Does our Association Need to have Healthy Reserves?

A good answer is both “yes” and “no”. Let me explain. Yes: Typical Governing Documents and the uniform legal expectations of Boardmembers  across the country require Boardmembers to maintain and protect the assets of the corporation on behalf of the … Continue reading → The post Does our Association Need to have Healthy Reserves? appeared first on Association Reserves. Read More

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Change to the FHA “10% to Reserves” Rule?

FHA approval is a status condo associations can attain, allowing unit owners/buyers to receive FHA insurance on their loans which make those loan more attractive to lenders. Depending on your location, as much as 30% – 40% of all residential … Continue reading → The post Change to the FHA “10% to Reserves” Rule? appeared first on Association Reserves. Read More

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How Much are Adequate Reserve Contributions?

by Steven Beltramo, Project Manager At Association Reserves we understand board members face a big challenge to budget for the maintenance and replacement of their association’s major common area assets. Boards typically have little knowledge of project costs and when … Continue reading → The post How Much are Adequate Reserve Contributions? appeared first on Association Reserves. Read More

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Avoiding Future Special Assessments

By Drew Sleezer, Project Manager Life is full of risks. You may be stuck with your current circumstances, but you have surprising power to influence many future risks. As a manager or board member, you are responsible for the care … Continue reading → The post Avoiding Future Special Assessments appeared first on Association Reserves. Read More

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The Benefit of Updating your Reserve Study Annually

Reserve Studies are budget planning and disclosure documents prepared to help the board meet their responsibility to care for the assets of the association. Many of the association’s common area components are so large that the association needs many years … Continue reading → The post The Benefit of Updating your Reserve Study Annually appeared first on Association Reserves. Read More

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Cruisin’ for a Bruisin’ – Common Interest Communities

“Peak” years, for a common interest community, are those years when there are very large expenses that occur in a very short period of time. Typically this is due to having several components which make up the bulk of their common area expenditures. For most communities these very large expenses occur infrequently perhaps only every 20-30. Common examples of these are roofing, deck replacement and asphalt overlays all of which are infrequent but extremely costly common area components. The concern here is that many communities we work with have been cruising along in a poor to fair funding level for many years with no significant negative impacts. The community has… Read More

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National Reserve Study Standards – Four Funding Principles

When a professional reserve analyst develops a financial strategy for a common interest community (HOA, Condo, Cooperative) National Reserve Study Standards are taken into account. There are four basic principles in these standards: There are adequate reserves when needed The recommended financial strategy will take into account that some years will have dramatically higher expenses than others (often referred to as Peak or Threshold Years). The overall financial strategy should result in a reserve account balance which is large enough to cover expenses in all periods of time. There is little need for a reserve funding strategies which result in an Associations failure to meet its fiscal responsibility to the… Read More

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Life Isn’t Fair – But Funding Plans In A Reserve Study Should Be…

Fairness is a concept a reserve analyst must consider when developing a financial strategy for a community. It’s one of the basic concepts outlined in National Reserve Study Standards which was published by the well-respected Community Associations Institute in 1998 and is an extremely important consideration when providing the most tailored options(s) available to a community.  1. What is fairness? Fairness refers to adequately dispersing the reserve allocation expenses to the membership over time in an equal and stable fashion. This can be challenging as expenses occur irregularly and often seem to come due all at once in “Peak Years”; when several of the larger expense common areas meet the… Read More

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Functional Obsolescence – What is it and should we consider it in a Reserve Study?

Functional Obsolescence:is a reduction in the usefulness or desirability of an object because of an outdated design feature, usually one that cannot be easily changed. The term is commonly used in real estate, but has a wide application. Common interest communities, country clubs and private membership clubs of all sorts have common areas which are shared and utilized by the dues paying members and their guests. These common areas typically include recreation buildings, workout rooms, swimming pools, BBQ, areas all of which deteriorate with time and use. With respects to replacement reserve studies we are concerned with the adequate funding for these common areas over a long period of time… Read More

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Approval With FHA, Fannie Mae, Freddie Mac – The 10% Rule

In recent years lending institutions have become much more restrictive in approving and/or insuring loans for common interest communities. The FHA approval list has fallen by about 50% over the past 4-5 years. This has been due to a variety of reasons including new more restrictive reserve allocation requirements, owner occupancy standards and extensive documentation requirements. Impact on Market Appeal It has been our experience than many projects have seen declining marketability as financing options have dried up for Buyers. With rising real estate markets across the country this typically means the units in these community are seeing increases at a lower rate than units in communities which are approved… Read More

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