Self-managing a homeowners association can be difficult — but not impossible. To make sure that your community is on the right track, here are 5 important questions you should be asking.
Self-management is a popular approach for many associations. Though there are many pitfalls associated with self-management, it can be done. Depending on the capabilities of your HOA board, it can even be done well. For self-management to work, though, associations must conduct a performance audit from time to time. To get you started, here are the most important questions for self-management associations to ask themselves.
In a self-managed community, it is the board members who perform the majority of the work. Their responsibilities range from simple, administrative duties to more complex tasks such as maintenance, collections, financial planning, and insurance. Board members also make important decisions on behalf of the community.
As such, it’s important to have an active talent pool for potential board members. All homeowners want the best for the community but not everyone has the time to volunteer as a board member. If there are not enough qualified people, self-managing the HOA will become next to impossible. It’s also good to have involved community members who are willing to join HOA committees or provide assistance to the board.
When choosing the best management approach for your community, always consider if you have members who are passionate and willing to perform essential duties for the association.
Financial records are the lifeblood of an association. These documents help provide a clear view of the status of your community, as well as serve as the basis for most HOA decisions. As such, self-managed associations must be efficient and consistent in keeping financial records. You need to keep track of all the money coming in and out of the association. One of the most important tasks for the HOA board is to create and analyze monthly financial statements.
Unfortunately, financial reporting is very tedious and time-consuming work. Many board members also do not have adequate expertise to handle the intricacies of financial management. This is why poor financial management is one of the most common pitfalls of self-managed associations.
If you want your self-managed HOA to be successful, make sure there is proper and regular financial management. You can find community members who have financial expertise or outsource financial tasks to third-party service providers.
There will be many instances where HOA boards and residents do not see eye to eye. However, because power is on the side of the HOA board, residents may feel like they are getting the short end of the stick. It may seem like the HOA board is not on their side or not hearing their concerns.
If these kinds of conflicts continue, they may escalate and lead to litigation. This is not only costly for both parties, but it can also do a lot of damage to the community spirit and camaraderie.
In addition, if residents are not happy, it becomes much harder to manage the community. Board members cannot be effective if their audience is not willing to participate. That’s why it’s important to have an advocate for the residents. Consider having a designated third party who can advocate for the residents and deal with the HOA board in a more objective manner.
Self-managed associations are more common in smaller communities. But as the community becomes larger, the responsibilities also grow. The added workload can sometimes be too much for HOA board members to handle on their own. This can lead to inefficient and poorly-run operations. Your community may also experience bottlenecks as HOA boards are faced with situations that require a level of expertise they can’t provide.
As current board members become fatigued and overworked, they may end up leaving their positions. If there is no one else willing to step up, the association cannot continue to operate. Self-managed associations should be wary of these potential issues. There are many solutions that can increase efficiency such as investing in HOA software and hiring an office staff.
Since the HOA board handles most of the responsibilities, they also make most — if not all — of the decisions. In any community, it’s important for board members to be transparent and let members know what is happening in their community. To maintain the community spirit, the members must also feel like they are being heard and considered.
Lack of oversight and accountability can be very problematic for self-managed associations. There is a higher risk for financial mismanagement, lawsuits, negligence, fraud, theft, and other criminal activities. When such misdeeds are discovered, it may already be too late. It is the community that ends up paying for these mistakes.
If you choose a self-management approach, make sure to create checks and balances within the board of directors and the community at large. This will help create transparency and accountability in your community.
If you answered mostly “no” to the questions above, it might be time to consider a professional HOA management company. Most self-managed associations are afraid to make the jump because they are wary of the additional costs. Even though professional HOA management may increase your operational expenses, it will save you money in the long run.
HOA management companies have advanced tools and strategies that will make your HOA operations more efficient. They also have a large network of professionals so they’ll be able to provide the community with cheaper vendor services. Most importantly, an HOA management company can help you avoid costly mistakes such as lawsuits, board member negligence, or poor financial management.
If you believe it’s time to look for an HOA management company that can help your community, check out our online directory where you can browse HOA management companies near you.