Termite Inspection When Buying or Selling a Home in California — What to Expect

The escrow is moving along, everyone's getting comfortable — and then the termite report lands in the inbox. It's several pages, there's a diagram of the house covered in markings and codes, and somewhere in there are the words "Section 1" next to a dollar figure. The buyer's stomach drops. The seller gets defensive. And a routine, expected part of nearly every California home sale suddenly feels like a crisis. It almost never needs to.

The termite report — properly called a Wood-Destroying Organisms, or "WDO," inspection report — is one of the most misunderstood documents in a California real estate transaction. Understood correctly, it's not a bomb going off in your escrow; it's a structured checklist that tells you exactly what a licensed inspector found and sorts it into what needs to be fixed versus what's worth watching. This guide explains what the report is, what Section 1 and Section 2 actually mean, who typically pays, and how to keep the whole thing from derailing your deal.

A real estate termite inspection in California has to be performed by a company holding a Structural Pest Control Board license in the wood-destroying-pests category (Branch 3). The inspector examines the accessible parts of the home — the attic, the subarea or crawlspace, the garage, the eaves and exterior, and interior wet areas like bathrooms and under sinks — looking for evidence of the organisms that damage wood. That covers more than just termites: the "wood-destroying organisms" category includes drywood termites, subterranean termites, wood-boring beetles, and wood-decay fungus, commonly called dry rot.

The result is a written report with a diagram of the structure. Findings are keyed to the diagram and sorted into sections, and any areas the inspector couldn't access are flagged for "further inspection." In Southern California, one finding is so common it's almost expected: drywood termites. Our dry, mild climate is ideal for them, and they infest sound, dry wood above ground — eaves, attic framing, trim, fascia — which means WDO reports across the South Bay and greater LA flag them routinely. A drywood finding on a SoCal home is not a sign the house was neglected; it's a sign the house is in Southern California.

Almost everything that causes confusion and anxiety around termite reports comes from not understanding these two categories. Get this distinction and the whole report becomes readable.

Section 1 items are active infestations or existing damage from wood-destroying organisms — evidence of a problem that is present right now. Visible drywood termites or their droppings (pellets), subterranean termite mud tubes, a wood-boring beetle infestation, fungus damage from a chronic leak, and the damaged wood these cause all fall under Section 1. These are the findings lenders focus on, and clearing the Section 1 items is what produces a "clear" report or a Section 1 clearance. When people talk about needing a "termite clearance" to close, they're almost always talking about Section 1.

Section 2 items are conditions that are likely to lead to an infestation or infection, but where there's no visible evidence of active organisms yet. Think of them as risk factors: earth-to-wood contact, excessive moisture or a plumbing leak, faulty grade that drains toward the structure, cellulose debris (wood scraps) in the crawlspace, or form boards left in place under the house. Section 2 items are recommendations — smart to address to prevent future problems — but they're often not required for a clearance the way Section 1 items are. They frequently become the buyer's future maintenance list.

This is the question that generates the most friction, and the answer surprises people: in California, there is no law dictating who pays for the termite inspection or the corrective work. It's entirely negotiable, and it's spelled out in the purchase contract. What people think of as "the rules" are really just customs, and customs vary by market and shift with whether it's a buyer's or seller's market.

That said, some patterns are common. Traditionally, sellers have often paid to correct Section 1 items — the active problems — because a lender won't fund until they're cleared and the seller wants the deal to close, while buyers more often take on the optional Section 2 items as future maintenance. But none of that is guaranteed; in a competitive market a buyer might agree to handle everything, and in a slow one a seller might cover it all. There's also an important loan-specific wrinkle: for VA loans, the buyer (the veteran) typically cannot pay for the termite inspection or the Section 1 work — it usually has to be covered by the seller or another party. The single most important thing is that whatever the arrangement, it should be written explicitly into the purchase agreement so there's no dispute later.

Once Section 1 items are identified, correcting them depends on what was found — and for the SoCal-classic drywood termite finding, there's more than one path.

After the corrective work is done, the company re-inspects and issues documentation that the work is complete — commonly a "Notice of Work Completed" and, where applicable, a Section 1 clearance. That clearance is typically what the lender and escrow are waiting on. Because tenting and repairs take time and have to be coordinated with the escrow timeline, this is a step you want to start early rather than discover at the last minute.