Termite Report Section 1 vs Section 2: Who Pays When You Sell a South Bay Home?

(The information below is for reference only based on research and personal experience, it is NOT meant to be legal, financial, or tax advice. I can refer you to any of those professionals so feel free to reach out.)

Who pays for Section 1 and Section 2 termite work when you sell a South Bay home?

No California law decides it. Your purchase agreement and your negotiation do. By long local custom, South Bay sellers usually pay for the termite inspection report and the Section 1 work (active infestation or damage), because most lenders want a clearance before they fund. Section 2 items (conditions likely to cause future problems) are negotiable, and in a slower fall market like this one, buyers are asking for them more often.

By Ben Larson | October 17, 2026

The termite report is one of the least glamorous documents in a home sale, and one of the most likely to cause a fight in week two of escrow. Sellers expect the home inspection to be the big negotiation. Then the pest report shows up with two sections, a list of bids, and a buyer's agent asking who is paying for what.

This question comes up constantly. A recent thread on r/SouthBayLA asked, "Are termites common? When is it a deal breaker?" On r/FirstTimeHomeBuyer, a California buyer asked simply, "Fumigation who pays?" The honest answer is that it depends on what you agreed to in writing, and on how much leverage each side has right now.

Right now, buyers have more of it than they did a year or two ago. One weekly South Bay MLS snapshot this month showed more than 700 active listings that had been on the market 30 days or longer, and price reductions are common. When buyers have choices, Section 2 requests and repair credits show up more often. Knowing how the report works before you list keeps you in control of that conversation.

What Section 1 and Section 2 actually mean

In California, the termite report is formally a Wood Destroying Pests and Organisms inspection report, prepared by a company licensed by the Structural Pest Control Board. It is separate from the general home inspection, and it sorts findings into categories:

• Section 1: visible evidence of an active infestation or infection, or damage caused by one. Think drywood termite pellets in the attic, subterranean termite tubes along the foundation, or fungus damage (often called dry rot) in a window sill or deck board.
• Section 2: conditions likely to lead to infestation or infection, with no active problem yet. Earth-to-wood contact, a slow plumbing leak, excess moisture, poor ventilation, or wood debris under the house are common examples.
• Further inspection: areas the inspector could not reach, such as a finished garage wall, a sealed attic section, or a deck with no access underneath. These are unknowns until someone opens them up.

The way I explain it to sellers: Section 1 is usually a must, and Section 2 is usually a maybe.

The South Bay has plenty of both. In Torrance, many older homes, including a lot of the single-story homes built in the 1950s and 1960s, have original wood eaves, wood windows, and decades of drywood termite exposure. Near the water in Redondo Beach, marine moisture is hard on wood decks, railings, and trim. Up the hill in Rancho Palos Verdes and Palos Verdes Estates, I see a lot of large wood decks, wood-framed additions, and older homes where a full tent is a real possibility.

Who pays, and what is negotiable in this market

The contract controls. Under the current C.A.R. Residential Purchase Agreement, the allocation of costs section is where you and the buyer agree on who pays for the pest inspection report. Who pays for the corrective work is not automatic. It gets settled in your offer and counter terms, or during the buyer's investigation contingency when the buyer sends a Request for Repair and you reply.

In practice, here is how it usually plays out in the South Bay:

• The report: sellers commonly pay for it, especially when they order it before listing.
• Section 1 work: sellers commonly pay. Most financed buyers' lenders want a clearance (a completion notice showing the Section 1 work is done) before funding. Even cash buyers often ask for it, because nobody wants to close on an active infestation.
• Section 2 work: negotiable. In a hot market, sellers routinely decline. In today's more balanced market, buyers push for some of it or ask for a credit instead.
• Further inspection: often handled in stages. Someone pays to open the area. If active damage turns up, it becomes Section 1, and the Section 1 terms apply.

When the buyer asks for Section 2 work, you have real options. You can agree, decline, fix only the items that matter most, or offer a credit. I walk through the trade-offs of saying no in my post on how to refuse a repair request after inspection, and a credit is not always the same as a price cut. I compared the two in seller credit vs price cut. Any credit has to work with the buyer's lender, so confirm that through the agents before you sign.

One more thing that trips sellers up: selling as-is does not erase what you know. Past treatments, prior reports, and known damage belong on your disclosures. A clean, honest disclosure package makes the termite conversation shorter, not longer.

How I handle the termite report with my sellers

Here is the sequence I use, so the report never surprises us in escrow:

1. Decide on a pre-listing termite inspection. On older wood-frame homes, I usually recommend it. You get to see the scope, collect bids, and price the home with real information. The trade-off is that whatever the report says becomes something you disclose. I wrote about why a pre-listing inspection makes sense for Rancho Palos Verdes sellers, and the same logic applies across the South Bay.
2. Ask for a clearly separated report with itemized bids. You want Section 1, Section 2, and further inspection items listed apart, each with its own price. A single lump-sum number is impossible to negotiate.
3. Get a second bid on big scopes. If the report calls for a full tent or major wood replacement, a second licensed company is worth the time. Reports and bids can differ, and the buyer may order their own.
4. Schedule Section 1 work around your move. Local treatment can be quick. A full tent means everyone, including pets and plants, is out of the house for a few days, plus prep time. Build it into your seller escrow timeline so it does not collide with packing, a rent-back, or the closing date.
5. Decide your Section 2 stance before an offer arrives. Know which items you would fix, which you would credit, and which you would decline. Deciding in advance keeps emotion out of the counter.
6. Watch the shelf life. A pest company can typically reinspect its own findings for a limited window, generally about four months, before a full new inspection is needed, and lenders may want a recent clearance. A long listing period or a delayed escrow can mean paying for another inspection.
7. Use a holdback only as a backup. If work truly cannot be finished before closing, some transactions hold funds in escrow until the clearance is issued. That takes written escrow instructions and the buyer's lender has to approve it, so do not count on it.

Every home is different. A 1955 ranch with a crawlspace and a 2005 stucco home with a slab will produce very different reports. That is exactly the kind of thing I like to look at with a seller before we set a list price.

Frequently Asked Questions

Is a termite inspection required to sell a house in California?

Not for every sale. State law does not require one across the board, but most financed buyers request it, many lenders want a Section 1 clearance before funding, and the report gets delivered through escrow when the contract or lender calls for it. In the South Bay, nearly every sale I handle has one.

Who usually pays for Section 1 termite repairs in the South Bay?

By custom, the seller. That is a local norm, not a law, so the answer is whatever your purchase agreement and repair negotiations say. Put it in writing.

Do I have to fix Section 2 items before I sell?

No. Section 2 items are conditions that could lead to problems, not active damage, and they are negotiable. You can fix them, credit the buyer, or decline. In a slower market, a reasonable response to the items that really matter often keeps the deal together.

What if the buyer's termite report finds more than mine did?

It happens. Inspectors access different areas and judge conditions differently. Ask for both reports side by side, compare them item by item, and consider having your company reinspect the disputed items before you agree to anything.

Can I sell as-is and skip the termite work?

Yes, you can market a home as-is and decline repairs. You still have to disclose what you know, and a buyer using a loan may still need a Section 1 clearance to close. A real estate attorney can review your specific contract language if you are unsure.

The bottom line

Termite work is one of the most predictable costs in a South Bay sale when you plan for it, and one of the most frustrating when you do not. Know what Section 1 and Section 2 mean, decide your stance early, and get the report working for you instead of against you.

If you are getting ready to sell, start with a home valuation. I will look at your home's age, construction, and condition, tell you what I expect a termite report to say, and show you how it fits into your pricing and net proceeds before we list.

About Ben Larson

Ben Larson leads Larson Realty Group, powered by Real Broker, serving the South Bay of Los Angeles. Licensed since 2006 with more than $100 million in closed sales, he specializes in listings across the Palos Verdes Peninsula and the beach cities, and works extensively with probate, trust, and inherited property sales. Reach him at https://larsonrealty.group. DRE #01746853.