Partner Post: Special Assessment Got Your Community Down?
You may be one of the many communities facing major repairs. Finding the money from the homeowners is most often a very difficult and painful process. Your homeowners come to the meetings angry but you must understand that the anger is based on the fear they are going to lose their home.
Who are these homeowners? Retirees, who are concerned about using their savings? First-time homebuyers who had to borrow from mom and dad to make the down payment? People that are trying to make it paycheck to paycheck and there is no extra money? The reality is, these homeowners are not in a position to be able to fund a one-time special assessment and will most likely vote no to any project because they do not have the money. The higher percentage this group makes up of your community the greater probability that your vote will fail or that a recall election may be called.
But what happens when your community must make these major repairs. How do you offer doable options for your neighbors to help keep them in their homes and reduce the fear?
Provide them options…
- Pay Cash – some homeowners may have the money for the entire special assessment. They may have investments(discuss with a financial advisor), credit cards(special promotional rates), or savings accounts.
- Borrow funds that are secured on real property – such as a second mortgage or equity line of credit on your home.
- Pay the special assessment over time because the board of directors provides a commercial loan for the community. Interest rates are reasonable and can be fixed over the term of the loan. No personal information will be required, does not go on credit reports, nor is a lien placed on your unit by the bank.
What are the advantages of borrowing?
a. Downward slide of property values slowed or eliminated. Structural problems, which must be disclosed to potential buyers, will make it difficult to sell homes and lead to falling home prices. Getting construction done quickly and improving the appearance and/or eliminating structural integrity problems can slow or eliminate falling home values.
b. Needed repairs/improvements completed quickly. By borrowing the money, total needed funds become available for use much faster than through the traditional special assessment process. Passing a special assessment will give the board of directors the power to collect the money. There is still the difficulty of collecting from those homeowners who do not have the ability to pay.
c. Reduced financial impact on homeowners. By participating in the loan, homeowners avoid having to make a lump sum special assessment payment. Homeowners can pay their share over time to reduce the impact on their personal finances.
What are the disadvantages of borrowing?
- May increase monthly assessments. A special or increased assessment may be implemented to support the loan. Sometimes there are budget items or reserve contributions that can offset some or all of the increase.
Don’t let a major repair get your community down. Homeowners that are informed and given options make better decisions for the community.
Patrick McClanahan, CMCA®
Vice President
Mutual of Omaha Bank
Community Association Banking/CondoCerts
Cell:636 352 3826 | Fax: 800-296-9803 | Toll Free: 866-800-4656 ext 7575
Patrick.McClanahan@MutualofOmahaBank.com | www.CABanc.com
The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views of Mutual of Omaha Bank.