Question: We are buying a house in Maryland, and our sales contract requires that the seller provide us with a letter from a termite company indicating that the house is free from infestation. Exactly what should we look for when we get this letter? Are termites a problem?

Answer: Absolutely. They are a real problem, and without taking the proper protections, you can end up spending a lot of money treating and correcting your house.

According to the experts, this is "termite country." Since the late 1980's, when environmental concerns stopped the use of such chemicals as chlordane and heptachlor (which had been proven effective to curtail termite activity), termite damage has been on the rise.

Thus, most lenders insist on receiving a letter -- a certificate -- from a licensed termite inspection company indicating that the house is free of active infestation.

The standard sales contract used in the Washington metropolitan area contains the following language:

The (Purchaser at the Purchaser’s expense) or (the Seller at the Seller’s expense) will furnish a written report from a pest control firm dated not more than (30)(60) Days prior to Settlement showing that all dwelling(s) and/or garage(s) within the Property (excluding fences or shrubs not abutting garage(s) or dwelling(s) are free of visible evidence of active termites and other wood-destroying insects, and free from visible structural insect damage. Any extermination or structural repairs identified in the inspection report will be at the Seller’s expense.

(Regional Sales Contract, paragraph 13)

Termites (also known as white ants) feed on the cellulose in wood. In the Washington area, property owners often find subterranean termites. These little devils hide below ground so as to obtain adequate moisture, but come to the surface to eat. The surface is the wood touching the damp ground. Termites create corridors in this wood, and then move freely through these passages happily eating their way, seeking additional food, moisture and shelter.

Whether you are a buyer or a seller, you must carefully review the sales contract clauses dealing with termites. Not all contracts are the same. Let us first look at this from the buyer's point of view.

Some sales contracts only refer to an inspection of the house. If this is the case, make sure that you add "garage and accessory buildings" to the language. The house may be termite free, but the garage may be completely infested.

Second, watch out for the language which only requires the inspection of “accessible” or “visible” areas. This often will not include basement crawl spaces or other inaccessible areas, which unfortunately carry the greatest risk of infestation. I have known too many home buyers who found termite infestation in wooden basement floors that were covered with wall to wall carpets. If you as buyer discover termites after you go to settlement, you probably do not have any right to ask your seller to make the repairs -- and you may be stuck for a large sum of money correcting any such termite problems.

If there are such inaccessible areas, you should discuss the matter with the seller (or the seller’s real estate agent) and try to convince them to allow the termite inspector greater access. You may have to agree to pay a nominal fee to restore any destruction that is made during the inspection, should you opt not to go to closing.

You should demand that the termite company that makes the inspection provide you with a one year warranty against termite infestation. Some companies will offer such a warranty; others will not. Additionally, it is strongly recommended that after you go to settlement, you continue the warranty on a year-to-year basis. This will not only give you continued peace of mind, but will probably save you a lot of time and money when you go to sell your house.

Keep in mind, however, that this warranty is limited. It will not protect you against termite damage; it will only obligate the termite company to reinspect - and re-treat -- the property should termites appear.

You should confirm that the termite company conducting the inspection is, in fact, licensed in the jurisdiction where your house is located. The fact that the company is licensed in Virginia, for example, does not permit the inspection to take place in Maryland or in the District of Columbia.

You should be able to confirm the existence of the license with the appropriate licensing department in the State or County where the property is located. Many jurisdictions have excellent web-sites where you can do your inquiry on line.

Finally, insist on obtaining a copy of the termite certificate no later than the date of settlement. Many inspection companies forward the report to the broker and the lender, and often the buyer does not get a copy. You should also amend the contract language so that it reads that the report is "acceptable to the lender and the purchaser". Review the report carefully. Compare it to the Seller disclosure form which you should have received earlier. If you have any questions, don’t complete settlement until you are completely satisfied that there are no problems. If there are, you should insist that the seller agree to escrow an amount of money to fix any such problems.

From the seller’s point of view, there are some additional matters to consider:

First, if the termite inspection company finds damage caused by termites, often that company also wants to make the necessary corrections. Insist on obtaining at least two or three bids for any such work before authorizing the termite company to proceed. I have seen too many sellers pay sizable termite repair bills at settlement without having any opportunity to obtain comparable estimates. Keep in mind that most termite companies are not contractors.

Second, some contracts also contain the following language: “Seller, at his own expense and prior to settlement shall repair any prior or current visible damage caused by termites or wood-boring insects.”

I generally recommend that sellers consider striking this clause when the contract is being negotiated. Why should a seller fix prior termite damage when it may not be necessary?

Finally, a note of caution. Many people buy firewood from strangers who drive around neighborhoods trying to make a sale. Beware and be cautious of this wood; it often contains termites. If you put the wood near your fireplace -- or rest it against the side of your house -- you may find those little creatures starting to eat into your most valuable investment: your house.