August, 2004
Feature
Inspection News and Views from the American Society of Home Inspectors



The Ins & Outs of Commercial Building Inspections

JENNIFER G. PROKOPY

Second in a series: ASHI members talk about what it takes to enjoy success in the commercial market


Inspection-photos-123.gifCommercial building inspections (and property condition assessments) offer inspectors opportunities to build their business, increasing their client base, referral network and revenue. They also offer challenges: inspectors of commercial structures face much larger projects, more detailed building systems, greater responsibility, and an increased commitment of time and staff. (Photo: Electrical and other systems can vary substantially in larger buildings.  Photo courtesy of Mark Stronach)

The ASHI Reporter spoke with members who believe that for all its challenges, the commercial building market is well worth pursuing. Here, we bring you information on special considerations of the market, including tips on building a stable of expert consultants, guidance on codes and standards, information on creating inspection and property condition reports, strategies for devising a pricing approach, and the importance of building relationships that strengthen your business.

Experts

Without a doubt, employing expert consultants can increase an inspector’s prospects, widening the range of buildings that can be examined skillfully. “This isn’t something that you do all by yourself,” says Charles Bellefontaine, owner of Bolingbrook, Ill.-based Chicagoland Home & Building Inspections. “If you want to be successful at commercial property inspections, you want to be in and out of that property in four hours, so it’s important to take it on as a team.” Bellefontaine says that on his inspections, he might bring in as many as five experts to assist, with the goal of minimizing the amount of distraction for current tenants.

Expert consultants will vary according to the type of project, according to Mark Stronach, owner of HomeSpec LLC and Structure Assessment Group in Portland, Ore. For example, on an office building he might bring in a structural engineer, elevator expert, and someone who understands fire protection systems; on a small apartment building, he might not bring any of those consultants on board.

Finding consultants

old-photos-2-055.gifThere are many sources of expert consultants, starting with other ASHI Members, many of whom came to home inspections from backgrounds in plumbing, electrical or engineering. Kenny Hart, technical advisor and instructor for Homebuyers Inspections, Inc., in Virginia Beach, Va., says ASHI chapter meetings often provide chances to meet potential consultants. “We often invite architects, engineers and different trades to speak to us, and they might turn out to be a great resource,” he says. (Photo: Typical building in a multi-building residential property.    Photo courtesy of Mark Stronach)

Inspection-photos-069.gifJim Katen, owner of Benchmark Inspection Services in Gaston, Ore.,  also relies on friends and colleagues from the field for expert opinions. “For example, I’m uncomfortable with three-phase electrical systems, so I’ll bring in an electrician friend who will look at that system for me,” he says. In a pinch, Frank Libero, president of United Inspection Consultants in Garnerville, N.Y., will call a town building inspector and ask for a recommendation. “That’s usually a safe referral,” he says. (Photo: A multi-tenant retail property. Photo courtesy of Mark Stronach)

Organizing your team


Corey Friedman, president of Northbrook, Ill.-based Greater Chicagoland Home Inspections, views himself as a team leader on commercial inspections, “the inspector as general contractor, piecing together all the components,” he says. “A team approach is useful.” He says that while some clients can find their own consultants, inspectors can garner more business by doing the research: “If they want services, we’ll find the experts who do it—we’re one-stop shopping, as long as they tell us what they want.”

Other inspectors keep the consultant relationships less formal, like Katen, who prefers to learn as he goes: “If I know in advance that a building has a particularly challenging component, I’ll bring an expert along to teach me during the process,” he says. Many of those consultants are Katen’s colleagues from the field.
Inspection process

Each ASHI Inspector we spoke with has his own unique approach to commercial inspections. Some focus on doing a property condition assessment (PCA), performing a quick overview and providing a general report on the building, while others prefer to conduct a meticulous inspection, generating a highly detailed report. Some felt, like Katen, that it’s “inappropriate for someone to try and use their regular home inspection reports, technique or style and apply it to commercial inspections.”
Others, like John Cranor, owner of Cranor Home Inspections in Glen Allen, Va., are comfortable applying ASHI standards in some commercial settings.

While each has his own approach to the process, they all agree on one thing: know your client’s needs and expectations up front to avoid confusion and aggravation down the road. “By being very clear up front, you minimize the chance that you don’t meet client expectations,” says Friedman. “You need good communication with the client about its planned use—once you change (a structure’s) primary use, that’s going to involve changes to the building.”

Client’s best friend

old-photos-3-184.gifDuring the course of a job, an inspector might encounter items of potential cost or risk to the client, so inspections should include not only an examination of systems and conditions, but also a mind toward future use, says Cranor. “A person doing commercial inspections has to pay attention to things that could be a potential liability for a purchaser,” he says. For example, on one inspection, Cranor interviewed building tenants about a dark parking lot. “Employees felt like they were always at risk of being mugged. I pointed that out to the person buying it, so he knows there is a potential issue,” one of both cost and liability. (Photo: Neglected rooftop of commercial building. Photo courtesy of Mark Stronach)

Codes and compliance


IMAG0043Screwdriver.gifAs with residential inspections, most agree that it is important to be familiar with regional codes; at the same time, inspectors should be clear that they are not code inspectors. “We don’t enforce code,” says Friedman. But general knowledge is necessary, says Hart, especially because on commercial properties, inspectors run into issues that are more subjective than those often found in homes. “For example, on a driveway of a house, potholes are no big thing,” he says. But when inspecting a commercial driveway, an inspector has to examine the number of spaces, find out if they’re wide enough to meet code, and if that driveway might be able to accommodate a new level of use planned by a purchaser. “We are not code inspectors, but we definitely need to have more knowledge of codes,” says Hart. (Photo: This image shows defective parapet roofing material; the screwdriver drives the point home. Problems such as this one can mean big repair costs for purchasers of commercial properties. Photo courtesy of Kenny Hart)

In addition to national and regional codes, inspectors should familiarize themselves with standards set by the National Fire Protection Association. “Anyone who does commercial needs to be familiar with the NFPA 101 Life Safety Code Handbook,” says Friedman.

An understanding of requirements of the Americans with Disabilities Act is also a must. “You need to be more aware and knowledgeable about ADA requirements when you’re inspecting a commercial property,” says Cranor. “The person buying it might not be aware that they have to do certain things to be in compliance.” 

Reporting

IMAG0059pileofjunk.gifWhen it’s time to share results with clients, the same variance in approach to inspection is evident in reporting styles. “With commercial inspections, every property is unique and individual,” says Katen. He takes hundreds of pictures and copious notes on site, and then writes a narrative report including information shaped by the client’s needs. He submits a digital report to the client, complete with photos and notations. Others, like Libero, don’t usually supply photos to the client: “If they knew what was in the picture they wouldn’t need me,” he says, explaining that his reports tell clients “what the condition is, what it means to them, what they should do about it, when, and with or by whom.” (Photo: Not only is the condition of this structure’s water heater —almost completely obscured by other objects—tough to determine, but the scene may speak to greater issues of disuse and disrepair at the property. Photo courtesy of Kenny Hart)

Stronach says his reports are shaped by the fact that most investors are looking for an overview that includes an exit strategy. “An investor is looking at ‘what happens later when I sell?’ A lot of them are looking to improve the property, sell it, and move on to the next one,” he says. He tries to put everything into perspective for clients, “looking at what we have to deal with right away, within the next year, the next two years, and what’s unknown,” Stronach says.

For example, an issue of particular importance to potential owners, says Friedman, is abandoned cables. “According to the 2002 National Electrical Code Article 800.2, there are now requirements to remove abandoned cables, such as phone and data, from above suspended ceiling grids,” Friedman says. Potential costs can be even higher than those involved in roof and heater replacement.

Other inspectors prefer to use their home inspection report style as a template and build from there. Bellefontaine says there’s “no significant difference” in the report format he uses for both residential and commercial work. “It’s broken down into different categories, including roof, exterior, electrical, heating—the reports are longer, but the subject categories don’t change,” he says.

Almost universally, there is a focus on fast turnaround of reports. Hart says it’s typical for his company to e-mail a report as soon as it’s available, and send a hard copy in a binder with photos for next-day delivery.

Contracts and compensation
Contracts often are very different from those used in home inspections. “They’re very clearly spelled out,” says Bellefontaine. “They’ll have their attorneys look at contracts as well, which doesn’t happen that often with residential,” he says. Friedman encourages commercial inspectors to have their own attorneys also check all pre-inspection documents.

old-photos-3-160.gifPricing strategies vary as widely as reporting approaches. Hart says a majority of his inspections are quoted after he conducts an initial drive-by: “Then I know I’m going to bring X number of people with me, and it’s going to take X number of days to do a report,” he explains. Others, like Friedman, provide an estimate up-front based on a client-provided description of the structure, and then charge a final fee based on the number of people involved and hours spent. Katen started quoting flat fees, but quickly found that the approach served neither him nor the client: “Now I quote a range, and I try really hard to fall right in the middle,” he says. (Photo: Water intrusion damage is common in apartment buildings. Photo courtesy of Mark Stronach)

Marketing and referrals

As in the home inspection market, relationships and good communication grow business, through networking opportunities and referral sources. While almost none of the inspectors we interviewed use conventional advertising, all said that a large portion of their business comes from referrals. “Most of my marketing is done during the inspections,” says Libero. “Ninety percent of my work comes from past customers.”

“Standard marketing in this business doesn’t work,” he continues. “To do commercial marketing, you have to golf with the banking guys,” says Libero. He supplements those efforts by writing articles for home improvement magazines and maintaining a Web site. And he says that with the current increased emphasis on mold abatement, doctors can be a great source of referrals.

“I try to focus on relationship-building, which is key to getting the business,” says Stronach. He relies mainly on referrals from commercial real estate brokers, and “I’ve built relationships with individual investors, too, who come back to me over and over.”

Cranor says that in addition to his regular referral sources, he also gets business from ASHI Members in other states, who might only know him by reputation. Katen has a similar experience: other than an occasional Yellow Pages™ ad, he says his business has grown strictly by word-of-mouth.

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Back to School?


Almost every inspector we interviewed chose not to pursue formal training in commercial building inspection, but many recognized the potential benefit of doing so. Drawn to the field when a residential client asked him to inspect a commercial property, Corey Friedman, president of Northbrook, Ill.-based Greater Chicago Home Inspections, “didn’t do any additional training” to prepare for the work, but says “that’s not something I advocate.” If commercial work was more than just a fraction of his overall business, says Friedman, he would pursue more formal training.

Commercial work constitutes about 10 percent of Charles Bellefontaine’s business, but he also spurns formal training, instead opting for consultants to fill in the gaps: “I just learned to recognize what my limitations are and bring in experts to focus on those areas,” says Bellefontaine, owner of Chicagoland Home & Building Inspections, Northbrook, Ill. He doesn’t think training can prepare anyone for the details needed to understand building systems: “HVAC, elevators, high-voltage electricity: even if you take a class, they’re not going to teach you about things like that, so that’s when you want to bring in a licensed journeyman” or other experts.

Of the seven ASHI Members we interviewed, only one had taken extensive formal training. When Mark Stronach, owner of HomeSpec LLC and Structure Assessment Group, Portland, Ore., decided to pursue commercial work on a larger scale, he enrolled in the Commercial Training Program offered by Carson Dunlop Weldon and Associates in Toronto. The three-day course covered insurance needs, reporting techniques, ASTM standards, equipment issues and more, providing “a very good overview, and enough depth to perform a confident inspection,” says Stronach. Students receive a 250-page textbook and other materials, and go on-site to various buildings to practice their skills. “It’s not cheap, but it’s well worth it” for those who want to boost their commercial work, he says. Commercial inspections now constitute between 25 and 35 percent of his business.

For more information on the class, visit www.carsondunlop.com/weldon and click on the left-hand column link to “Commercial Training Program.” According to the Web site, the course is approved for 20 CAHPI(BC) and 20 ASHI Membership Renewal Credits, and follows the protocol established under ASTM E2018-01.

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