Performing the Right Assessment for your Multifamily Property
When people think of multifamily or multi-unit properties, they think of apartment buildings. However, nursing homes, assisted living facilities, and student housing are also considered multifamily or multi-unit properties. When you need a building assessment of a multifamily or multi-unit property, there are four major entities that provide standards for an assessment. The standard you should use depends on the type of funding used to purchase the property.
- The American Society for Testing and Materials (ASTM) Guide to Property Condition Assessments (PCA) is the industry standard for building assessments on commercial properties, including multifamily or multi-unit properties. ASTM’s PCA guidelines include a review of the building’s documents, interviews, an on-site walk-through survey, and an opinion of cost analysis over the next two years for all major repairs and replacements. When it comes to multifamily and multi-unit properties, ASTM encourages conducting a statistical sampling of the total number of units. This sampling is to provide an overall assessment of the total units within the building. All of the units can be assessed at the request of the client; however, the statistical sampling method allows the report to be completed within the due diligence timeframe, and helps keep the assessment fee affordable to the client. The ASTM standard does not require any environmental considerations such as mold sampling, radon testing, etc. These components fall under the ASTM standard for Environmental Site Assessments (ESA).
- If you are receiving funding from Fannie Mae or Freddie Mac the assessment must be performed to their standards and regulations for multifamily or multi-unit properties. Also known as Physical Needs Assessments, Fannie Mae and Freddie Mac have different guidelines for performing multifamily and multi-unit property assessments. Freddie Mac provides a reporting tool for consultants to use. This tool is a fillable document and is on the Freddie Mac website.
- The Fannie Mae standards and requirements are similar to the ASTM’s standards but are more stringent. For instance, Fannie Mae requires that the building consultants and field observers have certain credentials. They also require some specific information on some of the building components, and they require a specific report format. All of this information is provided in the Fannie Mae Form 4099. The Fannie Mae guide also includes an environmental element which requires the consultant to report on moisture, microbial growth, and pest management.
- Another entity is The United States Department of Housing and Urban Development (HUD). HUD has developed two guides for building assessments: Rental Assistance Demonstration (RAD): Physical Condition Assessment (RPCA), and a Green Physical Needs Assessment (GPNA). These two sets of guidelines are not interchangeable. The RAD PCA was the initial HUD program that was developed from HUD’s Mark to Market with a Green Initiative. These assessments both follow the ASTM guideline, but also add a “Green” element to the assessment, which requires consultants to identify “Green” building components along with traditional building components. Additionally, both of these guides include an energy element that evaluates the building’s energy consumption that adheres to the American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) Procedures for Commercial Building Energy Audits, Level II guidelines.
This is a simple overview of the different types of assessments that can be performed on a multifamily or multi-unit commercial property. It is important to know which assessment is needed based on your client’s needs. For additional information on each type of assessment, visit the entity’s website.