Termite Letters & Lead Paint

Termite Letters

If the buyer is getting any type of FHA loan, HUD will order a termite inspection from one of their preferred vendors once the contract is ratified. (HUD will not do this for Conventional, VA, or any other type of financing)

HUD will pay for the termite treatment if there are active termites, prior to closing, and w/ their selected vendor.

Buyer can get their own termite inspection for their informational purposes at buyer’s cost.

If buyer is getting other financing, buyer must order termite inspection if required by buyer’s lender. Remember, HUD will not authorize repairs prior to closing.

If evidence of previous termites were found, but there are not active termites, and buyer’s lender is requiring a treatment, HUD will not pay for a treatment. HUD will also not pay for any repairs required by your buyer’s lender from termites. A buyer can switch over to FHA 203b w/ repair escrow and have the treatment completed after closing.

When switching from a conventional loan to an FHA loan, HUD will order a termite inspection & treat if necessary. This can cause a delay.

Lead Based Paint Inspections

If buyer is an owner/occupant and is purchasing a home built before 1978 w/ any type of FHA financing HUD will order a lead based paint inspection.

For FHA 203(b) or FHA 203(b) w/repair escrow Financing

HUD will order & pay for a lead-based paint inspection and will deliver the inspection report to the Selling Broker by overnight delivery service along w/ a paint stabilization plan and cost estimate if deteriorated lead based paint is found, and will also deliver a supplemental LBP Disclosure Addendum. If deteriorated LBP was found in the report, HUD will perform stabilization prior to closing if the cost is $4,000 or less. If the cost is more than $4K:

HUD at its sole discretion may cancel the contract.
HUD will allow the buyer to change to an FHA 203(k) loan and finance the difference of the cost of the lead stabilization performed after closing. HUD will credit the buyer $4K on the settlement statement that will be put into the repair escrow.
HUD will allow the buyer to cancel the contract and refund the earnest money deposit if deteriorated LBP is found - even if the amount to correct is less than $4K,

FHA 203(k) Financing (at contract ratification)

HUD will order & pay for a lead based paint inspection and deliver the inspection report to the Selling Broker by overnight delivery along w/ a paint stabilization plan and cost to cure estimate if deteriorated lead based paint is found, and will also deliver a supplemental LBP Disclosure Addendum.

Buyer will have the right to withdraw from the contract and receive 100% of the earnest money deposit, if the home does have deteriorated LBP and buyer is dissatisfied w/ the findings and cost estimate.

If buyer proceeds w/ the sale, the LBP stabilization must be completed as part of the renovation plan prior to the buyer taking occupancy of the home. HUD will give up to a $4,000 credit at closing towards the cost of the stabilization

Cancellation due to Dissatisfaction from LBP Report

Written notification to cancel must be either postmarked by the latest of fifteen calendar days from the date the contract was accepted from HUD or two business days following the date of the Purchaser’s signature on the supplemental LBP Disclosure Addendum.

Switching from Other Financing to FHA Financing

Lead Based Paint and Termite Inspection must be ordered
Termite: 5-7 business days for inspection, additional time if treatment is needed
LBP: 7-10 business days for inspection, additional time if abatement is needed

Changing from FHA to Other Financing

May cost the Buyer Money
Cost of LBP and termite inspection that HUD has incurred is now absorbed by the buyer
Termite letters average around $100
LBP average around $700
Additional cost if there is treatment or abatement

Kelly Behrens