Faulty Grades
This is an interesting and misunderstood term. Let's start with the definition from the OPM (Office of Pest Management).
"Faulty grades exists if the exterior grade is above or at the interior slab or wood floor level. All faulty grades are based upon the exterior grade."
It sounds simple enough until you read it on a termite report. Especially when a lender reads it and sees "Faulty". Everything comes to a halt, until "Faulty" is off of the report.
Faulty Grades can be broken into two categories: 1. Correctable. 2. Non Correctable. These terms won't be on any termite report, but understanding the difference can really help you get the transaction moving forward.
1. Non Correctable (construction style)
These Faulty Grade calls are really about the way the home or building is constructed. Examples of these are: basements, sunken floor (aka step down living-rooms), sunken tubs, interior fire-pits (aka conversational pits), houses on hills that have slopes running to the back of the house or adjacent to the home, stucco exteriors that run into the grade. Even though these are called Faulty Grades, they are highly desirable styles of construction.
Take a house in Paradise Valley (85253 - the most costly zip code in the South West). A home here could be: built on a hill with slopes, have stucco exterior that runs into the grade (it doesn't stop above the grade exposing the stem wall), have basement or floor level built into the hillside, or any other type of slopes. In this neighborhood these would be premium features.
For these types of calls we add a little extra verbiage to the report such as "this is a common call in the area." These extra words seem to help the reader of the termite report get a much better sense of these type of Faulty Grades.
A special note about VA loans:
When any of the calls on a report from 15, 16, 17, and 18 are check marked yes, the VA slows down the financing process. Especially when number 17 Faulty Grade is marked yes. The VA almost always states they can't finance a home with a Faulty Grade.
Here is my standard question to the VA lender: Do you finance homes with basements in Arizona? Of course they do. I then inform them that basements in Arizona are considered Faulty Grades. The floor level is at or below the grade of the exterior. They then start to understand and continue with the financing. The above examples of construction style Faulty Grades are pretty much the same thing.
2. Correctable
Correctable types of Faulty Grades are much easier, usually. The types tend to be Faulty Grades that are essentially made and/or caused by owners of the home.
A few examples: A raised planter bed around the exterior of the home. The construction of the planter bed could be stone, brick, block, wood, etc. If the planter bed has three sides and the back wall is the wall of the home, then it is a Faulty Grade. When you fill the planter with dirt, the dirt goes up against the house and above the level of the slab on the interior. This can be pretty easy to correct. You dig out the dirt, creating an air gap up against the house wall and planter. This eliminates the Faulty Grade.
Here is a great picture that illustrates the FG/Planter. The grade level (dirt level) of the planter on the exterior of the home, is higher that the floor level of the interior of the house. According to the OPM, this is a faulty grade.
Another common type of Faulty Grade is when home owners do landscaping; they create mounds of dirt that slope towards the house. There are dozens of these types of calls. The key is to see what the call is and look for a simple fix.
When it comes to Faulty Grades, usually a simple repair and/or extra verbiage on the report will keep the transaction moving on.
Below is an example of a Faulty Grade. The red line shows the typical level of the dirt up against the house. The pile of dirt creates a Faulty Grade. This call would show up on the report as FG/high dirt level.
I am interested to know what you would say about the addition of a concrete porch that created a faulty grade. The concrete porch comes just under the stucco of the home. Drainage around the porch (with a covered roof attached to the house) is good. And there is a slope from the porch down to the driveway. But this has brought our VA buyer to a halt. If you have a suggestion for our termite inspector, it would be greatly appreciated.
ReplyDeleteDawn,
ReplyDeleteThis is a great question and common problem with VA funding. The VA will fund termite reports with faulty grade calls. I would ask the lender if they finance homes in Arizona with basements. The answer is always of course. Then explain that in Arizona a basement is a faulty grade.
Now the situation you described, sounds like the slope (faulty grade) was created during the building of the home. So I would have your termite inspector add some additional verbiage to the report. Usually once this is done the VA will understand and move forward with the funding. I would add this to the actual graph and the empty lines below the slope call; this fg/slope call is a common building style in the neighborhood.
Please let me know how this works for you.
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ReplyDeleteWe bought a house very recently where the yard slopes into the foundation instead of away from it. Though the slope is not extreme, it is noticeable and the owners, the home inspector and the termite inspector did not disclose it. (We did not consider what a problem it could be) After a light rain, we see about 3 inches of water that collects all along the back of the house and cannot drain. After a heavy rain, about 6 inches. It just sits until the foundation can absorb it. VERY concerning. We found termites and have treated. We've contacted the previous owners, the home inspector and the termite inspector and the are all pointing fingers at each other regarding the faulty grade. Any suggestions?
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