By Robert M. Nordlund, PE, RS
Association Reserves, Inc.
It’s hard to dispute the adage, “In property, three things matter: location, location, and location.” A community association board can’t usually do much about a property’s location, but it can and should do many things to enhance the value of its owners’ homes.
Too many boards waste too much time on urgent, ultimately petty matters like disputes about people, pets, and parking. This is unfortunate; for most homeowners, housing is their largest single asset. A board that acts to maximize home value makes a large and lasting difference to its members’ wealth.
What are the most important things that an association board can do to enhance property values? Based on 30 years of experience in the industry, here’s my Top 10 list:
1. Budget accurately & honestly
A realistic, balanced budget is the foundation of a board’s ability to boost home values. Associations need an operating budget that reflects the cost of running the association and maintaining common areas day-to-day, and a reserve budget that offsets long-term maintenance costs.
Operating budgets show income and expense, including everything from salaries to light bulbs, estimated based on month-to-month experience. Most boards find operating budgets relatively easy to understand.
Reserve budgets are a bit more esoteric. They project the future cost of the repair, replacement and refurbishment of association common areas. Reserve budgeting begins with an estimate of costs expected to occur every 2, 5, 10, 20, or even 30 years. Then those costs must be translated into an annual figure that reflects the yearly, ongoing deterioration of the common areas. That yearly figure is the amount that should be transferred out of the operating account into the reserve fund.
Because reserve budgeting is complicated and requires many judgment calls, many boards rely on the results of a formal Reserve Study prepared by an independent, CAI credentialed Reserve Specialist™.
2. Maximize curb appeal
Curb appeal is the impression that a property creates, as viewed from the street. Imperfections that insiders learn to ignore appear as glaring flaws to a potential buyer seeing them for the first time. Here’s a mental checklist I use when I visit an association property for the first time:
- Clean, attractively landscaped grounds. Trash is picked up, grass is freshly mowed, and hedges freshly trimmed.
- Attractive, helpful signage. Signs look good and say clearly what a first-time visitor needs to know.
- A functioning entry gate, well-lit entryways and walkways, and an inviting lobby. You only get one chance to make a first impression!
- A sparking clean pool. The dream of “carefree living” is an attraction of shared-community ownership. Your most visible play space will reinforce this dream or else refute it.
- Clean carpets and properly maintained asphalt. Walking surfaces create a sense of attractiveness—or its opposite—for everyone who passes.
- Up-to-date paint jobs & colors. Styles change. If you don’t update the colors, rooms and hallways soon look like your parents’ common areas.
The easiest way to stay on top of such items is through regular inspections and work-order tracking. Neglect these, and your curb appeal will suffer.
3. Avoid deferred maintenance
Deferred maintenance is the practice of postponing repairs in order to create a false appearance of financial solvency. Repair, replacement, and refurbishment all need to happen sooner or later. When they are postponed, the cost is almost always greater. Indicators of deferred maintenance include letters missing from an entry sign, plastic tarps covering a roof, faded pool furniture with broken straps, or a leaning mailbox.
Boards are often tempted to underfund reserves. This approach may be popular in the short run, but it is nothing but a way to kick the can down to the unfortunate set of homeowners who will have to pick up an even more expensive tab in the future. With a realistic reserve contribution, major projects can get done when needed. Keeping common areas free of visible (and not-so-visible) defects creates a positive impression on real estate agents and prospective buyers.
4. Avoid special assessments
Inadequate reserve budgeting leads to special assessments, most of which can be avoided. Often all it takes to eliminate them altogether is a few more dollars in monthly reserve contributions from each homeowner. An association that imposes frequent and unsettling special assessments soon gets a bad reputation among local real estate agents, who warn potential buyers, who then hesitate to make good offers. A special assessment that has not been disclosed to a new buyer can sometimes even result in a lawsuit.
A strong reserve fund reassures buyers they are joining a well-managed association and encourages them to pay top dollar. Sound budgeting may require higher fees in the short run, but in the long run it raises the value of all the homes.
5. Create a culture of transparency
Homeowners appreciate it when managers and boards conduct association business transparently, making it easy to see what has been done and why. Owners have an interest in protecting the value of their homes, and they deserve to know about association business. Meeting agendas and minutes, budgets and financial reports, and reserve studies all should be open to homeowners. In many states, homeowners and prospective buyers are legally entitled to inspect association records.
Transparency means more than posting minutes to communicate what has already been decided. Effective leaders also use their websites, newsletters, and bulletin boards to say what will be decided next, so homeowners can contribute to the process.
Perhaps the most important aspect of transparency is the attitude and tone with which association leaders conduct meetings and respond to inquiries. Transparency builds trust, and trust translates into a reputation that attracts good offers when homes go on the market.
6. Build community
Homeowners and board members have a common interest in enhancing their home values. Smart leaders avoid actions that suggest they see themselves primarily as regulators or dispute resolvers. Instead, they invest time, energy, and money in building social networks and connections with and among homeowners. Refreshments at board and association meetings cost very little when compared with their potential to enhance the home values by making your community appealing. Hosting a block party or coordinating group participation in charitable activities benefiting the neighborhood t large are both good ways to create a sense of community
Don’t forget to invite your local Realtors to some of your community events, so they can spread the word!
7. Adhere to your association’s rules and standards
Nobody likes rules—except, perhaps, when we invoke them against others! Rules are a necessity of life, especially for neighbors who share common space. Rules and architectural standards exist to build up your community, not to punish owners.
Write each rule so it includes, along with the rule itself, the community-building reason why the rule exists:
- “In order to keep our children safe, parents are asked to discourage running on the stairway.”
- “In order to maintain the peaceful quality of our association, pool hours end at 10 pm.”
- “In an effort to protect property values, paint colors need to comply with our approved architectural standards”
Rules exist to protect community, not to provide excuses to annoy or punish others. To remind homeowners of this, use words like we and our, and avoid legalistic, top-down terms like shall and must when writing rules. Your neighbors will appreciate it—and your home values will appreciate!
8. Employ accredited, credentialed managers
Running a community is complicated and important work that calls for industry-specific training and experience. Effective association managers are unfailingly civil and prompt when they respond to requests from owners. They manage the association for the benefit of the owners, not themselves. This means they strictly avoid underhanded dealings, such as kickbacks or sweetheart deals with vendors. Accreditation from CAI assures associations that they can expect professionalism from their managers.
Effective managers enhance home values in innumerable ways. By striving for excellence in everything they do, managers increase homeowner satisfaction and encourage pride of ownership. By providing Realtors with prompt and friendly service, they build the association’s reputation where it counts.
9. Train board members
Strong associations know that effective boards don’t happen by accident, so they encourage members to join CAI, attend CAI board training and subscribe to Common Ground. Taking a few minutes at a board meeting to discuss an article is an excellent investment in board training.
Well-trained board members help to focus the full board’s attention away from petty squabbles onto critical elements of homeowner value, such as insisting on a disciplined and realistic approach to budgeting. Board-member training shows in effective leadership, community pride, and good financial stewardship of common areas—all of which enhance homeowner value.
10. Team up with knowledgeable business partners
Even the most professional managers, working with the best boards, don’t know all they need to know to navigate all of technicalities that will arise. To guide the association towards a successful future, leaders need a team of specialists, including an accountant, attorney, banker, insurance agent, and a reserve study professional. In addition to their special skills, professionals who earn CAI’s “Educated Business Professional” distinction demonstrate they know how to help community associations foster excellence and avoid expensive mistakes and conflicts.