Learn the basics of termite bonds and letters, and find out why you might need one when looking to buy or sell a home.
Contributed by: Doug Webb
Last modified: August 28, 2022
If you're looking to buy or sell a home in the near future, it's important to learn the basics of termite bonds and letters and find out why you might need one. It's important to start with the fact that what is often referred to as a termite letter is actually a Wood-Destroying Insect Report (WDIR) or Wood-Destroying Insects and Organisms Report (WDIOR). Along with other types of inspections, a termite inspection is an important aspect of homeownership.
This inspection is a visual inspection of accessible areas of the home and results in a WDIR. This is a document that confirms a home for sale has been inspected for any signs of wood-destroying insects. The letter typically details type of infestation and damage found, recommended termite treatment or wood destroying insect treatment and limits of the inspection conducted.
If you are applying for a Federal Housing Administration (FHA) loan or a Veteran's Assistance (VA) loan, a wood-destroying insect inspection is required for approval. Rules can vary by state as some states require that the state-specific WDIR form be issued instead of any other FHA or VA letter.
Mortgage companies may also require this type of documentation. If you are a homeowner attempting to sell a home, acquiring a WDIR or having an established termite contract prior to the sale of a home can help save time and expedite the sale. This can also help avoid a last minute surprise that can range from the cost of a treatment for active termites to the cost of replacement of damaged materials in the structure.
Do I need a termite letter?
In most cases, the answer is yes, you need to show that the structure has been professionally inspected in order to complete the real estate transaction. The mortgage company is the one that actually requires a WDIR to protect themselves from financing a home that might have significant damage and that they could be stuck with should there be a default on the loan. It also protects the seller from being accused of hiding issues or not disclosing visible insect damage which could cause significant legal issues after the sale.
As a seller, having a termite letter can help speed up the sales process and increase the sales price. For a buyer, the termite letter is a source of security. Some states even recommend that the buyer get a termite inspection and letter as a source of security.
What is a termite bond?
If termites are discovered in a house that you are planning on buying, many lenders will require you to have a "termite bond." Although sometimes used interchangeably with "termite agreement" or "termite contract," a termite bond is something entirely different. In other words, the lender is really looking for a termite agreement or a termite contract. A bond is simply a fee that a pest control company pays to a regulatory agency when it establishes its business. If the pest control company goes bankrupt and owes customers money, the bond (usually a few thousand dollars total) is split among claimants.
Termite bonds do not cost the homeowner or potential termite customer any money but are rather a regulatory requirement for termite control companies to operate their business.
How does a termite contract work?
When you consider a termite agreement with Terminix, the first thing that happens is a thorough inspection of your home. A termite control professional will look for any evidence that termites have taken up residence in your home.
Once you are under a termite agreement, typically, as part of your annual service, a termite inspector will schedule a yearly check-in on your home to make sure any termites haven't come back or moved. If termites are found, the termite professional will generally recommend a treatment plan for your home to eliminate them.
If termites aren't found in your initial inspection, then your termite control technician may recommend a termite prevention and protection plan.
How much does a termite contract cost?
The average cost of a termite contract varies depending on your home and your specific needs. Of course, if you are eligible and you choose to purchase a contract that covers repairs, your costs may be higher than what they would be with a basic service contract. It's wise to consider the benefits of both types of contracts based upon your home.
Is a termite contract worth the money?
Termites are extremely destructive insects and they cause over $5 billion in damages to homes in the U.S. every year. A termite contract is the best protection against these destructive insects.
Is a termite contract transferable?
Termite contracts can often be transferred to the new buyer who's moving onto the same property that a termite contract is already in place for, though this can vary by each termite agreement and termite company. However, a termite contract can't be transferred from one property to another. If you're moving, one of the first things you should get for your new home is a termite contract.
How do I get a termite contract?
To get a termite contract, schedule a free termite inspection today. Our termite professionals will inspect your home, looking for any signs of termites and their damage. And you can rest assured that our recommendations are based on experience and knowledge dealing with these destructive insects.
