint, carpet, cabinets, appliances and flooring? In a newly-constructed home everything is new. Everything is clean. No nasty grease smells, pet odors, scuffed up baseboards or well-worn floors.

Shoddy home maintenance isn’t a concern either because the home is brand new. Then, many homebuilders will supply you with a one-year home warranty, especially if you ask for it. That kind of peace of mind is priceless.

3. The Opportunity to Customize

The ability to take a blank slate and impose one’s personal tastes onto it is the biggest reason many buyers choose a new home over an existing one.

Some of the customization features that you may be able to choose include:

• Location – often, you’ll pick which lot in the community you want to live on.
• Flow – if you purchase before the home is built you may be able to dictate where the bathroom is located or ask that the laundry room be built upstairs instead of downstairs.
• Design features – from wall color to flooring to cabinetry, you’ll be making a lot of personalized decision when you purchase a new home.

Buying a newly constructed home is a buyer-centered experience. As experienced new home buyer representatives, we are happy to walk you through every step of the process to ensure you get the home of your dreams.

Selling a home looks so easy, doesn’t it? After all, what does a real estate agent do to get homes sold that you can’t do?

Russel Baze, the winningest jockey in thoroughbred horse racing, makes his job look like a snap. If you pleasure-ride, you wouldn’t be the first to think you may have what it takes to do what he does. But, we dare you to try it.

You must not only be fit enough to remain perched atop a nervous, high-strung horse but remain still as the horse accelerates  down the track at speeds in excess of 30 miles-per-hour.

You’ll simultaneously need to fight the push-back that the acceleration causes, all the while maintaining your balance using only your heels and calves.

It’s common to lack appreciation and understanding of other peoples’ expertise – we take for granted our doctor’s skill and knowledge, the scissor wizardry of our hair stylist and, yes, the marketing chops of a good real estate listing agent.

Which leads us to the number one factor that will get your home sold.

Marketing

Unless you work in marketing as your profession, it’s safe to say you may know little about how to market a home. To do so, strategically, requires:

• Understanding current market conditions
• Knowing homebuyer trends
• Determining the most likely buyer for the home
• Knowing where to market the home
• Knowing how to present the home for maximum impact
• Pricing the home strategically
• Having the money to put a robust marketing plan into action

Example of a DIY home seller disaster

A few weeks ago, while looking through the MLS listings for homes for a buying client, I came across a home that was priced so low that I naturally assume it needed major work.

I took a closer look at the listing and learned that it was being sold by owner. It had been on the market for nearly a year, in a market where the average home sells in 34 days.

Typically, a home that sits on the market for too long does so because it’s overpriced. This home, however, was priced at rock bottom and STILL no takers.

I have no idea what other marketing avenues the seller was using, aside from an MLS listing, but even with that, he or she failed miserably.

The first thing buyers look at in a listing are the photos. This listing had only four photos, the first of which was a shot of the front of the home. It was not only blurry, but it was snapped from too far away. The home has curb appeal, but you can’t see it in the photo.

The next photo was of a long, narrow, empty room. I assumed it was the living room. If it were staged, potential buyers wouldn’t be left guessing the room’s purpose.

The kitchen, the most important room to most buyers, lacked any appeal whatsoever. Or, was it that the photo was so dark and, again, blurry?

Then, the homeowners included a photo of a pool table.

No, not a room that held a pool table, but a closeup of a pool table

The final image was the bathroom (the second most popular room for homebuyers). The toilet seat was left up, the shower curtain was open, the counter was littered with toiletries and the photo had almost no lighting.

If this home seller is trying to make less for the home than it’s worth, he is doing a bang-up job.

I certainly don’t expect a homeowner to have professional photography skills any more than I hope my clients don’t expect me to have them. Which is why it’s so important to rely on a pro to snap the photos of this HUGE investment you’re trying to sell.

Crisp, sharp, well-lit, compelling photos – and lots of them – go a long way toward getting homebuyers off the internet and into your home.

Staging empty rooms is vital if you want to sell quickly and for top dollar.

Where’s the info?

Photos aside, the homeowner also suffered a DIY disaster in the remarks section of his MLS listing. There was not one word in the remarks section. Nothing.

Imagine you’re trying to sell your car on Craigslist. Will you merely post dark and blurry photos of it without a bit of text outlining the car’s details? If so, will you really expect to be inundated with inquiries about it?

A professional listing agent understands how to use the limited remarks section for all its worth. He or she knows who is in the likely-buyer pool for the home and targets these people by highlighting the features they demand.

This is knowledge that the average homeowner lacks

The final nail in this home’s coffin

I did an even deeper dive into MLS statistics for this home and the results were fascinating. As mentioned earlier, the home went on the market nearly a year ago. Two months after listing it in the MLS, however, the homeowner dropped the price $10,000.

Naturally, he or she noticed other homes flying off the market and assumed he’d priced his too high. If that were really the case, lowering the price would provide fresh exposure and a new round of buyer interest.

Two months later he again dropped the price, $10,000

Still didn’t sell. So, and this is quite curious – four months later he raised the price $10,000. This happened three months ago and the home is still on the market.

Sadly, at this point the home is stigmatized. Buyers tend to steer clear of homes that have been on the market this long, assuming there is something wrong with them.

The competition is kicking his hiney

The listing that comes up next to our homeowner’s is priced $29,000 higher and being marketed by a pro. The home has been staged, the photos are brilliant and the listing remarks top-notch. In a side-by-side comparison, the slightly-more expensive home wins, hands down.

Now, this example is of the MLS listing, just one aspect of what it takes to market a home for sale. We have no idea if the homeowner is utilizing other marketing vehicles, but we doubt it. Homes just do not sit on the market for this long when they’re marketed professionally.

This is a textbook case of how lost a DIY home seller can become

Without a professional to guide him, he will take a beating on price when and if the home finally sells.

In the hands of a capable listing agent, this homeowner would’ve priced the home competitively out of the gate. The home would’ve been completely prepared for the market, thus justifying the price.

The appropriate research mission would let the listing agent know who to target in the marketing plan and where and how to reach them.

If I knew this homeowner, I would’ve cautioned him against dropping the price until he’d fixed the home’s presentation issues, re-photographed the home for the MLS listing and added some compelling text to it.

Now, I know that what I do isn’t rocket science. Statistics show, however, that your home, in the hands of a professional, experienced listing agent, will sell for more than you’ll make if you go the DIY route.

Not all homes are on city services – some have their own systems to deliver water and remove waste from the property. If you’re considering putting in an offer to purchase a home that has a septic system, read on for what you need to know.

General septic system anatomy

Whatever substances go down the home’s drains ends up in the septic tank. This means everything that is flushed, swirls down the sinks’ drains, and the stuff that drains from the washing machine and shower.

This tank is built to be watertight, to trap the solids it receives and then release what’s left (wastewater) into the systems drain (or, “leach”) fields.

Yes, that’s a simplistic explanation and if you’re interested in a more detailed look at septic systems, check out homeadditionplus.com or the U.S. EPA’s “Homeowner’s Guide to Septic Systems.”

If you buy it, you’ll need to maintain it

One of the biggest benefits of homes on city services is that the homeowners typically don’t have to worry about sewer maintenance. Buy a home with a septic system, however, and those chores are all yours.

And, like all home maintenance tasks, ignore them and you may end up with a rather large repair bill.

In fact, the national average cost for septic system repair is $1,472

according to homeadvisor.com.

So, what’s involved in maintaining a septic system? Ongoing maintenance includes:

• An annual inspection – A professional will check the system for, among other things, leaks, inspect the scum and sludge levels, check the effluent screens and inspect the mechanical and electrical components.
• Pumping out the tank – every three to five years

The nationwide average cost of pumping or cleaning a 1,000-gallon septic tank is $378, according to homeadvisor.com.

On the flipside, you’ll save money by not having to pay the city for sewer services (and, possibly water since many homes on septic have well water)

We can ask the homeowner for a ballpark figure of how much he or she pays for septic system maintenance each year and then compare it to what comparable homeowners on city services pay.

Think you can put off taking care of the system?

You don’t really want to find out.

Left unchecked, a leaking septic tank can saturate the leach field. If the field floods, sewage may come to the surface. Most likely, however, it will come back into the house – to the bathtub or sink. Neither a pretty site nor a healthy situation.

Although you may be tempted to put off the system inspection, it’s not wise. You have no way of knowing if everything is working as it should and that the groundwater isn’t being contaminated.

Then, there’s the cost of replacing what you failed to maintain. If you need a new tank, it will cost between $600 and nearly $4,000, depending on size and material. Then, you’ll need to have it installed which will cost between $2,753 and $8,016, according to HomeAdvisor.

The cost of installing a new drain field varies, according to the problem that caused the failure. Plan on spending between $5,000 to $20,000.

Don’t let this scare you off

If you’ve fallen in love with a home that comes with a septic system, don’t let the maintenance requirements scare you away. As mentioned earlier, the annual costs may just beat what you’d pay to be on a city sewer.

We’ll order a septic inspection before you finalize the deal and bring problems found to the seller.

Then, decide that you’ll have the system inspected annually to prevent any large surprises and that you’ll have the tank pumped out every couple of years. This way, the cost of living off the city grid doesn’t have to be a huge surprise of a bill somewhere down the line.

Warning: We’re about to give you the creeps.

It’s termite swarming season – that time of year when subterranean termite populations within colonies reach the carrying capacity and they swarm out in search of new digs.

Although they may start out underground, a few strategically constructed and placed mud tubes will allow them entry into the home.

They can also gain access to the home through wood that is in contact with the soil. This includes porch steps and supports, doorframes, deck supports and more, according to the pros at Orkin.

Evidence of an infestation can throw a real estate transaction into turmoil. The homeowners may be clueless about it and it scares the daylights out of the buyer.

Termites aren’t a problem in many parts of the country, but if they are prevalent where you live, you’ll naturally want to have the home inspected by a pest control expert before purchasing. If you’re using an FHA-backed loan, get to know its policies when it comes to pest inspections.

What FHA has to say about it

While some states, such as Nevada, require pest inspections, the FHA only requires borrowers to order a pest inspection under any the following circumstances:

• If the FHA appraiser sees evidence of an active infestation.
• If state or local jurisdictions mandate the practice
• If wood destroying pest inspections are customary in your area
• If the lender requests one

So, what does the inspector look for?

 

• The mud tubes mentioned earlier are one indication of an infestation. For several reasons (access to a food source is one), termites construct these tubes from the soil to wood. Sometimes the inspector has no trouble finding mud tubes. Sometimes, they are hidden inside walls, behind the homes baseboards, under the floors and behind walls.

Check out Orkin’s website to learn more about mud tubes and to see photos to help you identify them.

• The inspector will also look for termite wings. Like moths, termites may cluster around light sources, so one sign of an infestation are their wings littering windowsills or stuck in cobwebs.
• The inspector may check any wood structures on the property, such as fencing, wood mulch in the garden, firewood stacks and wooden structures.
• Termite damage is a sure-fire sign of an infestation, so the inspector looks for evidence of such on wood surfaces, such as floors.

Who pays for the inspection?

Although FHA doesn’t care who pays for the inspection, and it is a negotiable item, whether the seller or the buyer traditionally pay for it varies by region.

Homebuyers who live in regions with a high probability of an infestation may want to make the inspection a contract contingency, requesting that the seller pay for it.

If, on the other hand, the lender demands an inspection, the buyer will typically pay for it. Again, this varies by region.

What if an infestation is found?

Termite reports are broken down into two parts, Section 1 and Section 2. The former includes a report of active infestation and damage — items that must be remedied now.

Section 2 items are those that may lead to an infestation in the future.

If you have any concerns about wood destroying pests in a home you are interested in purchasing, have the home inspected. The national average cost of the inspection is $537, according to homeadvisor.com.

The national average cost for termite treatment, however, varies according to the scope of the problem, the size of the home and other factors. Plan on paying between $1,150 and $3,300, according to costhelper.com.