Previously, we discussed the role of an Insurance Valuation, comparing it to the financial analysis and planning tool known as a Reserve Study, in an article titled Insurance Valuation Vs Reserve Studies. (You may find it helpful to read that article before this one to establish a comparison).
Now, let's compare another financial tool that is often mistaken for the RS... the Condition Assessment.
What is a Condition Assessment?
The Condition Assessment is a physical evaluation of a commercially owned asset, sometimes referred to as a commercial inspection or a property condition assessment (PCA).
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This evaluation and report is not to be considered technically exhaustive but instead is a tool used by potential investors to reduce uncertainty about the condition of a property.
The resulting report should include the following elements in a clear, easily understood format:
· Summery of the property's visible components
· Details about physical defects or damage found
· Quality of workmanship or installations
· Identify maintenance deficiencies
· Estimates for correcting deficiencies
· Statement of terms and condition
Why Do We Need a Condition Assessment?
1. A comprehensive assessment provides due diligence for lenders and investors on a potential purchase of real estate.
2. It provides expert evaluation of the quality of construction, integrity of building systems, and other critical components prior to a commercial real estate transaction.
The professional CA provider understands the latest industry standards of structural, roofing, mechanical, plumbing, electrical, lighting, and interior systems. He assesses the condition of existing equipment and components, uncovers maintenance problems and estimates the costs for correcting physical deficiencies... making him worth every penny to potential investors!
Even though the Reserve Study, the Insurance Valuation and the Condition Assessment all have similarities and common objectives from the analyst point of view, each document serves a different purpose for you the consumer.
If you are a member of a condominium or timeshare association, you might be interested in having an Insurance Valuation to make sure you are properly covered and to see if you can save some money on your premiums! Or perhaps your association is in need of a current Reserve Study, to ensure adequate funds are being set aside for future capital expenditures.
As a real estate investor, your CA provider is just another part of your advisory team... helping you to make an informed decision about your real estate purchases.
If you still have questions or need more information, please feel free to contact me.
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