A Well Run Association Means Dollars in the Pockets Of Owners


We have all heard of the horror stories of living in a neighborhood association. From special assessments, increasing association dues, to militant owners who fanatically enforce the rules and regulations of the neighborhood, if not managed properly, a neighborhood association can certainly have a negative impact on the resale value of a home. Add to that the fact that the local housing markets have been showing little or no growth over the past couple of years. As you can see a neighborhood association’s resale value needs all the help they can get. While the housing market is beyond one individual’s control, there a few simple steps a savvy property manager can take to make a tangible impact on the resale value of the neighborhood.

To understand the first action a property manager can take, you must understand a few basics of the setup of a neighborhood association. Neighborhood associations are essentially a little city. They have their own governing body, budgets, rules and ordinances, and residents. The governing body is the executive board. They run the neighborhood based upon the community bylaws, reports and feedback from committees, and monitor the overall well-being of the neighborhood. The executive board members have a lot of decisions to make in a short amount of time. The size of their responsibility is large and the sheer volume of information can be overwhelming.  A key difference between a municipal government and the association government is that the executive boards are frequently run by residents who are volunteers. These volunteers are frequently busy with their own professions and their own life. Their time available is limited compared to the professional town leaders. Even though the executive board member’s time is limited, a similar number of decisions need to be made. Each of these decisions can directly impact a neighborhood’s desirability and each decision has far reaching consequences. If issues aren’t effectively addressed, problems are swept under the rug, and decisions are made with erroneous information due to time limitations, the neighborhood won’t reach its full potential. This opens the door to the potential impacts on home resale values.

The best thing a property manager can do is communicate effectively. I know that this cliché appears trite and something that we hear at every business seminar but try and understand the association’s executive board member’s point of view. A good property manager views this as an opportunity to showcase their communication and organizational skills. The savvy manager realizes they can overcome this challenge by organizing information so it is easily digestible to account for the fact that time and attention spans can be short. They produce an executive summary on all initiatives along with the financial reports. They list the ugly, the bad, the good, the why, and potential impact on upcoming initiatives. Instead of just sending monthly financial reports, the property manager organizes board decisions by summarizing cogent points. This report minimizes the time a board member will need to make decisions.  This time savings will allow the proper decisions to be made efficiently and allows the maximizes the

There are other potential impacts on resale value that many home buyers aren’t aware of but a savvy property manager can help manage. Despite lower public awareness, they can have an equally great impact on resale value. One hurdle is that the secondary financing market is becoming much more difficult for properties in a neighborhood association. Secondary market lenders have always scrutinized delinquencies, adequacy of reserves, inquired about current litigation, and reviewed budgets versus performance and all association meeting minutes. A property manager always actively manages the delinquencies, the budget, and safety of the neighborhood. Recently secondary market lending institutions, like Fannie Mae, are placing stricter regulations on and tightening their qualifications for underwriting mortgages in neighborhood associations.  For example, if a condominium association does not meet the Fannie Mae guidelines for lending in a condominium association, the borrower must try and receive non-warrantable financing. The impact of this is significantly higher interest rate for buyers.

A savvy property manager understands the impact  this climate of increased underwriting regulations has on resale values. The project manager proactively contacts a local project approval expert review association documents for errors and potential pitfalls to lending. Incorrectly written association documents are a leading cause of unwarrantable association lending. The project approval expert should also check the association’s approval status through Fannie Mae. The difference between approval and non-approval can cost a potential buyer hundreds of dollars per month in higher interest rates on their mortgage. They should also consult with their insurance broker and a loss prevention expert In order to minimize the occurrence of slip and fall suits or other preventable lawsuits.

The third action an association manager can impact is on the reputation of the neighborhood association in the community. A neighborhood association’s positive reputation in a community will motivate the local Realtor will take their clients to the neighborhood first and often. The Realtor will want their buyer clients to be happy and a neighborhood with a sterling reputation will only improve satisfaction and lead to more referrals for the Realtor. The property manager can apply for neighborhood accreditation or certification. Accreditation means the neighborhood is meeting or exceeding strict standards of governance, budgeting, and owner satisfaction. Only a small fraction of neighborhood associations achieve this status and is an impactful point of differentiation. One can also prepare a community facts sheet to be included in the seller’s listing brochures.  Things to include are unique features of the association.

Don’t be afraid to boast about your company’s strengths and how they uniquely improve the lifestyle of your residents. Online service requests, 24/7 service call lines, community newsletters, community webpages and portals, or that Ice Cream Social you held for your neighbors can help set the neighborhood apart. Don’t be shy or bashful. Share all the good things with local and community news organizations. These organizations are always looking for news articles with local ties. That community ice cream social, the accreditation, and even a community that has balanced a budget and not had a fee increase in five years is always newsworthy and helps create a buzz about the neighborhood.

Once a neighborhood association gets a bad reputation in the community, it is difficult to change. As you have seen, there are a lot of factors that can easily tarnish a neighborhood’s reputation if not managed. Realtor’s with buyer clients will think twice about showing a home in a neighborhood association with a negative reputation.  The good news is that a savvy property manager can take a few simple steps to limit the impact of potential negative externalities of living in a community association. By neutralizing the potential negatives, they can make the neighborhood association a significant positive externality on home resale value.