A separated report is a variation of the standard report types. Separated termite reports are generally issued for escrow reports and help define what is currently a problem and what may lead to a future problem. This information is used in the negotiation process between buyers and sellers. Also, most lenders will require that all Section I Findings and Recommendations be completed in order to fund the loan.
The following language shall appear just prior to the first finding/recommendation on each separated report:
“This is a separated report which is defined as Section I/Section II conditions evident on the date of the inspection. Section I contains items where there is visible evidence of active infestation, infection or conditions that have resulted in or from infestation of infection. Section II items are conditions deemed likely to lead to infestation or infection but where no visible evidence of such was found. Further inspection items are defined as recommendations to inspect area(s) which during the original inspection did not allow the inspector access to complete the inspection and cannot be defined as Section I or Section II.”
Each finding and recommendation in the termite report needs to be labeled either Section I, Section II. If the item is a recommendation for Further Inspection then the Section is Unknown. Inspectors need to be expert termite report writers in order to accurately label each finding. Many findings can be classified as either Section I or Section II depending on the situation. Example: A common finding is Cellulose Debris in the substructure. This is simply loose cellulose material like wood or cardboard laying on the ground in the substructure of the home. Cellulose Debris would generally be a Section II item because if it is not remove it will make it easier for a Subterranean Termite infestation to develop. However, if the Cellulose Debris are full of active Subterranean Termite infestations then you should classify the item as Section I.
Is there something different about inspection reports for an escrow? If you ask most inspectors they will tell you yes. In truth, they are no different than any other report. The Structural Pest Control Board of California doesn’t make a distinction. However, there is something that sets the escrow inspection apart, liability and lots of it. The reason for more liability is that property buyers are looking at the report as a professional opinion about the condition of the property even if you are not hired to complete any work.
Example: Let’s say a Realtor contacts a termite company for a free inspection on their listing of an older home. The termite company sends out an inspector that rushes through the inspection and he misses that fact that part of the house is an un-permitted add on and there is no concrete in the foundation. Just wood sitting on the ground. An investor buys the home with cash and bypasses lending requirements. His offer on the house is based on the termite companies report of findings and estimated cost of corrective measures. While renovating the home for flipping, the new owner discovers the foundation problem and suddenly finds out that he needs to install a foundation and get the city involved in his quick flip. His profit has just vanished and he may loose money by the time he corrects all the problems and sells the property. In this case, you can bet the new owner will be coming back to the termite company to fix the foundation problem for free. In this case, it doesn’t matter that the termite company never charged a dime for their report and was never hired to do any corrective work. The structural pest control board will hold the termite company responsible for what they missed with a poor inspection and so will most courts.
Termite companies don’t even realize the level of liability they undertake every time they issue a termite report for an escrow until they get hit with a huge bill from a buyer and go through the process of trying to fight with an unhappy property owner and the Structural Pest Control Board about their liability. In Southern California the majority of termite companies give escrow inspections for free to try and stay competitive. It would be wise to charge for escrow inspections and take the time needed to do a thorough and professional report.