Quoting commercial inspections

[Peter C. Russell]

Hi All,
I just thought I would share an experience I had quoting commercial inspections.
I took the ITA course in 2005 because I had several requests to inspect large apartment buildings and turned them down because I felt I wasn't ready to do them. Now, how many out there that have completed this course feels differently, I know I did and I thought about what a great opportunity these inspections are.

Here's my story on these buildings and I hope it helps you guy's with pricing and understanding the reality of these inspections.

I was asked to quote on these buildings for a client who had a partner. There are 6 buildings with 6 units each for a total of 36 units. There is a mix of 1, 2, and 3 bedrooms per building. All of the buildings where built in the 1800s. As you can see they are brick exterior with asphalt roofs, brick chimney's ETC.

I estimated 6 buildings would take 6 day's to inspect. That equals to one building per day or 3 days in the field and three days of report writing. I also told my client that this report would follow ASTM 2018 guidelines and I would give them a cost range to repair deferred maintenance, upgrade components due to change of use , meet with the local building/code enforcement officials and produce a report so they can optimize their strategies for the purchase and reuse of these buildings. OK here's the quote

I priced this low because I wanted the job and also it was across the street from my office. The price was $3600.00 which came out to $600.00 per building. I thought it should be more like $800.00-$1000.00 per but I wanted the job.

Well I lost it to a national franchise company that came in and charged $2400.00 and completed it in less than 8 hours with four inspectors. The report was emailed first thing the next day.

The report, what a joke, it was a check list type of report that did not include anything close to what I had offered. I know this because one of the partners in this project came back to me for advise. I offered my time free of charge to see what had been inspected and why not, free education on the competition is priceless. The end result is I realize now more than ever what a growing market commercial inspections are and to be ahead of the curve with NACHI you can't loose.
I know I'm not the only one that does commercial inspections and I have limited mine to mainly large apartment buildings, which are nothing more than big houses and I will post anything useful here that I can.

I know everyone who took the course in Denver is excited about this part of the business and you should be. It's definitely our future!

[Steven C. Waskewicz]

Thanks for the info.
Was there any clue on how the competition priced it out? if they did it for $2400, I'd be wondering what the cost per sq.ft. was calculated, and whether that was a going rate, or arbitrary information?

Good to know though...thanks

Steve

[Peter C. Russell]

I'm not sure how they priced it out but they did the inspection as if it was a home inspection not a commercial inspection.

[rgiglio]

I am a recent NACHI member and have enjoyed many of the informative topics posted on the site. I just had a question in regards to you inspection. Did you take the course to get more experience inspection larger building because an apartment building is not a commercial building. Does the course you took cover apartment building along with commercial building as well. Just curious. Rob

[Bruce M. Graham, III]

Robert,
I believe anything over 4 units is considered commercial for your insurance.

[Bruce A. King]

I have not studied the 2018 document in great detail but I would be very careful in agreeing to inspect to that spec. unless you charge about three times the regular rate and hire experts to help.

Am I missing something there? comments please

[Dale Duffy]

Peter,

I inspect commercial buildings every week, each customers has their own perception of what they want, some want detailed inspections, and some want just the deficiencies noted. Most just want major repairs noted.

I have found that the buyers who just want the deficiencies noted are the easiest to work for, the inspections are fast and easy, the report is also easy to write. In the agreement, items like holes in sheetrock or doors are not even mentioned, just major cost items.

Just noting deficiencies without tell them they have a concrete foundation, wood framed with brick veneer, etc, etc, etc (not Sop style)...are easy inspections and can be priced accordingly. 99.9% of buyers don't care what the building is made of, they already know.

Personally if the buyer just wanted the deficiencies noted in the above pictures, I wouldn't have any problem doing it in a day using HomeGauge software with a notebook computer from building to building with one other inspector.

[Mike Nelson]

At the very least, think of buildings like this in terms of how much you would charge in a regular residential situation, then factor in the costs of the buildings, and time, and you will come to a much higher dollar figure, the scope of work is decided by the client typically, but the emotional issues are generally removed in this arena, and the transactions often go much smoother than homes. Never sell yourself short.

[Peter C. Russell]

The problem with this inspections they didn't list the deficiencies that's why he came back and asked my opinion. I went over it with and in 30 minutes or so he realized he got taken.

[Peter C. Russell]

Dale, I should have stated that the client wanted a complete inspection of all buildings and a random sampling of units. Their intent on this purchase was to do some renovation and turn them into condos for resale. My price was for a complete inspection giving them price ranges for upgrades, addressing safety issue's and some research with officials about the planned change of use.

One thing that stands out is when he asked for advise I said sure, no problem, we took a walk around and went into a basement of one of the buildings and there was major structural issue's that the other company had noted but did not advise. I recommended a structural engineer I know and they came out and wrote a protocol on how the repair should be done.

In the end they realized that saving $1200.00 on a 4mil. dollar purchase wasn't worth it.

[Dale Duffy]

Originally Posted by prussell

Dale, I should have stated that the client wanted a complete inspection of all buildings and a random sampling of units. Their intent on this purchase was to do some renovation and turn them into condos for resale. My price was for a complete inspection giving them price ranges for upgrades, addressing safety issue's and some research with officials about the planned change of use.

One thing that stands out is when he asked for advise I said sure, no problem, we took a walk around and went into a basement of one of the buildings and there was major structural issue's that the other company had noted but did not advise. I recommended a structural engineer I know and they came out and wrote a protocol on how the repair should be done.

In the end they realized that saving $1200.00 on a 4mil. dollar purchase wasn't worth it.

Peter

I understand your position clearly now, in fact I think your price was quite reasonably then.

As we all know, some buyers will try and save a dollar at first and spend thousands more as the end result of their concocted thinking.

But I sure wouldn't let the loss of this bid bother me by any means, win a few lose a few. Sounds too me like you have your protocols in order though, and I commend you for that.

[Peter C. Russell]

Thank you Dale, what type of commercial inspections are you doing? I'm taking it slow for now and will build up as I go. I have yet to do a restaurant or large multi story building but there out there and I want to grow into the larger inspections.

[Marcel R. Cyr]

Hi. Peter;

Been thinking about this since you first posted.

The math is telling me something funny.

You offered a proposal for $3600 and six days. = $600 P.D.
Assumming you worked 8 hrs. per day = $ 75 P. Hr.

Competitor proposal was $2400 @ 8 hrs. x 4 men = $2400 P.D.
Assumming the same here 2400.8=$300 . 4= $ 75 P. Hr.

That is ironic.

I can believe both parties are trying to make the same amount of money per hour, but one is more effiecient than the other, I would presume.

The Buildings pictured, I would guess at 1000 sq. ft. per floor x 3 = 3000 x 6 = 18000 S. F..

$3600 divided by 18000 =.20 p.sf.
Competition $2400 divided by 18000 sf. = .1333 psf.

8 man hours x 4 = 32

8 man hours x 6 = 48

48-32= 16 hours over the competition. 16 x $75 = $1200

$3600 - the competition $2400 = $1200

Well after all these calculations to show me that you were underbidded and,
take to long, I am exhausted.

Uncanny isn't it?

Marcel

[Dale Duffy]

Originally Posted by prussell

Thank you Dale, what type of commercial inspections are you doing? I'm taking it slow for now and will build up as I go. I have yet to do a restaurant or large multi story building but there out there and I want to grow into the larger inspections.

Peter,

I do every type of building, from restaurants, office condos, to multi-story buildings, and then offer yearly follow up maintenance inspections for many of the clients, which is easy work and very lucrative.

I have retired men in all trades available when necessary, electrician, plumber, HVAC man, and a structural engineer. So any type of inspection is available to clients, whether they want just the deficiencies noted or repair costs included also. I also have three licensed contractors in every trade available that I have personally used in the past, they can all give the buyer prices for repairs, they all have very good reputations here in Phoenix as quality contractors, so I kind of have one stop shopping, and my clients like it.

I would suggest try and get hooked up with Marcus & Millichap, I sure get a lot of work from their offices all over the country. Great bunch of commercial agents.

[Peter C. Russell]

Dale, thanks for the tip, I appreciate it. I'm not sure if most know but we have proposed licencing for not only home inspections but it would include all commercial inspections as well. I'm glad I have the chance to get involved early because I see this as a big part of my business in the future.

Hey Marcel, Jeez! easy on the math! The big difference you are missing is the quality of the report and how it helps the client. Anyone in NH can inspect a building and spit out a check list report the next day Via email. My inspection was to include not only the report with narrative comments with app. price ranges for upgrade/improvements and digital photo's but more importantly investigative reporting with the local officials who will have say in this change of use, which by the way plays a huge roll in the overall investment. I guess you can say " You Get What You Pay For "