Updated August 16, 2026
A PML report — probable maximum loss, sometimes called a seismic risk assessment — estimates the percentage of a building's replacement value likely to be lost in a major earthquake. Lenders order them on Los Angeles multifamily, and the number drives a specific decision: many lenders set a threshold, commonly around 20%, above which they require earthquake insurance as a condition of the loan. You do not need earthquake coverage to sell a building. Your buyer's lender may require it to finance one, which makes it your problem indirectly — because that premium lands in the buyer's expense underwriting and comes back to you as price.
Construction type and era. Unreinforced masonry and non-ductile concrete carry the highest exposure. Wood-frame construction generally performs better and produces lower PML figures — which is most of LA's older apartment stock and is why many buildings here clear the threshold comfortably.
Soft-story configuration. Tuck-under parking with living space above is the classic vulnerable LA typology, and it is exactly what the city's retrofit ordinance targeted.
Whether the retrofit was completed. A completed, permitted soft-story retrofit generally improves the PML result, sometimes enough to move a building from above the threshold to below it.
Site conditions. Proximity to known faults, soil type, and liquefaction potential.
Building age, height, and irregularity. Vintage construction methods and irregular configurations both raise the estimate.
Owners tend to think of the soft-story retrofit as a compliance obligation — something the city required and they either did or did not do. In a sale it functions as a financial input in at least three places.
It can lower the PML below the lender's threshold, eliminating an earthquake insurance requirement and the annual premium that goes with it.
It removes a known future capital cost from the buyer's model. An incomplete retrofit is a quantifiable expense a buyer deducts, usually generously.
It removes a closing risk. Some lenders will not fund on a building with an outstanding mandatory retrofit obligation.
If your retrofit is complete, gather the permits and the final sign-off and put them in the offering package. If it is not, that is a specific, priceable item and buyers will price it — with their own contractor assumptions, not yours.
It is not legally required. No statute obliges an owner to carry it.
Lenders require it above their PML threshold. That is the practical trigger, and thresholds vary by lender.
It is expensive, with high deductibles. Deductibles are typically expressed as a percentage of the insured value, which on a multimillion-dollar building is a substantial sum.
Many LA owners do not carry it. Which is itself a disclosure point rather than a defect — the buyer needs to know so their own underwriting is accurate.
Ask whether a prior PML report exists. If you financed the building, one may have been ordered. It is useful evidence even if dated, and it tells you roughly where you stand.
Assemble the retrofit file. Permits, engineering drawings, final inspection sign-off. This is the single most valuable seismic document you can hand a buyer.
Disclose the seismic history accurately. Prior damage, repairs, and any structural work.
Do not commission a PML report speculatively. The buyer's lender orders theirs and that is the one that governs. Ordering your own is worth it mainly when you have reason to think the result is favorable and want to use it — for instance, on a building whose retrofit was recently completed.
Put the insurance assumption in the operating statement honestly. If you do not carry earthquake coverage and the buyer's lender will require it, that premium is a real expense in their model. Presenting your expense stack without acknowledging it invites a correction during diligence.
You do not need earthquake insurance to sell. You do need to know what your building's seismic profile will look like to a lender, because that determines whether a requirement attaches and a premium enters the buyer's model. Gather the retrofit documentation, locate any existing PML report, disclose the seismic history, and be realistic about the insurance line. On a wood-frame LA building with a completed retrofit, this is frequently a non-issue — which is worth demonstrating rather than leaving the buyer to assume otherwise.
Who pays for the PML report?
The buyer's lender orders it as part of loan underwriting, and the buyer typically bears the cost. Sellers generally do not commission one unless they have a specific reason to want the number in hand.
Does a completed retrofit increase my building's value?
It removes a known cost from the buyer's model and can reduce or eliminate an earthquake insurance requirement, both of which help. It is better understood as removing a deduction than as adding a premium — but on a soft-story building the deduction it removes is substantial.
What if my building is unreinforced masonry?
Expect a higher PML, a likely earthquake insurance requirement, a narrower lender field, and a more specialized buyer pool. It is not an obstacle to selling, but it is a building where preparing the seismic file thoroughly matters more than average.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap.
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