Who performs commercial inspections?
The commercial inspection market is a huge and largely untapped source of revenue for individual property inspectors. Commercial inspections are generally performed by either engineers and architects, or by inspection companies that offer commercial inspections in addition to residential inspections.
Engineers and architects are typically single-discipline individuals who can only provide information about a system that’s within their area of expertise. Additionally, engineers and architects tend to charge premium fees, which gives the home inspector the opportunity to share the market by charging a more competitive rate.
Many residential inspectors working in the commercial market approach commercial inspections the same way they do home inspections. Typically, the language they use and their company branding and marketing remain unchanged and are based on their residential inspection services. However, because of the major differences between residential and commercial inspections, this approach will limit your success in the commercial inspection arena. When adding commercial inspections to your residential services, you must change your mindset and marketing strategy in order to be successful.
What’s the nature of the market?
The client for a residential inspection is often emotionally attached to the deal and is potentially more difficult to work with than a client for a commercial inspection. An inspection for a commercial property isn’t personal or emotional for the client because it is strictly a business transaction. When inspecting commercial properties, your clientele will consist of business professionals who will follow an established procedure in evaluating the property. This evaluation is commonly related to its potential to yield a positive return on the investment, and involves examining information related to many physical and business aspects of the subject property.
Unlike residential transactions that are based on appraisals and comparisons, commercial transactions largely rely on the property’s history and revenue. However, prospective commercial inspection clients make up more than just buyers and sellers.
Types of Commercial Inspection Clients:
- Real Estate Agent: In larger markets, including metropolitan and urban areas, it is common practice for an agent to specialize in either commercial or residential properties. Some commercial agents might specialize further and focus on specific building types, like office or retail spaces, or even transaction types, like lessors and/or lessees. In smaller markets, an agent might work in both residential and commercial transactions.
Since the commercial inspection field requires specialized knowledge, particularly in the areas of business and finance, most commercial agents hold a college degree. They also often work for a large firm or agency having a more formal and corporate culture than residential sales agents. Commercial agents often represent tenants and lessees, building owners and lessors, and investors.
- Property Manager: A property manager is an individual or a professional management company that buys, sells, leases and/or manages most types of commercial properties. The property manager is also usually responsible for property maintenance and repairs to keep the property in a safe and habitable condition and in compliance with local zoning ordinances. The property manager also typically manages a maintenance budget and retains all records of inspections, repairs, and maintenance for the owner or lessee.
Some management companies may employ an in-house or onsite property maintenance manager who is familiar with commercial building structures and systems. This person may supervise and coordinate with other professionals, such as contractors and inspectors, for maintenance and repairs.
- Homeowners’ Association (HOA): In terms of commercial inspections, an HOA is an association that oversees a multi-residential property, including condominiums and townhomes, which are individually owned. An HOA establishes and enforces rules for the properties within its jurisdiction.
Depending the size of the property, an HOA might hire a property manager or management company. The responsibilities between the two may vary but typically include duties like ensuring that the property is properly maintained, creating and managing budgets, retaining property records, and overseeing or coordinating with contractors and inspectors.
An HOA or property manager may hire a commercial inspector to perform periodic inspections, or to provide information for the physical analysis of a reserve study. A home inspector may occasionally work with an HOA if the HOA oversees a neighborhood of individually owned homes, but the job is considered a commercial project when four or more units in a multi-unit property are involved.
- Governmental Department or Agency: The government owns, purchases and leases all types of properties, including housing developments, office buildings, warehouses, and industrial facilities. These buildings are often professionally managed by large companies that will be your main point of contact. The type of inspection will vary, but the requirements and Scope of Work will be clearly defined. These projects are typically awarded to the lowest bidder.
A rule of thumb for commercial inspectors is: Don’t low-ball government bids. Make sure your proposal is based on accurate cost estimates for your time, travel, and fees for the consultants required for the project, as well as your own margin for profit.
- Private Investor: An individual or group that frequently purchases and leases all types of income-producing real estate is known as a private real estate investor. Some investment groups are real estate investment trusts (REITs), which are corporations that own and manage commercial real estate portfolios, which are offered to investors who can buy shares in them.
- Bank: Most inspections are required by banks to establish the condition of a building for lending purposes, including issuing a mortgage or renewing or refinancing an existing mortgage. One type of job you may encounter is a no-contact inspection, which is an exterior-only inspection and is common in the case of bankruptcy, or when a building has been neglected or has been vacant for long period of time. The bank will use this inspection to determine the condition of the building before putting it back on the market. When a bank hires you for an inspection, they will typically outline a strict procedure and provide their own inspection forms and checklists for you to complete. Other types of inspections required by banks include the exterior and interior, and contact inspections. Banks usually pay a flat fee, which may be less than what you’d earn for a project for a different type of client.
Other types of clients may be the buyers or sellers directly, or those leasing a space. Read How to Perform a Triple-Net Lease Inspection
Just as there are many different types of commercial properties, there are many types of commercial inspection clients. Something to keep in mind is that many of these clients will hire you to inspect a variety of different types of buildings and properties. To successfully adapt to the commercial sector of the inspection industry, consider the clientele, and tailor your marketing and presentation to suit your audience. For information about the different kinds of commercial properties you’re likely to encounter, read CCPIA’s article, Types of Commercial Buildings.