Fannie Mae DUS lenders and Freddie Mac Seller/Servicers know the importance of following Agency guidelines for Property Condition Assessments (PCAs). But this knowledge is also critical for multifamily buyers and borrowers, even when Agency-backed financing is just a possibility. 

In this five-part series, Tadd Clarkson, CREtelligent Director of Agency PCA Services discusses five things you need to know. In this first of five blogs, he discusses the qualification requirements of a Property Condition Assessment Consultant and those of any field inspectors performing on-site assessments on behalf of the Consultant.

Is your PCA Consultant Qualified?

Both Fannie and Freddie have very specific requirements regarding the credentials and qualifications of those performing Property Condition Assessments on Agency-back multifamily loans.

First and foremost, a Property Condition Assessment (PCA) Consultant must be in good standing with Freddie and Fannie as well as HUD and FHFA. They must be an independent third party unrelated to the property being assessed, its owner, or any entity affiliated with the owner.

Both Fannie and Freddie have well-defined qualification criteria around education and experience for both the PCA Consultant and anyone working as a field inspector for the Consultant. Both must also be well-versed in preparing ASTM-E2018 PCA reports.

On the education side, the PCA Consultant must have a Bachelor of Science degree in engineering, architecture, construction management, historic preservation, construction/building science, or building facilities management.

For professional experience, the PCA Consultant must have five years of experience in one or more of the following disciplines: architecture, engineering, or construction management and related cost estimating. They must have completed a minimum of five MF inspections in the last three years that are consistent with agency instructions and ASTM-E2018. They must also have knowledge of federal and local jurisdiction building codes and regulations.

Qualifications of Field Observers

The Agencies also have experience requirements for any on-site inspectors used by the PCA Consultant which it defines as Field Observers. The professional experience requirements for Field Observers are similar to, although somewhat less stringent, than that of the PCA Consultant.

To qualify, a Field Observer need only possess one of several different defined certifications, registrations, and training programs offered through trade associations and others. Alternatively, they can qualify if they have 12 years of experience assessing Multifamily properties and preparing ASTM E2018 PCA reports.

Insurance Requirements

PCA Consultants doing Agency MultiFamily assessments must have the following insurance coverage in amounts that are consistent with the market for the scope of their services.

– Commercial General liability

– Professional Liability

– Worker’s Compensation

– Auto – for owned and non-owned hired vehicles

The above state insurance policies should be issued by a carrier rated by AM Best A-VI or higher. The PCA Consultant must deliver proof of the required insurance coverage to the lender with the PCA report unless previously delivered to the lender within the past 12 months in connection with another PCA.

Download Best Practices

The above information summarizes Freddie and Fannie’s best practices for selecting and engaging Property Condition Assessment Consultants. While distinct entities, their requirements essentially mirror each other. You can download Freddie Mac’s best practices here.

Coming Up:

• Problematic Materials/Hot Button Issues: dissecting property issues that Agencies want to be assessed in specific ways.
• Replacement Reserve Costs: what you need to know in response to an increased Agency focus on the use of unrealistic life expectancies and unit pricing for property systems and components.
• Digital Data Requirements: meeting the digital data supplements structured per Agency-specific standards.
• Supplemental PCA Modules: understanding report “modules” that may need to be completed based on the property type or specific uses.