California Termite Inspection: Sections 1-3 Explained

A termite inspection in real estate is done to make sure that a home is free of termites and other damaging elements. What you may not be aware of is how that termite report is broken down and what those sections mean. We’re going to talk more about Section 1 and 2 of a termite inspection, what they mean, and the differences between the two.

So when would you need a termite report?

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Getting a Termite Inspection in Real Estate

Let’s start with your client that’s interested in buying a home. You show your buyer houses and they finally find the one they want. You make an offer and it’s accepted. Escrow is open and everyone is happy so far.

As with any property, we want to make sure there are no underlying issues. Your buyer has the right to a home inspection in a real estate transaction.  Along with that, your client has the right to a termite inspection. In some cases, if the buyer is dealing with a lender the termite inspection will be required as a condition of the loan.

The Termite Inspection & Clearance

Once you’re in escrow, hire a licensed termite inspector. They will examine the interior, exterior, attic, and—if the home has one—the crawl-space for signs of subterranean or dry-wood termites, fungus, and other wood-destroying organisms (WDOs).

When the inspector issues a clear Section 1 report—meaning no active infestation or untreated damage—the lender asks for that clearance only if the loan program or the appraisal requires it.

• Conventional loans: a section 1 clearance letter is requested only when the appraiser or purchase contract already flags pest issues.
• FHA loans: HUD Handbook 4000.1 says a termite/WDO report is needed only when the appraiser notes evidence of infestation or damage.
• VA loans (California): a full WDO inspection and Section 1 clearance are always required; since VA Circular 26-22-11 (June 15 2022) the veteran borrower may pay the inspection fee if necessary. ‍

‍A California termite clearance letter is considered current for 90 days; if escrow extends past that window, lenders typically order a quick re-inspection.

Along with termites, the inspector is checking for things like dry rot, fungus, and any other issues that come with damage to wood. The inspector will look at the interior and exterior areas of your home and check for any visible signs of a termite infestation.

Having a termite inspection is vital, especially in places like California where most homes are made from wood and stucco. Unless the home is new construction, don’t forgo having a termite inspection.  This will ensure that the investment in the home is sound and alert you to any problems from pests.

As you can imagine, this is extremely important because no one is going to want to invest in a home that has been structurally damaged. You want the report to disclose that the home is solid and has good structural integrity.

Reviewing the Termite Inspection Report

So the termite inspector has viewed the property, made his notes, and created the termite report.  The findings will be important to you as the real estate agent, to your buyer, and to the lender for the loan.  The inspector lists that there are Section 1 items in the kitchen, the bathroom, and under the house. Further along in the report, he lists that there are several Section 2 items.

Whoa, ok. At this point you may be asking, “What are Section 1 and Section 2 items?” Is one worse than the other?  Will these findings affect the sale of the home or conditions of the loan? Now let’s talk more in detail about what these terms mean, the differences between the two, and the impact they may have on the home.

Termite: Section 1

If the termite report comes back with Section 1 items, that means there is an actual infestation of termites.  That is the most important thing to know about what Section 1 means on the termite report. It’s fairly straightforward. Termites are there and are existing.  

We know this because the inspector enters the home and visually sees termites or evidence of termite damage.  That is Section 1 of a termite report. So let’s move on to what Section 2 means on the report.

Termite: Section 2

This is when the inspector notes potential damage to an area. If it is not treated or repaired in the near future, it can become a Section 1 item.  These areas are considered hotspots and generally refer to where termites can flourish or elements that can cause wood damage. So what does this mean exactly?  Let’s talk about a Section 2 example to make things more clear.

The inspector is viewing both the interior and exterior of the property and notices that the home has wood siding.  Alongside the home is the sprinkler system.  When it comes on, one of the sprinklers hits the side of the house slightly warping the wood.  

The inspector notes that it hasn’t damaged the side of the house yet; it still has structural integrity.  But he also notes that if the sprinkler head is left unchecked it has the potential to turn that wood siding into dry rot. So again, it has the potential of turning into a Section 1 item.

As you can see Section 2 items are not as serious as Section 1, but just as important when you are looking at the Termite Inspection Report overall.  Your buyer will want to be made aware of these potential issues to protect their investment.

Termite: Section 3

Section 3 flags areas the inspector couldn’t fully examine—think a crawl-space blocked by stored boxes, an attic hidden under thick insulation, or siding that’s sealed behind freshly painted trim. No active termites or clear-cut damage have been confirmed here yet, but the space is inaccessible and could be hiding Section 1 problems.

• Typical notes: “Inaccessible sub-area—recommend opening access hatch,” “Ceiling drywall prevents visual inspection of rafter tails,” “Heavy vegetation against rear wall—further inspection when cleared.”
• Next steps: The seller usually removes the obstacle (clears storage, trims shrubs, cuts an inspection port) so the pest company can return and finish the survey. Once opened up, any newly discovered infestation becomes Section 1, and conducive conditions roll into Section 2.
• Who pays? California purchase contracts often make the seller responsible for providing reasonable access, while any resulting repairs follow the same negotiation rules as Sections 1 and 2.
• Impact on escrow: Lenders rarely demand Section 3 work itself, but they will require a clean Section 1 clearance after the inaccessible areas are checked—so clearing Section 3 items early keeps the deal on schedule.

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How Much Does a Termite Inspection Cost in California? (H2)

Most real-estate termite/WDO inspections in California cost $100 – $200 in 2025, with price swings driven by size, location, and whether you need an official “Section 1 clearance” letter for escrow. State-wide surveys put the average around $100

Metro snapshot: Los Angeles and Orange County quotes trend toward the low end ($95-$140) thanks to heavy competition, while coastal Monterey-Bay and rural NorCal counties often start closer to $150.

Final Thoughts

Buying a home will be one of the most important investments you’ll ever make. You will want to safeguard that investment. Getting the termite inspection is just one safeguard that you should definitely invest in.

Remember, findings of Termite Section 1 may mean taking a more serious look at the property. Addressing the infestation should prevent more extensive damage.  If the report finds Termite Section 2 items, take that into consideration to avoid these issues becoming problems.

Would you purchase a home with no Section 1, but a considerable amount of Section 2 Items that would have to be addressed? Share why or why not with us!