Monday, January 31, 2011

HOA Finances and Reserves Should Signal Good Property Values

HOA finances and reserves 

Homeowners associations should be in the business at least in part to protect property values in their communities.

Reserve funding is essential for California common interest developments (homeowner associations) and home loans for buyers in those communities. should support property values

Bank of America has apparently declined to lend money to buyers of homes in some California homeowner association communities and said that it would only lend at HOAs with reserves that were 100% funded. 

(This BofA policy seems overly restrictive to me but probably makes a positive impression on property values).

California homeowners associationsTo find out about homeowners association and reserve funding, check with Association Reserves, Inc., which has data from over 7,000 reserve studies and profile of HOA reserve funding strength.  Whether large vs small communities, urban vs suburban, highrise vs townhome, new or old, trend results for HOA reserves appear the same as shown on this chart.   

Healthy financial reserves for HOAs are expected to promote property values and improve home resales.

To comply with the California Davis-Stirling Act, HOA boards need to have a reserve study done every three years with annual updates.

To improve property values, marketability of homes in their HOAs, boards should raise their reserve funding levels and fully disclose to members and prospective buyers about finances and reserves.

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Source: Association Reserves, Inc.,  Adrian Adams, Adams Kessler PLC.  This is for information only about California common interest developments and condo communities and not the providing of legal or tax services.  If you have a question about any HOA and financial reserves, you should contact an attorney.

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