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Termites can eat up home's resale value

Dear Steve,
My wife and I are about a year away from selling our house and have just recently discovered termites. We've had it thoroughly treated, by a company that offers a yearly warranty stating they will treat any future termite problems. How does the history of termites affect the market value of a home, and what is the proper way to disclose this information to a prospective buyer? -- Nate

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Dear Nate,
Indeed, a record of termite infestation -- particularly in a house that has been treated more than once -- can reduce the resale value of a home well after the infestation has been controlled, I'm sorry to inform you. But it's not the end of the world.

To help soften this, get another termite inspection prior to putting the house on the market to make sure it's all clear of infestation. Then present that as part of the previous termite report -- which will have a diagram of the structure and past treatment locations -- and part of the sales package along with your disclosure of any other possible defects or treatments. The buyers will also want to know if your treatment warranties will be transferable to them, and for how long.

In many places, it is standard practice to ask the seller to pay for a termite inspection and to provide a written certification stating that the property is all clear. So, depending on how long the selling process takes, you may have to pay for a reinspection, given the property's history. They are relatively cheap ($75 to $100) and are usually done independently of the standard house inspection.

There's no upside in trying to hide the problem.

Besides the fact that it would be fraudulent to do so, most buyers will have the home inspected before closing, and a trained eye may detect previous treatment. The buyers may also hire their own termite/pest inspector to take a closer look in light of your treatment disclosure.

Even if you try to sell the house "as is," it does not relieve you of your obligation to disclose a condition substantially affecting the habitability or value of the property -- the termites in this case -- even if previous treatment is not obvious. Hopefully, you caught the infestation in the early stages and there was little damage to the home.

As to the precise impact it may have on the resale, it depends on a number of factors. The more your home is composed of wood, the greater the potential for termite damage, of course. Older wood homes are a little more suspect. However, a past infestation does not necessarily increase the chances of a future one, particularly if your treatment included preventive measures such as the installation of protective barriers. But that doesn't mean the other party won't use the past infestation as a bargaining chip.

You may lose a little because of this, but if your home is in otherwise good condition and past damage was minimal and satisfactorily repaired, don't give away too much.

Good luck.

Bankrate.com's corrections policy -- Posted: Aug. 20, 2005
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