16A — February 10 - 23, 2017 — Pennsylvania — M id A tlantic
Real Estate Journal
www.marejournal.com
P ennsylvania
very commercial in- dustrial property sale includes a due diligence By Amy Hawley, SIOR, Markward Group and Michael Jeitner, PE, Bohler Engineering How not to sell your listing short E to move forward towards the settlement. Often, the solu- tion to the problem is to re- ment, or PCA, at the onset of servicing the listing.
potential buyers. Even if the seller chooses not to address any of the potential issues found in the PCA, in- cluding an itemized disclosure statement to the potential buyer, getting cost estimates from various subcontractors in advance can still result in a significantly lower punch list cost. However, if the process is delayed until the buyer con- ducts the PCA processes, they are doing so under the time pressure of the due diligence deadline, and consequently, won’t have the time to solicit
numerous bids for each line item issue. The result can often mean a 20% to 25% reduction from the original contractual selling price. A prime example of a costly line item repair that com- monly occurs during the pend- ing sale of a property is the roof condition. For a 30,000 s/f single-level warehouse, the property owner received bids from three roofing companies. The original building was 20,000 s/f. There was a 10,000 s/f addition that was built five years after the original section. The engineering firm that prepared a PCA report early on in the listing process, stated that the functional life expectancy of the roof for the 10,000 s/f addition was an- other three years. The property owner shared that information with all three bidding contractors. One roof- ing company came in with a bid that was $5-per-square- foot, totaling $150,000. An- other bid came in at $4.25-per- square-foot, totaling $127,500. A third roofer agreed with the condition assessment of the two roof sections that the engineer provided. They sub- mitted a bid in the amount of $4.50-per-square-foot for the 20,000-square-foot section, $90,000. The overall savings that the property owner saved for this one repair item was in excess of $55,000. This is just one line item that is likely to appear on the repair punch list for a given property. Any time you sell an existing commercial/industrial build- ing, there are likely to be items needing repair or remediation, whether it is the building structure itself, the utilities inside, or even the parking area. As a seller, would you agree it is worth investing $3,000 to $5,000 to have a multi-disciplined engineering firm perform a PCA on your site, and potentially save 10 times that amount in the final sale? Without question, at the very least, you will be better prepared to address what your potential buyers may discover during their due diligence period, and will be in a more advantageous position to nego- tiate the sale of your property. Don’t sell yourself short! Amy Hawley, SIOR is an associate broker at Mark- ward Group. Michael Jeit- ner is a principal at Bohler Engineering. n
At a minimum, the assess- ment should include inspec- tion of: the building structure, interior finish conditions, roof- ing condition, as well as the mechanical, plumbing, and electrical systems, and should take from a few hours to an en- tire day to complete, depend- ing on the size of the property. The resulting report would serve to identify various poten- tial issues with the property that can either be taken care of by the seller or itemized in a disclosure statement to
period prior to the settle- ment date. More often than not, the buyer finds s t r u c t u r a l d e f e c t s o r mechanical systems is-
duce the sell- ing price to cover the cost of repairs or emediation of the property. You’ve sold your listing short. There’s a better way!
Amy Hawley
Michael Jeitner
sues that require repairs or remediation. That’s when the negotiation begins as to how to remedy the potentially costly problem. The seller is anxious
The listing agent should encourage the property owner to hire a multi-disciplined engineering firm to conduct a Property Condition Assess-
C REATING V ALUE T HROUGH E XPERIENCE
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