More than 60 million Americans today live in 300,000 community associations across the nation. While some real estate values may decline, owners often are left with little to no equity in their property. Investors sometimes are left holding properties that do not produce a cash flow. Mortgage loans are re-pricing at higher rates and interest-only loans now require principal payments. All these factors are resulting in an increase in foreclosures.
Maintain your health
There is good news for savvy associations, however. It’s possible to head foreclosure off at the pass. Here is a list of suggestions to help your association run smoothly and maintain a healthy financial statement:
1. Establish and follow a clear and concise annual budget.
2. Review financial statements monthly for accuracy or deviations to budget.
3. Make corrections promptly or take needed action.
4. Establish reserve funding by preparing a reserve study and reviewing it annually.
5. Maintain property by ensuring roofs, painting, landscaping and paving are in excellent repair.
6. Set up a maintenance schedule so that all repairs are not due at one time.
7. Build a strong relationship with professionals: attorneys, certified public accountants (CPAs), insurance agents and bankers.
8. Establish a strong collection policy and be consistent in your collection practices.
9. Treat all owners equally and fairly.
10. Communicate often by using meetings, newsletters and websites.
11. Address rumors with professionalism and accuracy.
12. Remember that informed, educated owners are more likely to pay on time.
13. Prepare for board succession. Avoid burnout and encourage new owners to be involved.
14. Establish a line of credit with your bank to cover emergencies or short-term cash-flow difficulties.
Give your collection procedures a checkup
Collections are key to keeping your association on the path to success. Here is a list of tips to help ensure your procedures produce results:
1. Apply the association’s collection policy.
2. Be sure your management team understands and applies the collection policy.
3. Engage your attorney as soon as possible to handle delinquencies.
4. Send delinquent letters as needed.
5. File liens.
6. Commence foreclosure.
7. Review delinquency lists monthly or weekly and take action immediately.
8. Withhold delinquent owners’ privileges as permitted by the documents.
9. Maintain accurate records to strengthen collection efforts.
10. Eliminate miscellaneous expenses where needed.
11. Establish a bad debt line item in the budget.
12. Engage members to be proactive in maintaining the property to save money. Cultivate experts from the membership to lead maintenance teams for:
• Lawn care
• Pool cleaning and maintenance
• Painting
13. Form committees to report cost-saving ideas and financial planning.
14. Hire a collection agency to collect delinquent accounts.
15. Attend CAI and trade events with other associations.
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Author : Sandra Crouch
Company : Colonial Bank Association Services
Sandra Crouch is a credit administration manager for Colonial Bank Association Services.
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My company, NCS Plus, has created a very effective program to combat that issues with association fee collections. Below are the highlights our our program for association management groups.
Highlights of our Association Collection Service
We send 5 Demand Letters, including an Attorney Demand Letter as well as an optional “Thank You” letter.
Since these debtors are neighbors, we give associations two ways of starting the collection process-1. soft 1st collection letter that is a balance verification letter being done by a third party on behalf of the association (much more polite way of starting off). 2. standard collection letter.
We make 9 Professional Telephone Collection Calls by trained personnel that abide by all state and federal guidelines.
We have a Full Skip tracing department that get the new contact information of debtors 98% of the time with social security #s and 90% without.
We will (at the associations discretion) report the debtor to all three of the Major Credit Bureaus.
The association gets a personalized website that tracks every movement on their accounts, help manage the debtors and allows them to print almost any kind of report needed for monthly reporting 24/7, so they use it when they want it.
If it’s an association management company with multiple associations, then each association will get its own website for easy tracking on an individual as well as group reporting.
Debtors are pushed back to association or management company for direct payment and/or payment negotiation, so no waiting for their money. This way they can negotiate settlements with each debtor and take into consideration extenuating circumstances, if they wish.
We don’t replace the attorney in the equation, we just take the collection piece out of their very expensive hands. In our initial roll out of the program many clients are seeing enormous reduction in their collection costs (some up to 70%).
We are experiencing roughly a 25% collection rates within the first 45 days, which as you know is really profound.
All this $23-$40 one time flat fee per account depending on volume (for management companies its not volume from each association, but their combined volume) with no other fees at all.
Todd French
National Account Executive
NCS Plus, Inc
Let me begin by saying I have longtime reader, first time commenter. I thought I might as well say thanks for posting this piece (and all your others), and I’ll be back!