Underwriting

How to underwrite a house with an active termite infestation

Underwriting a house with an active termite infestation means carefully assessing the extent of damage and estimating the full cost of eradication and repair. You must factor in not only the treatment but also structural repairs to determine your offer ceiling.

November 12, 2026 · 3 min read

Identifying signs of active infestation during initial assessment

When you first look at a property, keep an eye out for common signs of termite activity. This includes mud tubes on foundation walls, discarded wings near windows or doorways, hollow-sounding wood, or small holes in drywall. These visual cues are your first indication of a potential problem.

Also, pay attention to any bubbling or distorted paint and wood that looks water damaged. Termites often work hidden beneath surfaces, so subtle signs are often the most telling indicators of active infestation.

Getting a professional termite inspection

If you suspect any termite activity, a professional termite inspection is non-negotiable before making an offer. A licensed inspector can identify the type of termites, the extent of the infestation, and the specific areas of the house affected.

He or she will provide a detailed report outlining the recommended treatment plan and any areas of damage. This report is essential for accurately estimating your repair costs and negotiating with the seller.

Estimating treatment and repair costs

Treatment costs vary depending on the type of termite, the size of the house, and the severity of the infestation. Get at least two to three quotes from reputable pest control companies for the eradication. These quotes will give you a range for your treatment budget.

Beyond treatment, you must estimate the cost of repairing the damaged wood or structural components. This might include replacing floor joists, wall studs, subflooring, or even roof trusses. Get quotes from contractors for these repairs, as this can be a significant expense.

Impact on after-repair value (ARV)

A history of termite infestation, even after remediation, can sometimes affect a property's appeal to future buyers, though proper repair mitigates much of this. Your after-repair value (ARV) should reflect a fully treated and repaired property.

Ensure that your repairs are done to a high standard and that you can provide documentation of the termite treatment and any warranties. This transparency builds buyer confidence and supports your ARV.

Factoring in risk and unexpected discoveries

Termite damage can be extensive and hidden. When underwriting, always factor in a contingency for unexpected discoveries. Suppose the inspector identifies surface damage, but behind a wall, the damage is more widespread; your budget needs to handle that.

A hypothetical budget might include a 10-15% contingency for pest-related repairs above the initial estimate. This protects your margins if the problem is deeper than initially assessed.

Communicating the issue in your offer

When you present your offer, clearly state that it is contingent on a satisfactory termite inspection, or that your offer price reflects the known termite issues and estimated repair costs. Be transparent about how you arrived at your offer based on this information.

This approach shows the seller you have done your due diligence and are serious about the purchase, even with the complications of an active infestation. It frames your offer as fair given the property's condition.

Questions people ask

Can I really see active termites myself?

You might see signs of activity like mud tubes, discarded wings, or damaged wood, but identifying active termites and the full extent of an infestation usually requires a professional. Do not rely solely on your own observations.

How long does termite treatment take before I can start repairs?

Treatment times vary based on the method and severity, but it typically ranges from a few days to a few weeks. Your pest control company can provide a clear timeline for when it is safe to begin structural repairs.

Will an active termite infestation scare off cash buyers?

A past or active infestation can deter some buyers, but a property that has been professionally treated and fully repaired, with warranties, is much more marketable. Transparency and quality repairs are key to attracting cash buyers.

What if the damage is worse than the inspector thought?

This is why you include a contingency in your underwriting. If the damage is significantly worse, you may need to renegotiate your offer with the seller or, if that is not possible, reconsider the deal. Having a detailed inspection report helps justify any renegotiation.