Property condition assessment is performed by qualified and experienced inspectors as part of the due diligence process when buying or renovating a building.
The inspection process consists of gathering critical facts about the property and results in a property condition report, an indispensable part of any real estate investigation.
As one of the global leaders in construction consulting services, VERTEX consultants share some of their expertise about this fundamental part of the due diligence process.
The quality of property condition assessment will depend on the knowledge and experience of the inspectors performing it.
When is property condition assessment necessary?
Property condition assessments (PCA) are requested by clients making significant decisions regarding specific properties, to acquire reliable and objective information.
Some of the most common situations when accurate and detailed facts about a property are necessary and require a PCA include:
- Finalizing a real estate transaction.
- Bringing the property up to code.
- Planning to repurpose or change the use of the property.
- Conducting a life cycle cost analysis.
- Serves as a risk management tool to prevent potential health or safety hazards.
The property condition assessment process
Depending on the circumstances, there are diverse PCA and due diligence levels that are not equally comprehensive.
They are generally adjusted according to the user’s requirements. However, the PCA process is most frequently conducted according to E2018, an industry standard established by the American Society for Testing and Materials (ASTM).
ASTM serves as a guide for field observers and Property Condition Report reviewers.
It defines good commercial practices for conducting a baseline property condition assessment of commercial real estate property.
As outlined by this standard, the property condition assessment process consists of four main components:
- Document review, research, and interviews to understand the property and identify physical deficiencies before performing the walk-through survey.
- A walk-through survey is a visual inspection of the property and its physical condition to identify potential deficiencies or inadequacies. Various components, systems, and equipment are observed and presented in the property condition report (PCR).
- Providing an opinion on how to remedy identified physical deficiencies. In this phase, the inspector uses the information gathered through the previous two steps to list physical flaws and calculate the cost of rectifying them. There are two categories of the remedies costs: immediate and short-term.
- A property condition report (PCR). This is the final work product prepared for the client. It incorporates all the gathered information and presents an opinion of estimated costs for suggested remedies.
These steps will provide core information about the property that a client needs by communicating the inspector’s observations, opinions, and recommendations.
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How long does PCA take, and how much does it cost?
The duration and the cost of a PCA assessment ultimately depends on its purpose, the client’s requirements and risk tolerance level, and the required level of due diligence requested by the client regarding the property’s characteristics.
Companies that provide this service offer an estimate according to the client’s input and needs. Experienced inspectors will find a perfect balance between cost, speed of assessment, and its quality.
The duration of the PCA process will depend on several factors that determine the complexity of the task:
- Responsiveness of the building owner or governing entities regarding the documentation review.
- Depending on the size of the property, the walk-through survey could last a single day or several days if additional visits are necessary. This can happen if some property areas aren’t accessible during the first visit.
- Condition and size of the property.
- Age and type of structures.
- Accessibility and location of the property.
- Scope or comprehensiveness of investigation.
- Inspector’s experience.
Of course, even though PCA reports present a crucial element of the whole due diligence process, the property’s condition is not the only risk factor involved.
Experienced consultants know that even when the building is in satisfactory or even excellent condition, additional surveys, like an environmental site assessment, are still needed to form a complete picture.
