Section 1 vs Section 2 Termite Report - What California Buyers & Sellers Need to Know

Your termite inspector hands you a report. You open it, and there’s a diagram of the house with color-coded findings, a bunch of paragraphs describing what was found, and — this is the part that trips almost every California buyer and seller up — findings labeled either Section 1 or Section 2. Then your agent says something like ‘the seller pays Section 1, you pay Section 2, don’t worry about it,’ and you nod like you know what that means. You don’t. That’s okay — almost nobody outside the industry does.

Here’s the honest reality about the section 1 vs section 2 termite report distinction, and why it matters more than most first-time buyers realize. These two categories drive who pays for what during escrow, how much the deal might actually cost you beyond the purchase price, and whether you should push back on the seller’s coding of items on the report. Getting this right can save you thousands. Getting it wrong can leave you holding repair bills you didn’t expect.

Let’s walk through exactly what each section covers, the California convention around who pays for which, how the coding decision actually gets made, and what to watch out for so you don’t sign off on something you’ll regret three months in.

⚡  Quick Answer

What is Section 1? Active infestations and active damage — the wood-destroying-organism findings that need to be treated or fixed right now.

What is Section 2? Conditions likely to lead to infestation — things that aren’t termites yet but probably will be if not addressed.

Who typically pays for what? California convention: seller pays Section 1, buyer pays Section 2. This is a norm, not a law, and it’s negotiable.

Can the seller refuse Section 1 items? Yes, but it’s unusual on a standard California residential deal. Most sellers accept the convention or the deal falls apart.

First move? Get an independent WDO inspection so you know the coding is honest. Call Termike at (888) 683-3592.

✅  Why You Can Trust Termike Pest Control

License: California Structural Pest Control Board — License #PR8832 (Branch 2 & 3 certified)

Membership: National Pest Management Association (NPMA)

Experience: 25+ years serving Orange County, LA County, Riverside & San Bernardino County

Escrow-Ready WDO Reports: Our termite reports come structured the way California escrow, lenders, and real estate agents expect — clearly separated Section 1 and Section 2 findings

Honest Section Coding: We don’t inflate Section 1 findings to drive treatment revenue, and we don’t undercode real issues to make a deal look easier. What we find is what we report

What Section 1 Actually Means on a Termite Report

Section 1 findings are the ones that require immediate action. In California WDO-report language, this covers active infestation and active damage — meaning wood-destroying organisms are eating the structure right now, or they’ve already caused damage that has to be repaired for the wood to hold its structural role.

Typical Section 1 items include:

• Active termite infestation visible in framing, subfloor, or accessible wood — live activity confirmed by the inspector

• Active fungal decay (dry rot with ongoing moisture) that’s degrading wood at the time of inspection

• Damaged wood that’s structurally significant — joists, sill plates, load-bearing studs, rafters — needing removal and replacement

• Wood-destroying beetle activity (powderpost, deathwatch, or similar) that’s currently active

• Any WDO condition the inspector judges as requiring immediate treatment or repair to protect structural integrity

The word that matters here is active. Section 1 isn’t about how bad the finding is — it’s about whether whatever’s happening is happening right now. Old termite damage in a joist can be Section 1 if the wood needs replacement to hold its load. But an inactive gallery in a decorative baseboard usually isn’t.

According to the California Structural Pest Control Board, licensed inspectors follow specific criteria for coding findings — which is exactly why an experienced, honest inspector matters. Section 1 coding drives the money conversation, so this is where inspection quality shows up most.

What Section 2 Means on the Same Termite Report

Section 2 findings are the ones that aren’t problems yet but probably will be if left alone. In WDO language, these are ‘conditions likely to lead to infestation’ — situations at the property that create the environment termites or fungus need to establish, without there being active activity right now.

Typical Section 2 items include:

• Wood-to-soil contact anywhere on the property — landscape timbers touching siding, fence posts pushed against foundation, deck posts in dirt

• Excessive moisture in crawl spaces, around plumbing, or against exterior wood — the condition that supports subterranean activity

• Cellulose debris under the house or in crawl spaces (scrap wood, stored lumber, form boards left after construction)

• Faulty grade or drainage routing water toward the foundation

• Sub-area ventilation issues that trap moisture in crawl spaces

• Old termite evidence with no current activity — droppings, wings, or damage that’s clearly historic

Section 2 items don’t threaten the house today. They set the property up to have problems tomorrow. Which is why they still need to appear on the report — a house with severe Section 2 issues is a house with a termite problem waiting to happen, even if there’s nothing there yet.

Who Pays for Section 1 and Section 2 in California Escrow

Now the money part. There’s a widely-used California convention, but understanding that it’s a convention — not a law — matters a lot when things get contested.

The Standard Section 1 vs Section 2 Termite Report Payment Convention

Seller pays for Section 1 items. The theory is that active infestation and active damage existed before the buyer took ownership, so the seller carries the cost of getting the property to a clear-of-active-issues state. Section 1 work typically happens before closing, and the resulting clearance letter (or Notice of Completion) shows the items were addressed.

Buyer pays for Section 2 items. The theory here is that conducive conditions are ongoing maintenance issues — properly the responsibility of whoever owns the property going forward. Section 2 items don’t have to be fixed for the deal to close; the buyer just takes on the responsibility of addressing them post-closing if they choose to.

Where the Section 1 vs Section 2 Termite Report Convention Bends

• VA and FHA loans sometimes require both Section 1 AND some Section 2 items to be resolved before closing, depending on the specific findings and lender requirements

• Cash purchases and investor deals often ignore the convention entirely — everything gets negotiated in the purchase price

• As-is sales (explicitly stated in the contract) put both sections on the buyer unless separately negotiated

• Seriously large Section 1 items sometimes trigger renegotiation of the entire deal rather than seller-funded repair

The California Association of REALTORS® publishes guidance on standard WDO handling in residential transactions — it’s worth reading before your first negotiation call, especially if this is your first California purchase.

How the Section 1 vs Section 2 Coding Decision Actually Gets Made

This is the piece that surprises most homeowners. The section coding on a section 1 vs section 2 termite report isn’t a rigid algorithm — it’s the inspector’s licensed judgment about each specific finding. Which means two things matter enormously.

• Inspector experience. Coding gray-zone items correctly — old damage that’s still structural, moisture-related decay that may or may not still be active, borderline cellulose-debris situations — is judgment work that takes years to do well

• Inspector independence. If the inspector is being paid by one side of the deal, there’s pressure (sometimes subtle, sometimes not) to code in that side’s favor. An honest inspector reports what they find, regardless of which section it lands in

If the Section 1 items on a report seem inflated (or the Section 2 items seem to be minimizing things that should be Section 1), a second opinion from an independent inspector is entirely reasonable. Termike’s piece on what fails a termite inspection in escrow covers the discovery side, and the WDO NPMA-33 termite report article covers the report format itself.

According to the U.S. Environmental Protection Agency identification framework, active WDO findings warrant immediate action and conducive conditions warrant correction — so the two-section structure isn’t arbitrary. It reflects a real distinction between what needs fixing now and what can wait.

What to Watch For When Reading Your Own Report

Regardless of whether you’re the buyer, seller, or a homeowner just curious about a report you commissioned, these are the specifics that matter when you’re reading a section 1 vs section 2 termite report yourself.

1. Read the diagram, not just the text. California WDO reports include a coded diagram showing where each finding sits on the property. Match the paragraph descriptions to the diagram — sometimes what sounds minor in text is actually located in a critical spot

2. Check whether damage findings are coded correctly. Old damage in structurally significant framing is Section 1, not Section 2. Watch for damage that’s minimized as ‘historic’ when the wood actually needs replacement

3. Look at the cost estimates. Each Section 1 finding typically has an associated repair or treatment cost. Add them up — that’s the number that drives negotiation

4. Note the ‘further inspection recommended’ items. These are areas the inspector couldn’t fully access. They’re not free-pass items — if anything, they’re yellow flags that something might be hiding

5. Check the report’s expiration. California WDO reports have a limited validity window. If yours is more than a few months old, get it refreshed before closing

6. Ask about anything unclear. A reputable inspector will walk you through the report and explain the coding decisions. If they won’t, that’s its own signal

The Bottom Line

The section 1 vs section 2 termite report distinction is one of those pieces of California real estate that seems arcane until you’re staring at a report during your own escrow — then it becomes the most important thing on the page. Section 1 is active infestation and active damage, and it’s the seller’s bill under the standard California convention. Section 2 is conditions likely to lead to infestation, and it’s the buyer’s to address going forward. The coding matters because it determines who pays, and the payment convention matters because it’s a norm — not a law — meaning it can be negotiated when it needs to be. Understanding the framework lets you read your own report critically, ask better questions, and end up in a fair deal rather than an expensive one.

Frequently Asked Questions

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

A: Section 1 covers active infestation and active damage — wood-destroying organisms currently at work, or damage significant enough that repair is needed to protect structural integrity. Section 2 covers conditions likely to lead to infestation — situations that create the environment termites or fungus need to establish, without there being active activity right now (wood-to-soil contact, moisture problems, cellulose debris, faulty drainage). The practical distinction is 'needs fixing now' vs 'sets up a future problem if not addressed.' Under California convention, sellers typically pay Section 1 and buyers typically take Section 2 post-closing, though this is a norm rather than a law and can be negotiated.

Q: Does the seller have to pay for Section 1 items?

A: Not by law, but by widespread California convention on residential resale transactions — yes, usually. The convention exists because Section 1 items are active problems that existed while the seller owned the property, and clearing them before closing gets the house to a defensible baseline. Most sellers accept this or the deal falls apart. Where the convention bends: cash and investor deals often ignore it entirely, VA and FHA loans may require additional work, and as-is sales explicitly put everything on the buyer. Your purchase contract governs what actually applies — if section allocation matters to you, get it in writing rather than assuming the convention will hold.

Q: Can I negotiate Section 2 items even though they're conventionally my responsibility as the buyer?

A: Yes. The Section 1 / Section 2 payment split is a starting point for negotiation, not a fixed rule. Buyers commonly request seller credits for significant Section 2 items — particularly moisture issues, faulty drainage, or wood-to-soil situations that would be expensive to correct. Whether you succeed depends on the market (buyer's market vs seller's market), the size of the Section 2 items, and how the ask is framed. A reasonable Section 2 credit request supported by contractor estimates is more likely to succeed than a broad 'you should pay for all of it' demand. Your agent will know what's typical in your specific area.

Q: How do I know if the Section 1 vs Section 2 coding on my report is accurate?

A: You often can't tell just by reading — coding gray-zone items correctly is licensed judgment work. The signals that something might be off: Section 1 items that seem far larger than the described damage would warrant, Section 2 items that describe damage which sounds structurally significant, or a report that reads as if it was written to favor one side of the deal. If any of that describes your report, an independent second opinion from an inspector not connected to either side is entirely reasonable. Termike offers independent buyer-side and seller-side inspections specifically for this purpose — call (888) 683-3592.

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