If you are buying or selling a home in California, a termite report will land on
your desk at some point. It will be several pages long, it will have a diagram
of the house with numbered areas, and somewhere in it every finding will be
labeled either Section 1 or Section 2.
That label is the part that costs money. Here is what it means.
The short answer
Section 1 covers active infestation or existing damage — the problems that are
happening right now. Section 2 covers conditions that could lead to a problem
later but have not caused damage yet. In a home sale, Section 1 items are the
ones that usually have to be cleared before escrow closes. Section 2 items are
usually negotiated between buyer and seller.
What Section 1 means
A Section 1 finding is evidence that wood-destroying organisms are present, or
that they have already caused damage.
That includes:
- Active termite colonies, whether drywood or subterranean
- Visible damage to structural wood from termites or beetles
- Fungus damage — what most people call dry rot
- Evidence of a past infestation that left deterioration behind
The common thread is that something has already happened. The organism is there,
or the damage it caused is there. A Section 1 item is not a warning about the
future; it is a description of the present.
This is the section that lenders care about. If a mortgage requires a clear
termite report, what they are asking for is a Section 1 clearance — a
document stating that the Section 1 items in the report have been corrected.
What Section 2 means
A Section 2 finding is a condition that is likely to lead to infestation or
damage if it is not addressed, but that has not caused damage yet.
Typical examples:
- Wood-to-earth contact, where a post or siding meets the soil directly
- Faulty grade — soil built up above the level of the foundation
- Plumbing leaks or excessive moisture in a crawl space
- Cellulose debris left under the house after construction
- Wood that is untreated and exposed to weather
None of these means you have termites. All of them mean you are making it easier
to get them. Subterranean termites need contact with soil and moisture; wood
touching dirt is an open door.
Section 2 items are real. Ignoring them for ten years is how a house ends up with
a Section 1 report.
Why the split matters during a sale
The distinction exists because it separates what is wrong from what could go
wrong. That separation is what makes the report usable in a negotiation.
In practice, Section 1 items are most often handled by the seller — the sale
usually cannot close until they are cleared, particularly when a lender is
involved. Section 2 items are commonly left to the buyer, or used as a point
of negotiation on price.
This is convention, not law. Who pays for what is a term of the contract, and it
is negotiable. We have seen sales where the seller cleared everything, and sales
where the buyer took on the entire report in exchange for a price adjustment.
What matters is that both sides understand which findings fall into which
category before they start negotiating.
That is also why the quality of the inspection matters. A report that misses a
Section 1 item does not make the problem disappear — it just moves the cost to
whoever owns the house when it is finally found.
The third category: further inspection
There is one more label you may see, and it confuses people: a recommendation
for further inspection.
This is not a finding. It means part of the structure could not be examined —
an attic with no access, a crawl space blocked by ductwork, a wall covered by
built-in cabinetry, a subarea too tight to enter safely.
An inspector can only report on what is accessible. When an area is not, the
honest thing to do is say so rather than assume it is clean. If your report
includes a further-inspection item, it is worth resolving before you close.
Inaccessible areas are exactly where problems go unnoticed the longest.
What happens after the report
Once the report is issued, there are usually three paths:
- Corrections are completed, and a clearance or certification is issued for
the Section 1 items. - Corrections are negotiated, with a credit issued in escrow instead of the
work being done before closing. - The findings are documented and deferred, most often with Section 2 items
the new owner plans to handle over time.
The right path depends on the timeline, the lender, and what the two parties
agree to. What should not happen is a report being filed away unread because the
sections were not explained.
Read the labels
If you take one thing from this: the section numbers are not administrative
formatting. They are the difference between a repair you have to make now and a
condition you should keep an eye on.
Before you sign anything, find out which of your findings are Section 1 and which
are Section 2. If your report is not clear about it, ask the company that wrote
it.
J&M Termite Control has been inspecting Bay Area homes from Mountain View
since 1973, working under California Branch 3 registration #5223. If you need a
termite report for a sale, or a second opinion on one you have already received,
request an inspection.
Related reading: what happens during a termite inspection
and the treatment methods we use.
