[State of the Industry] Tough Times for Termite Renewals

Once upon a time, mailed invoices were guaranteed to bring in termite renewal money. Those days are long gone, another casualty of the sliding housing market and slumping economy, said pest management professionals. In fact, the number of renewals for termite coverage dropped more than 29 percent from 2004 to 2007, according to Specialty Products Consultants President Gary Curl, who annually surveys 800 pest management companies nationwide.

The drop can be blamed on many causes. Some states like Georgia no longer require wood-destroying insect reports when closing a home sale, so professionals are unaware when new owners take possession. Renewal notices are mailed to the previous owner and then forwarded to his or her new address. Most are tossed out and never reach the current owner, said Arrow Exterminators Realtor Relations Vice President Nancy DeLany.

“The new homeowner is not even aware the coverage has lapsed or that it was even under coverage,” she said. To make matters worse, the Georgia Association of Realtors removed the inspection requirement from its standard contract in January, DeLany added.

Massey Services Quality Assurance Vice President Adam Jones has seen a similar trend in Florida. He said the increase in cancellations can be pinned on the once highly speculative market for new construction. Homes often changed hands two or three times before they were completed by the builder, he explained. Now when renewal time arrives, the house is either vacant or belongs to someone else. The Florida Department of Agriculture and Consumer Services reported at least half of the homes in the state have no termite protection, despite climate conditions that make them vulnerable to infestation.

A tough economy is forcing customers to make choices, said DeLany. Rising adjustable mortgage rates, insurance premiums, property taxes and fuel costs are cutting into disposable income. Even commercial real estate and apartment communities are taking cost-cutting measures, said Jones. “They see termite protection as one of those areas they can do that in.”

Many customers also don’t fully understand the termite threat, Jones said. It may be Northerners relocating South, or even those in termite-heavy states who never have experienced problems due to excellent protection programs. “They don’t perceive the risk as great as it really is,” said Jones. “That’s a communications issue.”

As a result, professionals are hitting the bricks. “You have to sell termite protection,” which means tracking down new homeowners and knocking on doors, said Jones. “You’ve got to be smarter and work harder at it.”

DeLany is spearheading a committee through the Georgia Pest Control Association to help real estate agents understand the contract change pitfalls. Currently inspections fall under due diligence for the prospective buyer. The group likely will appeal to state government to get the wood infestation report reinstated. “It’s an injustice to the consumer,” said DeLany.

One bright spot is New Orleans. After Hurricane Katrina in 2005, termite renewals took a nose dive because “the houses were gone,” said Eddie Martin, president of the Terminix franchise in Metairie, La. Now, renewals are coming back “every day, every week, every year” as the city reconstructs itself, he said. Some hoped the long-lasting flood would drown the termites. “I’m sure some did, but they’re sure strong now,” said Martin. There are two types of homes in New Orleans, he reminded: “the ones the termites are eating on and the ones that are protected.”