Walls and Ceilings - termites or...

I am looking at buying this house and I came across this in the laundry room. I am not very sure what it is. It appears to be termites but being located in Denver, termites are rather a rare thing out here. Anyone have any ideas as to what this is??? Here is link with a picture to it. http://home.graffiti.net/gneissguy/ Please help!!!!!

Your photo link did not work for me. If purchasing a new home, it is wise to get a home inspection and a termite inspection. If there is insect damage, it can be more extensive than what meets the eye. For termites to be a 'rare' thing in Denver, there are certainly a large number of termite contractors in the area. I do not believe that Colorado has a required termite inspection.

Subtropical species like Formosan termites can not survive the extremes of cold in Denver. The Eastern subterranean termite, same as the termites in the Northeast, are, however, present in Colorado and can be a problem in moist areas. See the following article from Colorado State: http://www.ext.colostate.edu/Pubs/insect/05532.html

Thanks twelvepole for the valuable advice. I realize the importance in getting a home inspection and I plan on doing so prior to the purchase of any home. However, I a currently torn between two houses that just went on the market yesterday. My fiance and I really like this house (the one with the pic) but am fearful that if we do proceed in purchasing it and it does turn out to be termites, then the other house probably be off the market leaving us without either house. I also realize that it is not possible to make a positive determination as to the cause of this flaking but I am hoping that someone might have some more ideas or ways to test quickly/cheaply the different possibilities of causes. Here is another link that should work
http://i159.photobucket.com/albums/t142/lake_lebarge/ViewingtripApril16th040.jpg

I truly do appreciate any help and advice anyone can give me. I look forward to purchasing a house and finally begin the joy of a honey-do-list :-). Thanks!

It looked like water damage to me.

A lot of states require passage of a termite inspection before closing - unless specifically wrote out of the contract. If that is your only [major] concern with the property, make an offer contingent on the home passing a termite inspection.

If there is a deck outside and above the window, a ledger could be the reason for moisture. - From the phot, it looks like there is something there.

Deck support ledgers attached to the house are not recommended because of the usual methods of attachments that permit water intrusion. Even with proper methods and flashing it is still a difficult connection.

If you have a pre-purchase home inspection inform the home inspector you are concerned about possible water intrusion and any associated rot/mold.

Concretemasonry, you hit the nail on the head!!! There is in fact a deck on the other side of the wall. I will definetely have the home inspector look at the connection and the possibly presence of mold/rot. Thanks everyone for the invaluable input and advice! I think I know what direction I will be heading.