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Termite Reports in California: Section 1 vs. Section 2 and Who Pays

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

A California termite report is a wood destroying pests and organisms inspection report, prepared by a company registered with the Structural Pest Control Board. Section 1 lists infestation or infection that is evident now, such as active termites, wood-decay fungus or the damage they caused; Section 2 lists conditions likely to lead to infestation or infection if nothing changes. State law sets how the report is written and delivered, but no law says who pays for the inspection or the repairs. That is negotiated in the purchase contract.

The split matters because buyers, sellers and lenders treat the two sections differently. This guide explains what the report must contain, what “further inspection” items mean, how the clearance at the end works, and how the cost conversation usually goes in a California sale. It is part of our home buying process guides.

What a termite report covers

The legal name is a wood destroying pests or organisms inspection report, often shortened to WDO report. Despite the nickname, it reports on more than termites: wood-boring insects and wood-decay fungus, often called dry rot, are part of the same inspection. It is not a general home inspection, so don’t expect it to evaluate the electrical system or appliances.

Business and Professions Code section 8516 sets the ground rules:

Who inspects. A registered company can’t give an opinion on whether wood destroying pests are present, or start work, until a licensed Branch 3 field representative or operator employed by the company has inspected the property.
When you get it. The written report goes to the person who ordered it and to the owner, or the owner’s agent, within 10 business days of the start of the inspection, and before any work begins.
What it shows. Among other items, the inspector’s name and the inspection date, a diagram of the structure marking infested or infected areas, conditions in the substructure and attic, recommended corrective measures and the pesticides proposed.
What it leaves out. The report must identify areas that were inaccessible or not inspected and recommend further inspection where practicable. If those areas are opened later, a supplemental report is required.
Public record. The company reports the property address to the Board on a prescribed form within 10 business days of starting the inspection, and keeps reports, field notes and activity forms for three years.

A report describes the visible and accessible areas on the day of the inspection. Wood inside walls, under finished flooring or beneath stored belongings may not be seen, which is why the inaccessible-areas list deserves a careful read.

Section 1, Section 2 and further inspection items

The statute doesn’t use the words “Section 1” and “Section 2”. Section 8516(c) requires the company to tell whoever orders the report that a separated report is available. If one is requested when the inspection is ordered, each recommendation must be separately identified as either an infestation or infection that is evident, or a condition that is likely to lead to one. The industry labels those two groups Section 1 and Section 2, and reports prepared for California sales are commonly ordered in that separated form.

Section 8516(e) adds a limit that helps sellers: a Section 2 condition may not be described as an actual defect or an active infestation. A Section 2 item is a warning about what could happen, not a finding that damage exists.

Category	What it means	Typical examples	How it is often handled in a sale
Section 1	Infestation or infection that is evident, and damage from it	Drywood termite pellets and galleries, subterranean termite tubes, fungus damage at a deck or window sill	Commonly asked of the seller, as repairs or a credit; some lenders want it cleared before funding
Section 2	Conditions likely to lead to infestation or infection	Moisture from a plumbing leak, wood in contact with soil, faulty grade or drainage near framing	Often left to the buyer or negotiated as part of a larger repair request
Further inspection	Areas the inspector couldn’t see or reach	Enclosed decks, attached structures, areas behind stored items or finished surfaces	Buyer may ask for access and a supplemental report before removing the contingency

The examples are typical, not a legal definition. How a given item is classed is the inspector’s call, and two companies can describe the same house differently. If a report puts a large item in one section and you think it belongs in the other, ask the inspector to explain the finding in writing.

Why further inspection items matter

An unopened area can hide the most expensive damage in the house, so a buyer who removes the investigation contingency with further inspection items open takes that risk. Ask the seller for access, or for permission to have the area opened and inspected, inside the contingency period. Get the seller’s written permission before any finished surface is opened.

What “termite clearance” actually means

When people say a house has “cleared”, they usually mean the company has issued a certification under Business and Professions Code section 8519. Section 8519 lists four forms the company must prepare if the person who ordered the report asks for one:

No evidence of active infestation or infection was found in the visible and accessible areas.
Recommended work is complete, and the property is now free of evidence of active infestation or infection in the visible and accessible areas.
The property is free of that evidence except for listed exceptions, where some work wasn’t completed.
A limited inspection of a specified area found no evidence of active infestation or infection in the areas inspected.

After a company finishes work under a contract, section 8518 requires it to give the owner or the owner’s agent a notice of work completed and not completed within 10 business days. The notice states the cost of the work done and the estimated cost of anything left undone. The certification can be endorsed on that notice or on a reinspection report.

Note what a certification doesn’t say. It covers the visible and accessible areas on that date, and the form with exceptions leaves the listed items open. If a different contractor did the repairs, the pest company may need to reinspect before it certifies, which is usually a separate charge.

Who pays for the inspection and the repairs

No California statute assigns the cost. The purchase agreement has a cost-allocation section where the parties check who pays for a wood destroying pest inspection and report and, in many contracts, who pays for recommended corrective work. Whatever the signed contract says controls. Our guide to the California Residential Purchase Agreement explains how that section works alongside the contingencies.

In practice, the cost questions come in three layers:

The inspection itself. Sometimes the seller orders a report before listing so buyers can see it; sometimes the buyer orders their own during the investigation period. Either party can be assigned the fee.
Section 1 work. Buyers commonly ask the seller to pay for Section 1 work, either by having it done before closing or by a credit. A seller in a strong market may refuse, especially on an as-is sale.
Section 2 work. These items are more often left with the buyer, though they can be traded in a broader request for repair.

A credit and a repair are not the same for a buyer with a loan. Lenders limit seller credits and may still require the work to be completed. Our page on seller concessions covers those limits, and the broader picture of which side customarily pays escrow, title and transfer tax is in who pays closing costs in California.

Diamond may refer you to partners we work with; you’re free to choose any provider.

Lenders and termite work

Whether a lender asks for a pest report depends on the loan program, the lender’s own rules and what the appraiser notes. Some lenders ask for Section 1 work to be completed, with a certification, before they fund; others accept an escrow holdback or don’t ask at all. Ask your loan officer early, in writing, what the lender will require, because a requirement that surfaces late can push back the closing date.

If a lender condition is likely, build it into the contract timeline. Our guide to the loan contingency explains how lender conditions interact with your deadlines.

Fumigation or local treatment

For drywood termites, a report may recommend either fumigation of the whole structure, often called tenting, or local treatment of the affected areas. Section 8516 requires the report to name the pesticides proposed, so the recommendation tells you what the company plans to use.

Fumigation treats the whole structure at once. The house has to be prepared and vacated on the company’s instructions, so it needs scheduling with the seller, and any tenants, well before closing.
Local treatment targets the areas the inspector found. It is less disruptive, but it only reaches what can be accessed.

Before any pesticide application, Business and Professions Code section 8538 requires the company to give the owner, or the owner’s agent, and any tenant clear written notice of the pest, the pesticide and its active ingredients, with a prescribed caution statement. For some kinds of application the notice must arrive at least 48 hours ahead.

The choice affects cost and timing, and a buyer may prefer one method for reasons the seller doesn’t share. If you are the one paying, ask for both options in writing with what each would leave uncertified.

Using the report in a negotiation

Get the full report, not a summary. Read the diagram, the findings, the recommendations and the inaccessible-areas list.
Check for earlier reports. The Structural Pest Control Board’s online property search shows whether a property was inspected within the last two years, and you can request copies of those reports from the Board in writing, using its form 43M-19 or a letter.
Separate the sections. Price Section 1, Section 2 and further inspection items separately; the report’s cost figures are the company’s bid, and another licensed company may bid differently.
Compare it with the home inspection. Moisture, roof leaks and drainage often show up in both reports. Our post on the home inspection covers the general inspection side.
Ask for a second opinion where the numbers are large. A second company’s inspection is a separate report, filed and dated on its own.
Decide repair, credit or price. Put the request in writing before the investigation deadline. Our post on contingencies explains why the deadline is the source of your leverage.
Agree who orders the certification. If the seller is doing the work, say in writing that the company will issue a notice of work completed and a certification before closing.

For sellers: deciding before you list

A pest report ordered before listing tells you what buyers will see, so you can fix, price or disclose the findings in advance. Our guide to pre-listing inspections sets out the trade-offs. Selling as-is doesn’t remove the duty to disclose known conditions; see selling a house as-is in California.

If you complete Section 1 work before listing, keep the notice of work completed and the certification with your disclosure package. A buyer’s inspector may still find something new, but a documented history answers the first questions.

This is general information, not legal advice. For a dispute over pest work or a report’s findings, talk to a California real estate attorney, and check a pest company’s registration with the Structural Pest Control Board before you hire it.

Questions people ask

What is the difference between Section 1 and Section 2 on a termite report?

Section 1 lists infestation or infection that is evident, and the damage it caused. Section 2 lists conditions likely to lead to infestation or infection, such as excess moisture. By law, Section 2 items can’t be described as actual defects or active infestations.

Who pays for termite repairs in California?

Whoever the purchase contract says. Buyers commonly ask sellers to cover Section 1 work, and Section 2 work is more often left to the buyer, but both are negotiable.

How long does a pest company have to deliver the report?

Ten business days from the start of the inspection, under Business and Professions Code 8516, and before any work begins. Your contract’s investigation period runs on its own clock, so order the inspection early.

What is a termite clearance?

A certification under Business and Professions Code 8519 that no evidence of active infestation or infection was found in the visible and accessible areas, either on inspection or after recommended work was completed. It can list exceptions.

Does a lender require a termite inspection?

It depends on the loan program and the lender. Some require Section 1 work and a certification before funding. Ask your loan officer what the lender will require before you write the offer.

What does “further inspection recommended” mean?

The inspector couldn’t see or reach part of the structure. The law requires those areas to be listed, and a supplemental report if they are opened. Resolve them before you remove your investigation contingency if you can.

Is a termite report the same as a home inspection?

No. A termite report is limited to wood destroying pests and organisms and the conditions that lead to them. A general home inspection covers the structure and systems more broadly. Most buyers get both.

If you’re weighing a pest report on a home you’re buying or selling, we can go through it with you and draft the request or response. Contact us to talk it over.

Sources & notes

Last reviewed October 2026 by Matthew Martinez.