Our Community Treasurer is Leaving… What Do We Do?

All the accounting tasks at your community are running smoothly.  The collections, bill payment and financial reporting is happening on time and with good accuracy and explanation.  You are a self-managed community and life is good – the important job of Treasurer is handled by an Ace volunteer.  Your board sort of takes this position and person for granted.  That is until you receive notice that your Treasurer is stepping down. They may not run for another term, they are “retiring” – burned out or worse a dealing with their own or a spouse’s health issue.  Alternatively the Treasurer may be selling their unit and moving away.  What do you… Read More

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HOA & Condo Collections

The Needy, The Greedy, & the Seedy. HOA & Condo Collections

Not all HOA & Condo delinquencies are created equal and each one has it’s unique circumstances. However, in most cases the delinquent owners can all fall in to one of three categories: The Needy, The Greedy, and The Seedy. The only question remains is: How do we handle these HOA & Condo Collections? The Needy member of an association may have fallen into bad circumstances either due to unforeseen financial events, unfortunate circumstances, or even by circumstances that often happen at community associations. People lose their jobs and sources of income or have their investments go bad due to no fault of their own, their family economy suffers a loss… Read More

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Delinquency and the HOA

The timely collection of fees and assessments is the lifeblood of any HOA, condominium association, co-operative, or timeshare. However, unit owners are not always able to pay their fees and assessments on time. Depending on the state you live in and the penalties for late payments ascribed in the governing documents, delinquency is handled in one a few different methods. This article describes some of the best practices common interest community associations can use to keep their delinquencies to a minimum and their collection efforts on track to keep the revenue flowing while the delinquency is remedied. Most HOAs have rules about when payments are late and what steps 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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Ways to Pay for Common Area Replacement Expenses

In completing reserve studies for HOA and Condominium Communities we are always reminding Boards and Community Members that common area expenses will occur whether the necessary funds have been set aside or not. The expenses in our reserve study reports are real and to ignore them or just kick the expenses down the road are both fiscally irresponsible and not in the best interest of the community as a whole. While the expenses will occur communities typically have one of several options in how they are paid for and not all are created equally. 1. Regular Assessment Dues – This is by far the cheapest and fairest to the current and future… Read More

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Paying the Piper – Special Assessment Reality

You’re a member of an Association which has a $200,000 roof replacement, a $20,000 swimming pool resurface, a $35,000 recreation building remodel and numerous other common area expenses that are expected to be incurred in the next 10-20 years. You as a member utilize these common areas every day and happily live the life of a condominium owner. This has worked out great for you and your neighboring community members. Life is good and you truly believe that this is the way to live as by splitting the cost between everyone, you are all able to be provided the luxuries that would be much too costly on your own. Moving… Read More

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Cost Estimates & Being too Optimistic in Reserve Studies

In reviewing prior reserve studies we often find that the cost figures of components are often too optimistic for adequate funding of the reserve account. Sometimes this is a reserve study professional who has changed these figures at the request of the Board but more often we have seen these figures being changed during update years when Board members update a study themselves, often utilizing costs figures taken from Internet searches which typically only provide partial cost data and are rarely accurate for multi-family and commercial construction. This can severely impact the short and long term funding objectives and place the community in a poor funding position with high risk… Read More

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Comparing Reserve Account Levels

Boards are often interested in how their Association’s reserve account balance is compared to other common interest communities (Condominiums, PUD, and HOA) in the area. Since each community has a unique common area component inventory just comparing the reserve account balances is not sufficient to compare communities for reserve fund strength. However there is a measure of reserve level adequacy known as “Percent Funded” which is provided in the reserve study which can be a good measure to compare communities with respects to funding levels.   Percent Funded Measurement   Percent funded is the measure of how much a community actually has in its reserve account versus how much it… Read More

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Surefire Ways to Drive Your Association to Financial Ruin

Common interest communities are non-profit businesses and just like any business budgeting and financial planning are essential to the success and longevity of the business. What is everyday common sense with respects to businesses is often ignored for common interest communities. While this may seem like a harsh assessment of many Boards out there it is an unfortunate reality as is evident by the high number of special assessments and loans being taken out by Associations to cover expenses that are usually expected and have years or decades to properly fund for. The reasons for the lack of adequate funds can most often be attributed to the following scenarios.  … Read More

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