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What is a property condition assessment, and how to perform it correctly?

What is a property condition assessment, and how to perform it correctly?

2 months ago

·

8 min read

Written by

Parminder Singh

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Commercial property acquisitions often include a property condition assessment, or a PCA, as a component of the due diligence process. In simple terms, a PCA is a commercial version of a home inspection, which helps minimize risk for both parties and renegotiate the price based on the assessment results. However, unlike home inspections, property condition assessments are way more complex. Commercial buildings are usually larger and have complex HVAC, plumbing, roofing, and electrical systems, calling for a more careful investigation.

What is a property condition assessment, and why do you need one?

A property condition assessment is a comprehensive evaluation conducted by qualified professionals to assess a commercial property. It involves thoroughly inspecting the property's physical condition, including its structural elements, major building systems, interior and exterior features, and overall maintenance status.


The primary goal of a property condition assessment is to provide a detailed understanding of the property's current condition, identify any existing or potential issues, and assess the overall risk associated with it. Commercial building inspections help evaluate the need for repairs or replacements, estimate maintenance costs, and check compliance with relevant building codes and regulations.


Here are the main reasons why you may need a property condition assessment:


  • A PCA helps potential property buyers or investors make informed decisions about the purchase or investment. By understanding the property's condition and evaluating risks, you can determine if it aligns with your expectations.
  • Property condition assessments can also be valuable for commercial building owners or managers who want to understand the current state of their property and plan for future maintenance or renovations. A PCA inspection provides a comprehensive report detailing the property's condition, allowing you to prioritize repairs, budget for maintenance expenses, and ensure code compliance.
  • Lenders or financial institutions often require property condition assessments during real estate transactions. Assessments help lenders evaluate the property's value, risk, and suitability as collateral.


What does a property condition assessment include?

As mentioned, a property condition assessment is a complex process covering different aspects of a property. Let's take a closer look at a PCA's scope.


Document review

This phase involves an examination of relevant documents such as previous inspection reports, maintenance records, building permits, and architectural plans.


Building site

The building site assessment focuses on evaluating various aspects of the property's exterior, such as analyzing the topography and examining retaining walls, paving, curbing, and lighting systems.


Building envelope

The building envelope evaluation concentrates on the integrity of the property's exterior walls and windows. It examines the walls for signs of cracks, deterioration, or moisture intrusion. Similarly, the assessment includes inspecting windows to identify leaks, damaged frames, or sealant failures.


Structural integrity

This step involves inspecting the foundation and framing of the property for any visible cracks, unevenness, or signs of settlement in order to identify potential structural issues or compromised integrity.


Interior elements

The interior elements assessment focuses on stairways, hallways, and common areas for any safety hazards, damage, or signs of wear and tear that may require repairs or renovations.


Roofing systems

The roofing systems evaluation encompasses a thorough examination of the property's roof, which includes assessing the condition of the roofing materials, checking for any visible signs of damage or leaks, and identifying areas that may need repair or replacement.


Mechanical systems

This part involves thoroughly examining the heating, ventilation, and air conditioning systems to ensure proper functionality, identify potential issues, and assess their overall condition.


Plumbing

The plumbing assessment examines the property's plumbing systems, including water supply lines, drains, fixtures, and related equipment, to identify leaks, blockages, and outdated components.


Electrical systems

This phase involves inspecting a property's electrical infrastructure, including wiring, panels, outlets, and lighting fixtures. This helps identify any electrical hazards, outdated wiring, code violations, or potential issues that may create safety risks.


Vertical transportation

The vertical transportation assessment includes inspecting elevators and escalators for proper operation, adherence to safety codes, and general condition to ensure their safety and functionality.


Life safety, ADA, code compliance, and air quality

This aspect of property condition assessment involves reviewing the property's compliance with life safety codes, accessibility standards (such as ADA), building codes, and air quality regulations. It's aimed at identifying potential violations or concerns related to fire safety, accessibility, water intrusion, mold, or other health and safety factors.


Optional: site-specific testing

In some cases, additional site-specific testing may be conducted, for example, using infrared thermography to detect energy loss, air leakage, or moisture intrusion within the roofing and building envelope.


What is a PCA report?

A property condition report is a detailed document summarizing the findings and observations of the property condition assessment and providing the most accurate picture of the property's condition. PCA reports typically include:


  • summary of the property's condition, including identified deficiencies
  • description of the building type, building components, systems, and materials
  • recommended actions
  • list of deficiencies ranked according to their severity
  • details concerning capital needs
  • photos of systems and deficiencies
  • a table of costs needed to correct deficiencies


What to expect from a property condition assessment

Commercial building assessments can take a few days to three weeks. First of all, a PCA provider analyzes relevant documents and conducts interviews to collect as much information about the building as possible. 

After carefully studying the answers, a commercial building inspector visits the property. The expert can spend several hours to several days on the site, examining every aspect of the property, from building envelope and structural systems to plumbing and interior finishes. Based on the inspection results, the inspector prepares a PCA report.


Steps to completing a PCA inspection


  • Document review

This step involves reviewing and analyzing documents related to the property, including the certificate of occupancy, previous PCA reports, leasing documents, outstanding and recorded material building code violations, construction and as-built drawings, publicly available documents, etc.

  • Interviews

Before visiting the site, the provider interviews key personnel, including the building owner, property manager, and facility engineer. These interviews can be held in person, over the phone, or by email. Additionally, the provider may ask you to fill in a pre-survey questionnaire.

  • Walk-through survey

A walk-through survey is a visual inspection of the property aimed at gathering information on its systems and components. Inspectors often take photographs to document the property's condition, including exteriors, parking areas, plumbing, HVAC, roofing, electrical, and life safety systems.

  • Cost estimate

Next, the experts prepare a professional opinion of the cost for correcting deficiencies identified during the walk-through survey. It's important to understand that this estimation addresses physical deficiencies rather than visual improvements or building maintenance. 

  • Drawing up the report

All findings of property condition assessments are summarized in detailed reports.


How can ProofKeep help you when conducting a property condition assessment?

Our app ensures that every piece of evidence captured remains original and untampered with, instilling trust in the integrity of the assessment. With impartial, credible, and authentic photos, videos, and audio files at your fingertips, you can swiftly resolve disputes and mitigate potential conflicts.

ProofKeep™ empowers you with solid evidence, facilitating seamless property transactions and informed decision-making.


FAQ

What is a PCA in the real estate industry?

A PCA (property condition assessment) in real estate is a comprehensive evaluation conducted by professionals to assess the physical condition of a property. It involves inspecting various property components to identify existing issues, potential risks, and maintenance needs.


How is PCA connected to due diligence?

PCA is a part of the due diligence process in real estate transactions. It provides crucial information to potential buyers or real estate investors, helping them make more intelligent decisions.


How much does a commercial property assessment cost?

The cost of a commercial property assessment varies depending on the property's size, location, complexity, and scope of assessment. Generally, it can range from a few thousand to tens of thousands of dollars.


How long does a typical property condition assessment take to complete?

The duration of a PCA can vary based on the size and complexity of the property. However, in most cases, it may take anywhere from a few days to a few weeks to complete the inspection and produce the final assessment report.


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Parminder Singh

Technologist, Conceptual Designer, Lifelong Learner, Story Teller
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