Considering Commercial Building Inspections?

First in a series: Hear what ASHI members have to say about a market that offers oportunity and challenge

Experienced home inspectors looking for a chance to stretch their skills can find it in commercial building inspections, a market that offers many opportunities for business growth. Especially for those with engineering or contracting experience, the commercial building market is large enough so that many inspectors can carve out a niche, garnering larger fees and working with a powerful client base.

But commercial buildings present a unique set of challenges, and inspectors considering a move to the market—or even considering supplementing their home inspection business with the occasional commercial project—must first get acquainted with the skills and experience required to succeed. The ASHI Reporter spoke with members across the country to offer an in-depth look at the ups and downs of entering the commercial building inspection market.

Inspections vs. property condition assessments

Commercial building inspections can take on many forms. Some inspectors choose to follow ASTM E2018-01 Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process, which offers guidelines for performing an overview examination of a structure. The field observer (the preferred title for those who conduct property condition assessments), who chooses this form, works with a property condition report reviewer to generate a property condition report for the client that offers a general description of the building and an estimate of what the client might expect to invest, depending on his or her goals.

Others choose to follow a more detailed approach, enlisting the skills of a team of experts to comb the building and provide the client with an inspection report containing details about the building’s systems and condition.

Many inspectors we spoke with employ a combined approach, using ASTM E2018-01 as a guideline, but going a bit deeper into the structure to provide a detailed perspective for the client. Most agreed that defining your method, and being clear about your approach with every client, are essential to satisfying the client’s needs and expectations. (For more, see sidebar, page 21.)

An open field

Many inspectors fall into the field of commercial building inspection, often on referral from an existing residential client who purchases a small commercial property. Others get pulled in by real estate agents and brokers they meet through home inspections. Mark Stronach, owner of HomeSpec LLC and Structure Assessment Group in Portland, Ore., says he started doing commercial work when an agent asked if he could inspect a smaller apartment building. And there are those who came to home inspecting from a technical background, such as Frank Libero, president of Garnerville, NY-based United Inspection Consultants, who later became intrigued by the challenge of commercial work. An engineer by training, Libero enjoys putting those skills to work on larger commercial structures. (Photo: Typical smaller commercial building roof and rooftop equipment. Photo courtesy of Mark Stronach)

The field is incredibly large and diverse: inspectors can pick a type of structure on which to focus, a size range or even a geographical area, and stay busy, says Corey Friedman, president of Greater Chicago Home Inspections in Northbrook, Ill. Friedman says an industrious inspector can take advantage of the market, which isn’t served by an organized inspection community: “The private commercial inspection world doesn’t really exist,” says Friedman. “For years, it has fallen on the shoulders of engineering firms that have taken on assignments.” (Photo: Newer apartment building in Portland suburb typical of large, complex buildings. Photo courtesy of Mark Stronach)

Benefits

Delving into commercial building inspections can open doors to bigger clients, higher fees and the increased security of business diversification, and it can provide inspectors a chance to learn new skills—or use some that they can’t use on home inspections.

A different type of client

Clients in the commercial realm are, in general, more educated in real estate issues and in matters of business. As a result, they can be easier to work with, according to Kenny Hart, technical advisor and instructor for Homebuyers Inspections, Inc., of Virginia Beach, Va. “Commercial clients are much more professional, and usually better educated,” than residential clients, says Hart. “And because they are professionals, they also know how to deal with legal issues if you stir them up,” a situation not uncommon in commercial work. (Photo: Smaller office building transactions occur every day. The systems and components often don’t vary a lot from residential. Photo courtesy of Mark Stronach)

Coming from a corporate background, Stronach also enjoys working with commercial clients, who he says are less emotional than homebuyers. “I really like doing the homes and working with people. It’s a big decision in their lives,” says Stronach. “But it’s nice to go to a commercial client and deal with a different mindset,” he adds. “I enjoy working with investors and commercial brokers. It’s a very different focus.”

Fees are often higher

As a rule, commercial inspectors command higher fees because the work requires more time, experience and expertise.  Jim Katen, owner of Gaston, Ore.-based Benchmark Inspection Services, says that inspectors really earn that higher fee and gain added benefits: “I charge more for commercial services, but the amount of time they take is much greater than a typical home inspection,” says Katen. “Commercial work isn’t particularly more profitable, but it does broaden my knowledge base, and that makes me a better inspector.”

More eyes = less risk?

Some inspectors believe that because they go in with a team on a commercial inspection, their risk is reduced. Charles Bellefontaine, owner of Chicagoland Home & Building Inspections in Bolingbrook, Ill., says that with “more eyes looking at different subjects, there are more chances to find defects, so liabilities are lower.” Katen agrees: “I don’t feel like I’m more at risk,” he says. Still, it’s important to confirm your insurer’s position on covering commercial work and secure necessary additional coverage. For example, John Cranor, owner of Glen Allen, Va.-based Cranor Home Inspections and chair of ASHI’s technical committee, says his insurer covers commercial work “as long as it doesn’t exceed 10 percent of my total inspection business. Otherwise, I have to get an additional policy.”

Referrals make it happen

As in the residential inspection business, referrals constitute a large portion of most inspectors’ commercial business development. By branching into a new field, inspectors are not just adding to their potential client base—they’re building relationships that can generate lucrative contracts. “The more referrals you have, the larger your client base will be and the better you’ll do,” says Bellefontaine.
Stronach concurs, adding that “there is a tremendous opportunity for building business” in the commercial market. He focuses on solidifying relationships with commercial real estate brokers, whom he says are in a position to refer many high-end clients. Provide a good experience for the broker’s client, he says, and you’re guaranteed repeat customers.

The diversification that comes from working with both residential and commercial clients also is a business booster, especially in today’s indecisive economy, which demands a nimble nature for success.

Developing a niche

“It’s a little easier to set yourself apart in commercial,” says Stronach. “You need to find a niche.” Most of the inspectors we spoke with agree, including Hart, who says specialty-oriented inspectors can succeed by targeting their marketing efforts and emphasizing their unique skills. For example, Libero specializes in performing Phase 1 environmental inspections; Cranor favors commercial building inspections over property condition assessments (PCAs) and prefers to work on small buildings.

Change of pace

One of the most basic benefits of expanding into the commercial market is simply the change of pace. Commercial work is done in “a completely different atmosphere,” says Cranor. “Usually, you have more time to get your thoughts together, it’s not as much of a time crunch,” compared to residential work. The divergence from residential work also is attractive to Katen: “It’s fun to see a challenge that’s different from the everyday home inspection. I enjoy that.”

Challenges

On the flip side, commercial building inspections bring their own unique frustrations and challenges, including increased time commitments and responsibility, a higher risk of liability, the need for greater understanding of building systems—and the necessity of juggling a team of experts that can address a variety of issues.

Sheer magnitude means more responsibility

The sheer size of a commercial structure can be daunting to inspectors new to the field. Where a home inspection might take four to six hours, a commercial inspection team of five or six people might cover a structure in the same amount of time, investigating a wide variety of building systems and issues unfamiliar to many home inspectors. “Everything is larger and more complex, often an order of magnitude greater than what I find in homes,” says Katen. (Photo: Assessment of the parking areas is a part of commercial inspections. Photo courtesy of Mark Stronach)

The resulting reports can be complicated and voluminous, taking lots of time and skill to compile; Hart even suggests building a team of support staff, one of whom focuses on reporting.

Inspections of even the smallest commercial properties require a greater knowledge of electrical, plumbing, HVAC and other components that might be unfamiliar. “It takes a broader knowledge of commercial-type equipment and systems,” says Cranor, so inspectors should consider getting trained or enlisting the right experts.

Bigger stakes = more risk?

While some inspectors we interviewed didn’t feel a greater risk, others believe the field brings more chances for liability issues. “If you miss something, it could be a much greater liability, because you’re talking about a lot more money,” says Cranor. “For example, on a roof, if you’re not familiar with commercial standards, it could be a mistake that costs hundreds of thousands of dollars,” he adds.

Friedman says that “pre-inspection agreements need to be looked at by an attorney,” so that the client is clear on what will be covered and what will be excluded during the inspection. “It’s not necessarily about right or wrong—it’s about creative writing. All you have to do is not meet someone’s expectations and suddenly you’re defending yourself,” he says.

Experts raise fees, necessitate a “big picture” perspective

An inspector’s background and experience will dictate the type and number of experts needed to complete inspections. Nearly everyone we spoke with relied on the services of experts, whether as independent consultants or as employees of the lead inspector’s company. Whatever the case, the use of experts can drive up the price of service, so commercial inspectors must be aware of the needs of each job in order to quote a fair price that covers the expense of expert opinions. Libero cautions that even if an expert works as a subcontractor, the client will ultimately blame any oversights or mistakes on the lead inspector, putting the onus on him or her to make good and possibly leading to even more expenses. (Photo: Typical for a multi-building residential property.  Photo courtesy of Mark Stronach)

On a large commercial job with a team of experts, inspectors should also keep in mind that the consultants may have tunnel vision when it comes to their specialty. While the upside is that a focused approach allows the experts to hone in on their tasks, the downside is that it’s even more crucial that the inspector keep an eye on the big picture to ensure a big problem doesn’t slip through the cracks.

Jargon

Along with an increased general knowledge of commercial building systems, inspectors also must talk the talk, speaking the language of the experts they employ. “For example, an elevator person speaks in his or her own jargon,” says Bellefontaine. “We have to be able to understand that language and convey it to our customers.” That process requires increased expertise, and can also translate into increased time spent creating reports.

New field can mean unexpected challenges

Perhaps, more than anything, inspectors new to the commercial building market should expect the unexpected. “Commercial properties are unpredictable,” says Katen. “It’s easy to get mired in them.” There are myriad details to review, and many systems to understand, so be prepared to handle new challenges on each job—or to bring in experts who can cover you in those areas.

In the next issue: We take a closer look at special considerations for commercial building inspections, includ-ing the use of expert consultants, the inspection process, educational opportunities, documentation and reporting, marketing and referral strategies, and more.

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What Makes a Commercial Building Inspection?

Inspectors hold a diversity of opinion on what makes a commercial building inspection. Some follow the guidelines of ASTM E2018-01 Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process, while others prefer to go their own way, offering clients a more detailed inspection and comprehensive approach. There’s no right or wrong—an inspector considering a move into the commercial realm should establish his or her own approach based on experience or comfort level. Your style will shape your fee schedule, influence your client base, dictate the amount of additional experts needed and much more.

By the book: the ASTM approach to PCAs

ASTM E2018-01 establishes guidelines for performing a property condition assessment (PCA), which some inspectors argue is technically not an “inspection.” For a PCA, a field observer (the preferred title for those performing PCAs) typically performs a walk-through survey, interviews maintenance workers and tenants, and pulls courthouse documents like surveys and other technical data on the structure. All the information provides an overview of the building’s condition, and the inspector can then provide the client with a property condition report. According to Kenny Hart, technical advisor and instructor for Homebuyers Inspections, Inc. in Virginia Beach, Va., PCAs are commonly performed for very large properties; experts used on PCAs are usually referred to as “consultants.”

A different path: performing inspections

Commercial building inspections differ from PCAs in that they provide much more detailed information to the client. Inspectors typically enlist the assistance of a team of experts, each of whom contributes information compiled in a highly detailed inspection report for the client. Some inspectors apply the ASHI principles in the commercial setting; others develop their own approach to ensure all the pertinent details are covered. Either way, inspectors and field observers should spell out the details in agreements and contracts.

Choose your method

Hart says the difference between PCAs and inspections can be significant. Taking a small shopping center as an example, he explains that during an inspection, an inspector would evaluate the air conditioning units for each individual store, taking off the covers, examining the fan belt and listening to each unit working. An inspection report would note the specifics for each unit. In comparison, for a PCA, a field observer would note that there are 15 original air conditioning units, two of which are recent replacements, so there are 13 units that might need to be replaced soon. The property condition report would explain the general condition, and would alert the client to the potential investment needs.

Many inspectors choose to combine methods to get the best of both worlds. Corey Friedman, president of Greater Chicago Home Inspections in Northbrook, Ill., says his inspections are a combination of both approaches: “I try to find a happy medium between providing the descriptive features and meaningful, useful information” about the long-term expectations for the structure.

No matter your approach, inform every client about your style to ensure it fits his or her needs and expectations. “I don’t look at it so much as doing a PCA versus a detailed inspection,” says Mark Stronach, owner and inspector of HomeSpec LLC and Structure Assessment Group in Portland, Ore. “I look to my client for direction. There are some who want it more like a home inspection,” he says, but others “just want to know the big ticket stuff, the deal breakers. I look to the client’s needs.”

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