A property condition report, which may also be called a physical needs assessment, looks at each part of a multifamily property in order to determine the current condition of each element of the property. The report will examine the site, building exteriors, and unit interiors, looking at components such as landscaping, electrical and HVAC systems, cabinets, appliances, doors, windows, and building foundations. It will also check for obvious structural or safety issues, such as mold or improperly installed fire safety equipment. All needed repairs will be classified into several categories, ranging from urgent to routine. In addition to being required by a lender and Freddie Mac, property condition reports are used to determine the amount of replacement reserves that borrowers will need to allocate on an annual basis.

This requirement also applies to the appraisal and the property condition assessment. The structures must all be considered one property.

A Freddie Mac SBL Property Condition Report includes information about the property, such as the address, the reporting date, the age of the buildings, the name of the inspector and the inspection company, and information about the lender. It also includes details about the building and material characteristics, such as building type, envelope, mechanicals (HVAC), amenities (site), construction type, elevators, electrical, mold, foundation type, mechanicals (plumbing), electrical, mold, problem materials/equipment, life/safety devices, interior, and parking. Additionally, it includes information about the unit mix, such as unit type, number of units inspected, carports, garages, and storage units. The report also examines various physical aspects of the property, such as maintenance structures, carports, roadways/parking lots, site utilities, site fences, and swimming pool and/or spa. It also reviews the building’s mechanical and electrical systems, such as hot and cold water distribution, domestic water heaters, elevators, and fire extinguishers. Finally, it examines individual aspects of units on the property, such as unit entry door(s) and frame(s), flooring, cabinetry, countertops and sinks, appliances, and bathroom improvements.

The Freddie Mac SBL Property Condition Report should be updated every three years, or when there is a change in ownership or occupancy of the property. This requirement also applies to the appraisal and the property condition assessment.

The benefits of having a Freddie Mac SBL Property Condition Report include a simplified pricing process, a simplified SBL insurance assessment, less documentation, a reduction in due diligence requirements, easier third party reporting, and better pricing. Additionally, the report will examine the site, building exteriors, and unit interiors, looking at components such as landscaping, electrical and HVAC systems, cabinets, appliances, doors, windows, and building foundations. It will also check for obvious structural or safety issues, such as mold or improperly installed fire safety equipment. All needed repairs will be classified into several categories, ranging from urgent to routine. In addition to being required by a lender and Freddie Mac, property condition reports are used to determine the amount of replacement reserves that borrowers will need to allocate on an annual basis.

The risks of not having a Freddie Mac SBL Property Condition Report include not being able to accurately assess the current condition of the property, not being able to identify any potential safety or structural issues, and not being able to determine the amount of replacement reserves needed for the property. Without a property condition report, lenders and Freddie Mac may not approve the loan, and owners of multifamily properties may not be able to make better investments in the future. Source