Property risk analysis supports growing international trade

Raksystems 9.7.2018 News

The real estate business is more and more international in nature, and the upwards trend towards the level of the past peak years continues. More commercial properties, in particular, are being sold to foreign buyers. In the real estate business, financial success can often be guaranteed with a property risk analysis. In most cases, the risk analysis covers a property portfolio which is valued by a structural engineering expert.

Technical risk assessment methods

The goal of the determination of a property’s technical value is identifying the property’s current and future repair needs, i.e. specifying the future repair liabilities so that the parties of the transaction can assess relevance of the requested price. It is in the best interest of the buyer to detect any problems and specify how common they are and whether realisation of the risks is likely, as well as determine any impact on the value of the property and the owner’s finances.

A TDD (Technical Due Diligence) is a survey realised in order to determine a property’s technical value. When the TDD has been completed, experts in other areas can assess the value of the property based on the location, for example. In many cases, a TDD is ordered together with an EDD (Environmental Due Diligence), which is a survey of the property’s potential risks due to contaminants in the soil and in the building itself.

A TDD is different from a traditional condition evaluation also in other respects than the intended use: a TDD is a technical risk assessment, but the long-term maintenance and repair proposal table (PTS) in a condition evaluation is meant to be used as a property management tool and not just a one-time trading tool like a TDD report.

Furthermore, a TDD includes issues that interest the buyer and the seller – which are always determined on a case-by-case basis – such as the available remaining permitted building volume, surface area measurements or indoor air surveys due to the risks of the property and their results. The parties are also often interested in statutory inspections, such as lift/fire safety inspections, fire compartmentalisation and the property’s safety in general.

Cultural differences are involved

Internationalism can be seen also in the assessment of a property’s condition, as the cultural differences of the buyer and the seller and the location of the property have a major impact on the transaction.

Buyers from abroad often have difficulties in understanding the Finnish weather conditions, soil, building methods or construction materials. For example, the fact that concrete exterior faces are susceptible to frost weathering may be a completely new issue to the buyer, in which case the expert must offer a clear report that explains how the problem can be resolved, calculate the potential financial impact for both parties to the transaction and assess the significance of the risk to the buyer.

Finland is located in a seismically very inactive area and the earthquakes experienced in Finland are very faint. For many foreigners, earthquakes are part of everyday life, however. The expert must also offer justification for issues that Finns take for granted but will perplex a foreign buyer.

Our task is being an impartial expert on Finland, Finnish construction and Finnish buildings.

Experience from tens of thousands of sites

Raksystems’ experts have already assessed the condition of tens of thousands of sites. We have performed TDD surveys of a couple of thousand sites and condition evaluations of up to 10,000 properties. In the past six month we have performed TDD and EDD surveys of up to 100 properties for twenty international customers. Our competent staff can act as reliable experts also in the case of large property transactions, perusing dataroom materials and highlighting pertinent information and any potential risk factors.

Materials on Finnish properties are only available in Finnish, which is why it is important to use our experts to identify important information and impartially present it to the parties of an international property transaction. As determining the technical value and detecting repair needs are important in the case of a technical property assessment, our long experience has only positive effects.