A termite inspection contingency is a clause in your home purchase agreement that gives you the right to have the property examined for wood-destroying insects before closing, and to cancel the deal or renegotiate if the inspector finds problems. It’s the mechanism that keeps a termite discovery from becoming your financial problem the day you get the keys. Treatment alone runs $250 to $3,200, and structural repairs can reach $10,000 or more, so the few paragraphs of contract language that create this right do a lot of work.
What the Contingency Should Spell Out
A protective contingency does three things. It defines the scope of the inspection, it sets a deadline, and it tells both sides what happens if the inspector finds something.
Scope means naming the organisms. Standard language covers subterranean and drywood termites, carpenter ants, carpenter bees, and reinfesting wood-boring beetles. That list tracks the organisms covered under the NPMA-33 inspection form, the wood-destroying insect report that most pest professionals, lenders, title companies, and escrow agents use in residential transactions.
The inspection window is usually 10 to 15 business days from mutual acceptance. That sounds generous until you try to schedule a licensed inspector during the spring and summer busy season and wait for the written report to come back. Build in time for both.
The most useful piece of contingency language is a dollar threshold. If repair estimates exceed a negotiated ceiling, you can exit the contract and recover your earnest money. Agreeing on that number up front removes the argument you’d otherwise have when an inspector finds damage behind drywall or under flooring.
One distinction drives most repair negotiations. Inspection findings split into active damage and infestation on one side (live colonies, hollowed framing, shelter tubes, fungus-damaged wood) and conducive conditions on the other (soil-to-wood contact, moist crawlspaces, wood debris under the house, cellulose stored against exterior walls). In many markets the seller handles active damage and treatment while the buyer accepts the preventative corrections, but that split is a negotiated term, not a default. Spell it out in the contingency or an addendum, because leaving it vague almost guarantees a dispute when the report lands.
Who Pays for the Inspection and the Work
No rule assigns the inspection fee to one side. The inspection itself runs $75 to $325. In competitive markets, buyers usually pay. In buyer-friendly markets, sellers sometimes offer a recent clear report with the listing. Either is fine as long as the purchase agreement documents the arrangement.
Repair costs are where the real exposure sits. Professional treatment runs $250 to $3,200 depending on method and severity. Structural repairs can hit $10,000 or more. Your addendum should state who pays for treatment, who pays for structural repairs, and what happens if the total blows past the agreed threshold.
If the property already has a termite bond — an ongoing service contract with a pest control company that covers annual inspections and, depending on terms, future treatment or repair — ask whether it transfers. Many companies allow transfers, sometimes for a fee, but the bond attaches to the property, not the seller. Confirm the coverage type, renewal history, and transfer terms in writing before you treat an existing bond as a substitute for your own independent inspection.
How Your Loan Type Can Override the Negotiation
The financing you’re using may force an inspection whether or not your contingency calls for one.
FHA Loans
FHA doesn’t require a termite inspection on every transaction. It becomes mandatory when the appraiser observes evidence of decay, pest infestation, or suspicious damage; when state or local law requires it; when it’s customary in the area; or at the lender’s discretion.1U.S. Department of Housing and Urban Development. HOC Reference Guide – Pest Control When triggered, you need a clear report or documented treatment before the loan can close.
VA Loans
The VA is stricter. A wood-destroying insect inspection is required for all home purchases in more than 35 states and territories, with additional county-level requirements in Colorado, Iowa, Nebraska, Nevada, New York, Pennsylvania, Utah, and Wisconsin. In states not on the list, the inspection is still required if the appraiser notes specific concerns.2U.S. Department of Veterans Affairs. Local Requirements – VA Home Loans
Veterans are now permitted to pay the termite inspection fee themselves. VA Circular 26-22-11 made that a permanent local variance, reversing the earlier rule that barred charging veterans for this cost. Veterans can also pay for repairs needed to meet the VA’s minimum property requirements, though the VA encourages negotiating those with the seller.3U.S. Department of Veterans Affairs. Clarification of VA’s Policy on Termite Reports (Circular 26-22-11)
Conventional Loans
Conventional mortgages generally don’t require an inspection, but individual lenders can insist on one, particularly when the appraisal flags conducive conditions or the property sits in a high-risk area. Adding the contingency to a conventional deal is cheap insurance even when nobody is making you.
What a Clean Report Doesn’t Mean
The NPMA-33 inspection is limited to readily accessible areas. Inspectors can’t break apart or dismantle any part of the structure, which puts a lot of real estate out of reach:
- Fixed wall coverings, fixed ceilings, and installed insulation stay in place.
- Carpet, tile, and hardwood aren’t pulled up.
- Heavy appliances, furnishings, and built-in cabinetry don’t get moved.
- Crawlspaces with less than 24 inches of clearance from floor joists to ground count as inaccessible.
- Dense vegetation against the foundation, snow cover, wood piles, and synthetic stucco or rigid foam board all block visual inspection.
Every one of those exclusions is a place termites can thrive undetected. Read the inaccessible-areas section of your report carefully. If the inspector couldn’t enter the crawlspace or noted insulation covering the rim joists, that isn’t a clean bill of health. It’s a gap, and you may want a follow-up inspection once the obstructions are cleared.
Timing matters too. The NPMA-33 report expires 90 days from the inspection date for mortgage and property transfer purposes. If closing slips past that window, you’ll need a new inspection. The form itself says it isn’t a 90-day warranty against infestation — it’s a snapshot of conditions on the day the inspector walked through.4U.S. Department of Housing and Urban Development. Wood Destroying Insect Inspection Report (Form NPMA-33)
Responding to the Report and Removing the Contingency
When the report comes back, you deliver a copy to the seller through whatever method the purchase agreement specifies, whether that’s an electronic transaction platform or certified mail. Delivery starts a response clock, commonly three to five days. The seller can agree to the requested repairs, propose an alternative, or refuse.
If the seller agrees to the work, insist on receipts and completion certificates from a licensed pest control company before closing. Chemical treatments, bait systems, and structural reinforcements all need documentation that the work met professional standards. A verbal promise to handle it after closing is worth nothing.
If the seller refuses, your options come straight from the contingency language. Well-drafted contingencies let you cancel and recover your earnest money. Some contracts require you to issue a formal notice demanding performance within a set number of days before cancellation becomes available, so read the clause before you walk.
Once you’re satisfied — either because the report was clean or because the repairs are done — you remove the contingency with a signed written notice to the seller. After that notice goes out, you can’t cancel over pest findings, and the transaction moves toward closing.
When Repairs Can’t Finish Before Closing
Sometimes treatment or structural work can’t realistically wrap up before the scheduled closing. Rather than push the whole transaction, the parties can arrange an escrow holdback. The seller deposits funds into escrow equal to the estimated repair cost, typically 1.5 times the estimate to cover overruns. Those funds release to the contractor once the work is verified complete, and any surplus goes back to the seller.
Not every lender permits holdbacks, and those that do often limit which repairs qualify. Pest treatment is eligible with many lenders, but confirm it with yours before you structure the deal around one. The holdback agreement should set a completion deadline, the exact dollar amount held, who selects the contractor, and what happens if the work isn’t done on time.
Risks of Waiving the Contingency
In hot markets, buyers sometimes waive inspection contingencies to make offers more attractive. This is where people get hurt. Waiving the termite contingency means you forfeit the right to back out if the inspection reveals an active colony or structural damage. You’re buying the property as-is for pest purposes, and whatever turns up after closing is yours to fix.
You can still hire an inspector after waiving. Nobody can stop you. But the findings can’t be used to renegotiate price or demand repairs. If the inspector finds $8,000 in damage, that’s your bill on closing day.
There’s a middle path. Shorten the contingency period rather than eliminating it. A five-day window instead of the standard 10 to 15 signals urgency to the seller while preserving your right to walk if something serious shows up.
If You Find Damage After Closing
Discovering termite damage after closing is the worst case, and it happens, often because the infestation was behind walls, under flooring, or in areas the inspector couldn’t access. What you can do about it depends on what the seller knew.
Most states require sellers to disclose known pest problems and treatment history on a property condition disclosure statement. If a seller checked “no” for termite history while knowing the property had been treated for an active colony two years earlier, that misrepresentation can survive an as-is clause and support a lawsuit.
Holding a seller accountable after closing generally requires showing one of three things:
- Fraudulent misrepresentation: the seller made a false statement on the disclosure form, knew it was false, and you relied on it in deciding to buy.
- Active concealment: circumstantial evidence that the seller hid the damage, such as fresh paint over hollow baseboards, new drywall patches over infested framing, or furniture placed to cover visible damage.
- Breach of contract: the purchase agreement required the seller to deliver a clear report or complete specific repairs, and they didn’t.
Proving seller knowledge is the hard part. Pest control company records of prior treatments, bait station renewal invoices, neighbor testimony about past swarms, and contractor statements about damage found during earlier renovations are the evidence that builds these cases. Without proof the seller knew, most claims fail regardless of how bad the damage is.
Recoverable damages, when the claim holds up, can include treatment, structural repairs, temporary housing during remediation, and in cases involving intentional fraud, attorney’s fees and punitive damages. These cases are expensive to litigate, which is the whole reason the contingency exists. Spending $100 to $300 on an inspection before closing beats spending $15,000 on repairs and legal fees after.