Condition Ratings in a PCA: Good, Fair and Poor, and How to Apply Them Consistently

Every system section in a PCR opens with a rating, and the executive summary tabulates them. The ratings look subjective and partly are, but E2018-24 ties the three standard terms to something measurable, and consistency across a report is what a reviewer checks.

The definitions, paraphrased

E2018-24 defines the terms relative to the reporting threshold. Good: in working condition and not expected to need immediate or short-term repairs costing more than the threshold. Fair: in working condition but may need immediate or short-term repairs above the threshold. Poor: not in working condition, or needs immediate or short-term repairs substantially above the threshold. The guide allows other terms (excellent, satisfactory) if the report defines them, and allows combined ranges such as "fair to poor" with an explanation. Most firms print the three definitions in the purpose-and-scope section and stick to them.

Rating a system with mixed components

A system is rated as a whole; its components can be described individually. The roof can be fair while the seams at one curb are poor; the HVAC can be fair while one rooftop unit is poor. The rating follows the cost consequence: if the system as a whole needs above-threshold work soon, it is fair; if the work is substantial relative to the threshold or the system is not functioning, it is poor. Naming the poor component in the same sentence keeps the reader oriented.

The systems summary

The executive summary's table lists each system with its rating, an action code (immediate repair, short-term repair, replacement reserve within the period, routine maintenance only, not applicable) and the immediate, short-term and reserve totals for that system. The action code is derived: a system with an immediate cost is coded immediate regardless of its rating. A reader can check the table against the ratings in one pass, and inconsistencies (a "good" system with immediate costs) are the first thing a lender's reviewer circles.

Not observed

A system that could not be observed (no elevator present; a mechanical room not accessible) is rated not observed, not fair. The reason goes in the section and in limiting conditions.

Mapping to Fannie Mae's 1 to 5

Fannie Mae's Form 4099 rates each component from 1 to 5 against criteria in Form 4099.D that weigh life safety, deferred maintenance, routine maintenance and remaining life. The mapping from E2018 terms is approximate: good corresponds to the upper ratings, fair to the middle, poor to the lower two, with the life-safety and deferred-maintenance criteria able to pull a rating down independently. A firm that records condition and remaining life per component can derive the agency rating; one that records only the word cannot. See Fannie Mae Form 4099.

Consistency checks before issuing

• Every system with immediate or short-term costs above the threshold is fair or poor.
• Every poor system has a remedy in Table 1 or a reserve line due early in Table 2.
• The narrative's first sentence for each system matches the summary table.
• Combined ranges are explained.

Baseline PCR drafts each rating from the field notes and the cost consequence, prints the definitions in section 2, derives the action codes in the systems summary, and lets the reviewer change any rating from the section heading with the summary following. The sample report shows the summary table.