What is a Section 1 item on a California termite report?

A finding of active infestation or infection by wood destroying pests or organisms, or damage caused by them: live subterranean or drywood termites, active fungus or dry rot, and the damaged wood they leave behind. Section 1 items are the findings lenders care about, because they represent a problem that exists right now.

What is a Section 2 item?

A condition deemed likely to lead to infestation or infection, but with no evidence of active pests or damage yet: earth-wood contact, excessive moisture, a shower leaking into the subarea, faulty grade, or cellulose debris under the house. Section 2 items are warnings, not active problems.

Who pays for Section 1 repairs, the buyer or the seller?

It is negotiable; nothing in California law assigns the cost. The long-standing custom in most California transactions is that the seller pays for Section 1 work so the property can get a clearance, and Section 2 items are left to the buyer to address (or negotiate) since they are preventive. Purchase contracts can and do allocate it differently, so the contract controls.

What is a Section 1 clearance?

Proof that all Section 1 items have been corrected: after the work is done, the structural pest control company files a Notice of Work Completed, and a report showing no remaining Section 1 findings is what escrow and lenders commonly call a 'clearance' or 'termite clearance.' It is a product of custom and lender policy rather than a defined legal document.

Do lenders require Section 1 clearance?

VA loans commonly require a wood destroying pest inspection and correction of Section 1 findings before closing, and many other lenders ask for a clearance when the purchase contract calls for one. Conventional loans vary. The safest assumption in a California sale: if there is a termite report in the file with Section 1 items on it, someone will ask for the clearance.

Is there a Section 3?

Not officially. Reports also list areas where further inspection is recommended: inaccessible areas the inspector could not open, like a locked attic or a slab-covered subarea. Agents sometimes call these 'Section 3 items' informally. They are neither Section 1 nor Section 2 until someone opens the area and looks, which is why buyers often pay to open them before closing.

Can Serv AI produce the report with findings already classified?

Yes. Inspectors dictate their findings and Serv AI drafts the WDO report with each finding written up and placed in the correct section, keyed to the diagram, ready for the inspector to review and sign. The Section 1 versus Section 2 call always remains the licensed inspector's judgment; the software removes the typing, not the decision.

Section 1 vs. Section 2 on a California Termite Report

The two sections, side by side

Every California Wood Destroying Pests and Organisms Inspection Report (the WDO or "termite report", required content set by Business and Professions Code Section 8516) classifies its findings into two buckets:

Section 1: happening now

Live subterranean or drywood termites
Active fungus or dry rot
Damage caused by wood destroying pests or organisms
Evidence of active infestation or infection

Section 2: likely later

Earth-wood contact
Excessive moisture or plumbing leaks
Faulty grade against the foundation
Cellulose debris in the subarea

The line between them is evidence. A leaking shower with fungus damage under it is Section 1. The same leaking shower with dry, sound wood underneath is Section 2. Same shower, different section, very different conversation in escrow.

Who pays

Nothing in California law assigns the cost. The allocation is purely a matter of the purchase contract, but the custom is so entrenched that most transactions follow it without discussion: the seller pays for Section 1 work so the property can deliver a clearance, and Section 2 items go to the buyer, who can fix the preventive stuff on their own schedule after closing, or negotiate credits for it.

The custom exists because of lenders. When a loan requires the Section 1 findings to be corrected before funding, the seller is the party who can get the work done while the house is still theirs. VA loans in particular commonly require a wood destroying pest inspection and Section 1 correction before closing.

What a "clearance" actually is

After the corrective work is done, the structural pest control company files a Notice of Work Completed with the Structural Pest Control Board, and the property can show a report with no outstanding Section 1 findings. That package is what escrow officers, agents, and lenders call a "Section 1 clearance" or "termite clearance." It is a creature of custom and lender policy, not a defined legal document, which is why exactly what a given lender accepts can vary.

The third category: further inspection recommended

Reports also list areas the inspector could not access: a locked attic, a furniture- blocked garage wall, an inaccessible subarea. These are neither Section 1 nor Section 2 until someone opens them and looks (agents informally call them "Section 3 items"). In a sale, an unopened area is an unpriced risk, which is why buyers often pay for the further inspection before closing rather than inherit the surprise.

WDO reports with the sections already sorted

Serv AI turns an inspector's dictated findings into a formatted WDO report: each finding written up, placed in its section, and keyed to the diagram. The inspector makes the calls; the software does the typing.

Section 1 vs. Section 2 on a California termite report (and who pays)