June 17, 2009

The Pieces of HOAs

One of the main goals and benefits of living in an HOA (home owners association) is the protection of property values. Value protection can be accomplished in several ways; however, it can more typically be catagorized in three different areas: maintenance, management and assessments.

Maintenance:

Maintenance is the process and means in which all of the physical aspects of the community are cared for. This can include lawn maintenace, tree trimming, weeding of planting areas, planting of flowers and trees, fertilization, mulching, snow removal from streets and walkways, exterior building repair or replacement, light repair and replacement, pool maintenance, corridor cleaning and maintenance and so on and so forth. These are typically day-to-day activities and require consistent attention because of constant changes which affect communities.

Management:

Management is the supervision or control of both maintenance and finances for the community. Maintenance managment would include negotiating contracts, writing contracts, creating work orders, scheduling work activities and ensuring work is completed as outlined. Financial managment consists of creating budgets, receiving and issuing payments, analyzing expenses and ensuring cash flows for short and long-term objectives.

Assessments:

Assessments, annual and special, are specified amounts levied to cover the costs for services and financial obligations of communities. Monies from assessments act much like municipal, state and federal taxes would; however, they apply to the community only. The amount of assessment depends upon the services provided to the community or what is requested by a majority of home owners. If owners want higher levels of service or additional services, they should expect to see higher assessments and vice versa. Each year annual assessments are established to cover estimated expenses for the year, a portion of which should be set aside for capital expenditures. Also, annual assessments should be expected to rise to offset cost of inflation. Special assements are levied for any unexpected expenses that may occur during the year; however, associations can greatly reduce the likelihood of a special assessment by wisely establishing budgets. Healthy budgets can increase the marketability and protect the property values within associations.

If associations and management can balance these areas, property values will find themselves at the higher end of markets and ensure that owners experience good returns on investment.

Posted By: Brian Morris