What Is a Property Condition Assessment?
A Property Condition Assessment is done to identify physical deficiencies in that property. Based on the physical defects, appropriate repair and replacement costs are recommended. The property condition report is prepared as per the ASTME_2018-15.
The Property Condition Assessment comprises of : 1. Walkthrough survey to identify physical deficiencies of the property 2. Document Reviews and Interviews -Document reviews, research, and interviews are done to assess the physical deficiencies of the property.3. Preparing the property condition report- The report is prepared based on the information obtained from the document reviews and interviews, the walkthrough survey. The report provides information on the physical deficiencies. It also provides opinions of cost to remedy the physical deficiencies that are identified.
The inspection and the report cover the following section of the property: 1. Site inspection, which includes topography, drainage, parking, utilities & landscaping. 2. Structural Frame & Property envelop – This is comprised of Foundation, Roofing & Exterior 3. Mechanical & Electrical System – This is comprised of Electrical, Heating, Cooling, Insulation, Ventilation & plumbing. 4. Interior – This includes interior finishes of ceiling, wall & floor. 5. Vertical transportation – Like elevator & escalator 6. Fire Protection- What sort of fire protection system is in place in the Property.
The following are not covered in Property Condition Assessment: 1. Capital improvement cost, renovation cost. 2. Inspection of rodents and insects. 3. Subsurface condition report is not included. 4. Confined space entry is not included, as this can pose a health and safety risk to the inspector. 5. Environmental Assessment is excluded. 6. Thermal imaging is not carried out.
How is Property Condition Assessment Essential in buying a commercial Property
Irrespective of whether the lender is asking the report or not, the buyer should always do the due diligence by getting the Building Condition Assessment done. This will help the buyer to know what problems are there in the property and how much is the cost to remedy those deficiencies. This will help the buyer to make an informed decision about whether to buy the property or walk away from buying the property.
Based on the cost, the buyer can then negotiate with the seller about the purchase price. He will also know the upcoming immediate repair and replacement cost and short-term repair cost and manage his cashflow accordingly.
Most lenders require a Property Condition Assessment to finalize the commercial loan, especially older properties. The assessment gives the lender valuable information about the cost of ownership and the remaining useful life of the property. When severe problems are identified in PCA, the bank may not approve the loan, or even the buyer may decide not to purchase the property.
Property condition assessment can also help the contractor who is going to renovate the property as he can reference the cost. A Property condition assessment can also be useful if the owner plans to renovate the property because your contractor will review the Property Condition Assessment to provide the total renovation cost to the Owner. Based on the renovation cost, the Owner can then decide whether to renovate the property or sell the property.
Sometimes owners require a Property Condition Assessment to plan for their next five or ten-year renovation or repair cost.
Property Condition Assessment can help the Owner at the end of a long-term lease to assess the repair cost involved and then negotiate the cost with the tenant.
It is always essential to engage a reputed Commercial Building Inspection Company to know what defects or repairs are involved. If the defects are major or not and how much immediate cost and the short-term cost is required to fix all the issues. Based on that, the Client can make an informed decision about the future course of action.
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