Multifamily Property Condition Assessments: Unit Sampling, Annex A1.1, Fannie Mae and Freddie Mac

An apartment property is commercial real estate under E2018-24 once it has more than four dwelling units, so the baseline guide applies in full. What changes is where the money and the uncertainty sit: hundreds of repeated components inside units you mostly cannot see, wood-framed exterior elements that fail on a schedule, and, when the loan is agency debt, a second rule book layered on top of ASTM.

What is different about multifamily

Three kinds of client order multifamily PCAs: acquisition buyers who want a negotiating schedule, bank and conduit lenders who want an immediate-repair escrow and a reserve figure, and agency lenders (Fannie Mae, Freddie Mac, HUD) who want their own format. E2018-24 addresses the property type directly in Annex A1.1, which is mandatory. In paraphrase, it asks the observer to:

• Survey each construction phase, and treat envelope observations as representative only across buildings that are actually similar.
• Look at a mix of units (occupied, vacant, damaged, and under renovation), including enough top-floor and bottom-floor units.
• Report which units were entered and why they were chosen, plus the number of units reported as not available for occupancy and the reasons given.
• Observe patios, balconies, enclosures and railings on a representative basis.
• Identify the supply piping type where visible, and any reported repiping or leak history.
• Note the electrical service size to representative units, whether units are individually metered, and the branch wiring type; if aluminum wiring is seen, say whether mitigation devices are present.
• State whether there is an attic and, if it is accessible, describe access, ventilation, leak evidence, insulation and draft stops.
• Note any indication of fire-retardant-treated plywood roof sheathing.

Residents need not be interviewed unless it is appropriate and the owner or user consents. The guide's Fair Housing Act abbreviated screening (Appendix X3) is specific to multifamily and is an added scope item, like the ADA screen.

The systems that drive cost

Unit interiors dominate the reserve by count: flooring, appliances, cabinets and water heaters are cheap per unit and expensive per property. Outside the units, the big lines are roofs, wood balconies and breezeway stairs, siding and windows, per-unit HVAC equipment and paving; pools and clubhouses add short-lived equipment.

Useful lives the reserve table uses

Component	HUD EUL, Family (yrs)	HUD EUL, Elderly (yrs)	HUD table row
Asphalt shingle roof	20	20	3.3.4.1.1
Balcony or porch, wood frame	25	25	3.3.2.7.7
Exterior stairs, wood frame or stringer	30	30	3.3.2.7.1
Vinyl siding	25	25	3.3.3.1.2
Vinyl windows	30	30	3.3.3.2.4
Electric heat pump condenser, pad or rooftop	15	15	3.4.3.1.1
Electric furnace or air handler	20	20	3.4.3.1.3
Residential water heater, gas or electric	12	15	3.4.1.2.6
Carpet, dwelling units	6	10	3.7.2.1.11
Refrigerator or freezer, dwelling units	12	15	3.7.2.3.1
Cabinets and vanities, dwelling units	20	25	3.7.2.2.7
Asphalt pavement	25	25	3.2.4.1
Asphalt seal coat	5	5	3.2.4.2
Pool or spa pumps and equipment	10	10	3.2.7.8

The HUD table is built for multifamily housing, so it fits this property type better than any other. The table gives the expected life; the remaining life on each line is the observer's opinion, and the report should say which basis each line uses. For a seniors property, the Elderly column applies. See the HUD table and remaining useful life.

Table 1 or Table 2

Table 1 candidates on apartments are usually life-safety or escalation items: rotted balcony framing or loose guardrails, deteriorated stair treads and stringers, missing or inoperable smoke alarms, blocked egress, active roof or plumbing leaks with damage below, and units that are down because of a physical condition. Each one should state which of E2018-24's immediate tests it meets. Down-unit make-ready belongs in Table 1 when a physical deficiency is the cause. Renovation or repositioning is not, because E2018 excludes cosmetic work and repositioning from the cost opinion.

Table 2 carries the recurring per-unit turns (flooring, appliances, water heaters, condensers) phased across the term rather than dropped into one year, plus roofs, siding, windows, stairs, balconies and paving at their remaining lives. See the reserve table explained and cost categories.

Access and unit sampling

E2018-24 sets no percentage. It leaves the number of units to the observer's judgment unless the user and consultant agree one, and asks that it be enough to form an opinion with reasonable confidence. S&P's older published criteria suggested roughly 10 percent of units as a guide. The agency numbers are firmer:

• Fannie Mae (Form 4099, July 2022 edition). For 5 to 50 units, at least 5 occupied units plus all vacant units up to 15. For 51 to 300 units, at least 10 percent of all units. Above 300 units, at least 5 percent and never fewer than 30. All down units are surveyed at every size, and so are units vacant longer than 90 days (within the 15-unit vacant cap in the smallest band). Units should be selected at random across unit types, buildings and floors, and the list should go to the point of contact ahead of the visit (typically 24 to 36 hours) so tenants can be notified. The report lists each unit entered by building, number, type, occupancy and floor. If the minimum cannot be met, the consultant tells the lender and records the deviation.
• Freddie Mac (Guide Chapter 62). All commercial units, and at least 10 percent of residential units overall, including at least half of the vacant units and half of the down units.

Check the current edition before scoping; Fannie revises Form 4099 from time to time.

Agency specifics

A plain E2018 report is not accepted on an agency loan. Fannie Mae's Form 4099 adds fixed report sections, a 1 to 5 rating for each component, schedules for the loan term plus two years, a problematic-materials checklist (4099.G) and modules for student, seniors, manufactured, cooperative, modular and mixed-use properties. Freddie Mac's Chapter 62 uses Form 1105 and its own repair categories: Critical Repairs (before the loan proceeds), Priority Repairs (within 365 days) and PR-90 Repairs (within 90 days). Its reserve projection covers the loan term plus two years, capped at 12 years. The report must be dated within six months before the full underwriting package goes in, and the site inspection within 30 days before the report date. See ASTM vs Fannie vs HUD and Freddie Mac vs Fannie Mae.

Common pitfalls

• Walking only vacant, freshly turned units and calling them representative.
• Not saying which units were entered, or why occupied units were not.
• Treating every phase of a complex as identical, or leaving out the down-unit count and its reasons.
• Reporting balconies from the ground without saying the connections were not seen.
• Listing aluminum branch wiring without saying whether mitigation was observed, which E2018-24's writing rules call out as insufficient on its own.
• Dropping every per-unit appliance into year one instead of phasing it.

Writing the report

Baseline PCR drafts the E2018-24 report from the field notes, photographs and documents: the Annex A1.1 observations under the right systems, the unit list and sampling rationale in the walk-through section, and every statement tagged as observed, reported or documented. It computes Table 1 and Table 2 from the firm's cost library and the HUD table. The engineer reviews and edits every line, confirms the ratings, remaining lives and categories, and signs. The agency formats (Form 4099, Form 1105) are not produced today, so agency work should be scoped separately. The sample report shows the ASTM structure, and the walkthrough checklist covers the field side.