Ask the Brokers – How Rotten is Dry Rot?

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This in my email bucket this morning:

I had contract through Seller’s Relocation company “AS IS” with 10 days contingengency.

ISSUE: 1st PEST Control Service company found “dry rot” damages at DECK, Door Frame, another PEST control company found “dry rot” at Eaves under roofs of house today.

They all say they can fix it, but this is only 11 years old house in Sunny San Diego with less rain. Because they could not explain to me logically or clearly why Dry Rot is occurred on the particular area (any structural issue or moisture damage or leakage), I have concerns about any future breakout of Dry Rot… any further worry of honest disclosure when I sell this house to new buyer in the future… Disclosures reports did not say anything about DRY ROT, even though they tried to fix the DECK and cover DRY rot by paint. I did not remove contingencies yet. Today is 13 days from Sales acceptance. My wife does not like the house any more due to worries. 1. Is this Dry Rot common issue and OK to fix and live it? Also can I walk away and get the honest money back? Thank you.

First of all, dry rot is very common, even in Sunny San Diego. The Wood Destroying Pest and Organisms (Termite) inspection covers much more than termites; it covers all “wood destroying pests”, which includes fungus and dry rot. You need not live in monsoonal climate conditions to experience dry rot. Indeed, moisture is the culprit, but any degree of moisture over time in combination with untreated wood (or wood needing a fresh coat of paint) can result in the situation you have.

And, this IS NOT uncommon in San Diego. On the contrary, a home with no evidence of wood rot is the exception to the rule. It is very treatable. The affected wood is generally replaced and repainted – That’s it. Assuming the issue is dealt with, there should be no reason to worry about implications when the home is later sold.

A footnote about wood destroying pests: I have seen one-year new homes require tenting and extensive wood replacement and thirty-year old homes issued a full-clearance (clean bill of health). In the case of termites, those crafty little guys have wings. If your neighbors have them (particularly if you are proximate to older homes), there is a good chance you do… or will. In the case of wood rot, an owner’s maintenance schedule, the climate, and the exposure of the home all contribute.

For me, the presence of wood rot at the eaves and on a deck would not be considered a fatal flaw. These are treatable and, assuming you address the issues, you should be fine. We are involved with a home right now with an estimated wood/termite repair bill of almost $20,000. This has only concerned the buyers in the context of who will be picking up the tab, not in that the condition exists. As a side note, many buyers and sellers are surprised to find that termite fumigation is relatively affordable (generally $1500 – $1800) compared to wood replacement; it is the latter that starts to sting the pocketbook.

Regarding your earnest money deposit, it really depends on your contract language. We spoke about the earnest money deposit at length here, but in the context of the standard California Associaton of Realtor’s Purchase Agreement. Many (most) relocation companies use their own addendums, and many of these call for a “passive method” of contingency removal. In other words, if the time comes and goes and no one has spoken up (in writing), the contingency is deemed waived. You should carefully review your particular contract to determine whether the passive or active method applies.

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