Get 1 year of free community web site hosting from Community123.com!
Monday, March 30, 2020











HOATalk is a free service of Community123.com:

Get 1 free year community website and email newsletter hosting from Community123.com!
Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.
Subject: High Reserve Amount and Unexpected Expenses
Prev Next
Please login to post a reply (click Member Login on the menu).
Author Messages
NpB
(Arizona)

Posts:188


03/14/2020 3:42 PM  
I am a firm believer that a high percentage fully funded reserve account is not only wise financially, but also the best method to increase property values and attract buyers. With so many HOA's nationwide poorly funded, it's the HOA's balance sheet is one of the first things I would look at when deciding to buy-in to a specific HOA.

With macroeconomic uncertainly lately due to unexpected events, I think having a solid "rainy day" fund is imperative.

My HOA thankfully does not have common roofs. The largest expense are the roads. What are some unpredictable, unforeseen expenses that could doom an HOA financially to where there would be a need for special assessment or a bank loan?

If the housing market tanks, owners whose house is worth less than what they paid for it, or who are counting on their house as their primary investment for their retirement will be adamant that a 100% fully funded HOA start spending money on cosmetic improvements they think will improve property values, but are completely subjective as to whether or not they will. Instead of repeated the recommendations of reserve study professionals and financial planners, what are some examples to use of unexpected expenses to prepare for?
KerryL1
(California)

Posts:7036


03/14/2020 4:38 PM  
What are the components listed in your reserve study other than roads, NpB? If listed, their failure won't be "unexpected." Fencing? Irrigation systems? Community lightning? Recreational amenities?

Your last paragraph, hypothetical as if often the case in your posts, doesn't quite make sense.

IF your HOA's reserves are 100% funded, that means the Owners' contributions to "fully fund" your reserves are enough that you can repair or replace run-down unsightly "cosmetic" components at the nd of their useful lives or near the end, and remain 100% funded. What are some examples of these "cosmetic" items, NpB?
GeorgeS21
(Florida)

Posts:2299


03/14/2020 4:48 PM  
I’m not following, again.
MarkW18
(Florida)

Posts:706


03/14/2020 4:50 PM  
Posted By NpB on 03/14/2020 3:42 PM
I am a firm believer that a high percentage fully funded reserve account is not only wise financially, but also the best method to increase property values and attract buyers. With so many HOA's nationwide poorly funded, it's the HOA's balance sheet is one of the first things I would look at when deciding to buy-in to a specific HOA.

With macroeconomic uncertainly lately due to unexpected events, I think having a solid "rainy day" fund is imperative.

My HOA thankfully does not have common roofs. The largest expense are the roads. What are some unpredictable, unforeseen expenses that could doom an HOA financially to where there would be a need for special assessment or a bank loan?

If the housing market tanks, owners whose house is worth less than what they paid for it, or who are counting on their house as their primary investment for their retirement will be adamant that a 100% fully funded HOA start spending money on cosmetic improvements they think will improve property values, but are completely subjective as to whether or not they will. Instead of repeated the recommendations of reserve study professionals and financial planners, what are some examples to use of unexpected expenses to prepare for?



IF, you think you "high reserve amount" adds anything to your home's value, you are very, very, very, sadly mistaken.
MelissaP1
(Alabama)

Posts:9127


03/14/2020 6:54 PM  
The HOA is NOT responsible for anyone's cosmetic improvements. Just the ENFORCEMENT of it. Hate to agree with Mark18 on anything but this time he is very right. Home values have absolutely NOTHING to do with a "fully funded HOA". They are apples and oranges.

Home values again are based on REAL numbers. Not numbers you want to assign to them in your head.

Former HOA President
TimB4
(Virginia)

Posts:16700


03/15/2020 2:35 AM  
Unexpected expenses:

Deductible on insurance (in case a claim is ever made).



Other then that, anything else should be within the reserve study. Just make sure that the board has the study include everything (signage, entrance monuments, storm water management, etc.).

Keep in mind that one could prepare for everything but bring down property values due to high assessments causing people not wanting to purchase within the development.
MelissaP1
(Alabama)

Posts:9127


03/15/2020 5:46 AM  
Let's clarify. A reserve account is NOT a "Rainy day" reserve. A "rainy day" account is more fluid and works more like a regular savings account. Reserve accounts are set up for capital improvements or high dollar maintenance. Reserves are for roof replacements, retention ponds, or road maintenance type of items. A "Rainy day" is for those unexpected expenses like Tim said an insurance pay out or some type of damage.

When we talk insurance pay out, the reality of HOA insurance isn't a Million dollar payout on a million dollar insurance policy. It's more like 80K. So if your HOA got sued tomorrow, it may have to fork over up to a 20K deductible AND still be on the hook for whatever excess of 80K is won. Judge rules a 100K payout, your all on the hook for 20K etc.

That is an example of one of the unexpected high dollar expense you may experience in a HOA NOT covered by reserves. You can combat it by changing the policy. Which could cost more money for more coverages.

Again I think you are greatly confusing HOA responsibilities and funding equating to home values. It doesn't work that way. High assessments most likely will drive people away. Plus one doesn't live in a protective bubble in a HOA.

Former HOA President
KellyM3
(North Carolina)

Posts:1485


03/15/2020 11:52 AM  
If you are fully funded, then the HOA should be keeping its common areas and amenities in tip-top shape. In my opinion, quality common areas can certainly influence home buyers who browse the neighborhood.

Regarding unexpected expense....the Reserve Fund can only effectively account for expense that CAN be planned. If you're planned-out for road maintenance, you're well positioned. Doomsday scenarios could be rampant tree loss from a tornado or storm. Rampant job loss from an economic downturn that leads to reduced monthly cash flow. Sinkholes (which would destroy a section of road). Anything your property insurance won't cover.

But that's Doomsday....and you can't really plan for it as it may never happen in a million years, literally.
NpB
(Arizona)

Posts:188


03/15/2020 11:59 AM  
An HOA with poor a poor financial statement and/or coupled with high monthly dues and special assessments deters buyers and lowers property values. It is common sense, but if you want proof, just do an internet search for well funded HOAs and synonyms thereof and a plethora of confirmations will appear.
NpB
(Arizona)

Posts:188


03/15/2020 12:04 PM  
Posted By KerryL1 on 03/14/2020 4:38 PM
What are the components listed in your reserve study other than roads, NpB? If listed, their failure won't be "unexpected." Fencing? Irrigation systems? Community lightning? Recreational amenities?

Your last paragraph, hypothetical as if often the case in your posts, doesn't quite make sense.

IF your HOA's reserves are 100% funded, that means the Owners' contributions to "fully fund" your reserves are enough that you can repair or replace run-down unsightly "cosmetic" components at the nd of their useful lives or near the end, and remain 100% funded. What are some examples of these "cosmetic" items, NpB?





The roads are the biggest expense. Everything else is minor. Cosmetic improvements that owners have proffered are not replacements, but rather new optional items like tables and umbrellas at the pool, putting in cobbled pavers instead of asphalt in some areas of roadway, raising the height of the perimeter wall, etc..
MelissaP1
(Alabama)

Posts:9127


03/15/2020 12:04 PM  
It does NOT deter HOME VALUES!!!! It deters people from buying into that particular HOA. That does NOT mean your house is valued less. Just means it's less value to potential buyers. The bank still considers your home valued at a certain amount of money no matter if you put it up for sale or not. That value is HOME VALUE.

Former HOA President
NpB
(Arizona)

Posts:188


03/15/2020 12:12 PM  
Posted By MelissaP1 on 03/15/2020 12:04 PM
It does NOT deter HOME VALUES!!!! It deters people from buying into that particular HOA. That does NOT mean your house is valued less. Just means it's less value to potential buyers. The bank still considers your home valued at a certain amount of money no matter if you put it up for sale or not. That value is HOME VALUE.





If a poorly funded HOA is in vicinity to other HOAs of similar home types, then yes, it does lower property values. Lower demand equals longer time on market and lower sales prices. An HOA that is 100 percent or more fully funded is a strong selling point for owners.
MarkW18
(Florida)

Posts:706


03/15/2020 12:23 PM  
The mortgage company loans based on either the purchase price or the appraised price, WHICHEVER is lower. The value of the home is what someone is willing to pay.

If you list your home for 500K and multiple offers come in a seller settle for the $600K, that is the purchase price. Then an appraiser comes in and appraises it at $550K. The buyer would need to come up with the $50K difference in purchase price and appraised price, plus any down payment requirement.

Next time a home sell in that area, the $600K becomes part of the new equation.

What a bank will look for from the association is sufficient reserves, number, not amount, of delinquencies and number of rentals. A buyer, beside the house, should be looking at the care of the amenities they would be paying into.
MarkW18
(Florida)

Posts:706


03/15/2020 12:25 PM  
Posted By NpB on 03/15/2020 12:12 PM
Posted By MelissaP1 on 03/15/2020 12:04 PM
It does NOT deter HOME VALUES!!!! It deters people from buying into that particular HOA. That does NOT mean your house is valued less. Just means it's less value to potential buyers. The bank still considers your home valued at a certain amount of money no matter if you put it up for sale or not. That value is HOME VALUE.





If a poorly funded HOA is in vicinity to other HOAs of similar home types, then yes, it does lower property values. Lower demand equals longer time on market and lower sales prices. An HOA that is 100 percent or more fully funded is a strong selling point for owners.



Do you know who looks at those numbers?
NpB
(Arizona)

Posts:188


03/15/2020 12:27 PM  
Posted By MarkW18 on 03/15/2020 12:25 PM
Posted By NpB on 03/15/2020 12:12 PM
Posted By MelissaP1 on 03/15/2020 12:04 PM
It does NOT deter HOME VALUES!!!! It deters people from buying into that particular HOA. That does NOT mean your house is valued less. Just means it's less value to potential buyers. The bank still considers your home valued at a certain amount of money no matter if you put it up for sale or not. That value is HOME VALUE.





If a poorly funded HOA is in vicinity to other HOAs of similar home types, then yes, it does lower property values. Lower demand equals longer time on market and lower sales prices. An HOA that is 100 percent or more fully funded is a strong selling point for owners.



Do you know who looks at those numbers?




I certainly did when I puchased. If one considers their house their primary investment, the HOAs reserve account funding is critical in a purchase decision.
MarkW18
(Florida)

Posts:706


03/15/2020 12:36 PM  
You were one in a million.
AugustinD


Posts:2906


03/15/2020 12:39 PM  
FHA lenders will take into account reserves and reserve studies, per specific guidelines. I can see this having a bearing on property values. (Of course, whether a condo/hoa wants owners whose FHA loans translate to down payments that are minuscule and also bad credit scores is another issue. I guess if the Reserves are healthy, at least these FHA borrowers are less likely to be hit with a special assessment.)
JohnC46
(South Carolina)

Posts:9299


03/15/2020 12:43 PM  
Our very experienced MC says the most common financial pitfalls of many HOA's centers around roads. Thankfully ours are town owned and as we are a Dead End neighborhood, it is almost like they are private. Unless you live here or deliver here, you have no reason to use them
KerryL1
(California)

Posts:7036


03/15/2020 12:50 PM  
So, NpB, your hypothetical sellers will not want to spend from reserves??? But that's what you claimed. But, they WILL want to add items paid for out of your operation budget? So what? Just say no. You're also speculating that "they" would want to expend more on some reserve items than they're current estimated value is, e.g., raise the height of the perimeter fence. Again, so what? What, btw, is the estimated value of that fence? What is its remaining useful life (RUL)?

I have a feeling you're not really comfortable about what are reserves components and what aren't. You do have a pool and they need to be resurfaced, their pumps need to be replaced, the decks around them needs to be repaired or replaced, etc. That's not chump change. I'd asked for you to name your reserves items and I guess you won't or don't know how. Are you sure all components you should reserve for are in your reserve study? When was the last time you had one done?

JohnC46
(South Carolina)

Posts:9299


03/15/2020 1:01 PM  
One of the running arguments is Reserves are for maintaining/replacing things not for capital improvements. I saw it happen when a wooden border fence needed replacement and some wanted to replace it with a much more expensive masonry type wall. Their Reserves would have covered the masonry wall but was it a proper use of the Reserves?
KerryL1
(California)

Posts:7036


03/15/2020 1:09 PM  
Our certified reserves specialist says, no, JohnC. He states that the reserves would cover the cost to replace the wooden fence. The HOA would have to find a different source to any for the additional cost to have a more expensive one: Special assessment; make room in the operating budget for the additional cost if near the beginning of the fiscal year; borrow the difference from reserves with a pay back plan in a letter to owners (may be CA Only).
GeorgeS21
(Florida)

Posts:2299


03/15/2020 1:11 PM  
Interesting scenario ... reserves would be used for that part planned for the wood fence, then additional non reserve funds for the amount not part of the baseline, then reserve requirements would be recomputed, then an assessment increase might need to be reconsidered.
JohnC46
(South Carolina)

Posts:9299


03/15/2020 1:15 PM  
I agree.
MarkW18
(Florida)

Posts:706


03/15/2020 1:21 PM  
If you had enough money to upgrade the wooden fence without a special assessment, if it were over a certain percentage, generally 5% of annual budgeted expenses, the membership would need to approve. Then you add the masonry wall to the reserve study.
MarkW18
(Florida)

Posts:706


03/15/2020 1:32 PM  
What FHA guidelines ask for is that 10% of budgeted expenses go into reserves. A lower amount would be consider if a reserve study was done within the previous 24 months.
AugustinD


Posts:2906


03/15/2020 1:49 PM  
FHA guidelines/requirements appear to be more complicated than this. They change not infrequently. E.g. see https://www.federalregister.gov/documents/2019/08/15/2019-17213/project-approval-for-single-family-condominiums, August 2019.
MarkW18
(Florida)

Posts:706


03/15/2020 1:56 PM  
Posted By AugustinD on 03/15/2020 1:49 PM
FHA guidelines/requirements appear to be more complicated than this. They change not infrequently. E.g. see https://www.federalregister.gov/documents/2019/08/15/2019-17213/project-approval-for-single-family-condominiums, August 2019.



I have a couple of FHA applications, so I do know what they require.
NpB
(Arizona)

Posts:188


03/15/2020 2:20 PM  
Posted By KerryL1 on 03/15/2020 12:50 PM
So, NpB, your hypothetical sellers will not want to spend from reserves??? But that's what you claimed. But, they WILL want to add items paid for out of your operation budget? So what? Just say no. You're also speculating that "they" would want to expend more on some reserve items than they're current estimated value is, e.g., raise the height of the perimeter fence. Again, so what? What, btw, is the estimated value of that fence? What is its remaining useful life (RUL)?

I have a feeling you're not really comfortable about what are reserves components and what aren't. You do have a pool and they need to be resurfaced, their pumps need to be replaced, the decks around them needs to be repaired or replaced, etc. That's not chump change. I'd asked for you to name your reserves items and I guess you won't or don't know how. Are you sure all components you should reserve for are in your reserve study? When was the last time you had one done?






Reserve study conducted in 2019. HOA is very well funded. Pool (heat pump, decking, resurfacing, motor, etc.) roads, painting, common walls are reserve items. I only claimed that having a well funded reserve is critical to maintaining high property values and attracting buyers.
JohnC46
(South Carolina)

Posts:9299


03/15/2020 2:21 PM  
Posted By NpB on 03/15/2020 2:20 PM
Posted By KerryL1 on 03/15/2020 12:50 PM
So, NpB, your hypothetical sellers will not want to spend from reserves??? But that's what you claimed. But, they WILL want to add items paid for out of your operation budget? So what? Just say no. You're also speculating that "they" would want to expend more on some reserve items than they're current estimated value is, e.g., raise the height of the perimeter fence. Again, so what? What, btw, is the estimated value of that fence? What is its remaining useful life (RUL)?

I have a feeling you're not really comfortable about what are reserves components and what aren't. You do have a pool and they need to be resurfaced, their pumps need to be replaced, the decks around them needs to be repaired or replaced, etc. That's not chump change. I'd asked for you to name your reserves items and I guess you won't or don't know how. Are you sure all components you should reserve for are in your reserve study? When was the last time you had one done?






Reserve study conducted in 2019. HOA is very well funded. Pool (heat pump, decking, resurfacing, motor, etc.) roads, painting, common walls are reserve items. I only claimed that having a well funded reserve is critical to maintaining high property values and attracting buyers.




Only if they know what to look at...LOL
NpB
(Arizona)

Posts:188


03/15/2020 2:25 PM  
Posted By JohnC46 on 03/15/2020 2:21 PM
Posted By NpB on 03/15/2020 2:20 PM
Posted By KerryL1 on 03/15/2020 12:50 PM
So, NpB, your hypothetical sellers will not want to spend from reserves??? But that's what you claimed. But, they WILL want to add items paid for out of your operation budget? So what? Just say no. You're also speculating that "they" would want to expend more on some reserve items than they're current estimated value is, e.g., raise the height of the perimeter fence. Again, so what? What, btw, is the estimated value of that fence? What is its remaining useful life (RUL)?

I have a feeling you're not really comfortable about what are reserves components and what aren't. You do have a pool and they need to be resurfaced, their pumps need to be replaced, the decks around them needs to be repaired or replaced, etc. That's not chump change. I'd asked for you to name your reserves items and I guess you won't or don't know how. Are you sure all components you should reserve for are in your reserve study? When was the last time you had one done?






Reserve study conducted in 2019. HOA is very well funded. Pool (heat pump, decking, resurfacing, motor, etc.) roads, painting, common walls are reserve items. I only claimed that having a well funded reserve is critical to maintaining high property values and attracting buyers.




Only if they know what to look at...LOL





Are you assuming that most buyers are financially ignorant?
GenoS
(Florida)

Posts:3664


03/15/2020 2:27 PM  
Posted By KerryL1 on 03/14/2020 4:38 PM
What are the components listed in your reserve study other than roads, NpB? If listed, their failure won't be "unexpected." Fencing? Irrigation systems? Community lightning? Recreational amenities?

We have a few items we have reserve accounts for that are not "typical" reserve items. Mainly because cost estimates can't be reliably estimated and also because they don't have any sort of expected "useful life". The two big ones that come to mind are insurance deductibles and a nebulous item called "drainage".

Our CC&Rs call for the HOA to cover any unfunded insurance deductibles and allocate that cost back to the homeowners as additional assessments. To make a long story short, with our current 2% windstorm deductible, we could be on the hook for approximately $300,000 in deductibles. This number obviously changes every year (and we've been told to expect a 10% hike in premiums this year). So do we maintain a fully-funded $300,000 reserve for unpredictable insurance deductibles, or do we reserve for a lesser amount and plan to make up for any shortage via a special assessment? Right now we're in the middle and it's something we struggle to communicate to the homeowners every year and especially the new homeowners every year who have a hard time grasping how our insurance works. When people find out we have hundreds of thousands of dollars in a reserve fund we may never need they don't always react well. So we do reserve for that, at least partially.

Drainage problems in Florida are common. Sometimes it's a pump for the irrigation system, sometimes it's dredging a lake. Sometimes it's digging new swales or ditches. A lot depends on the weather and the requirements aren't always predictable. So we do maintain several tens of thousands in reserves for those things. Some years we spend a lot. Some years we don't spend anything.
MelissaP1
(Alabama)

Posts:9127


03/15/2020 2:40 PM  
Yes most buyers are financially ignorant. Why assume they are not? Remember the real estate bubble burst? Those people weren't able to afford loans yet they were given them. Why? Because they were fed they could afford it at a low interest rate that blew up on them. So those who bought homes with variable rates got burned and put under in their homes. Mostly because they were not financially smart on home buying.

Former HOA President
NpB
(Arizona)

Posts:188


03/15/2020 2:51 PM  
Posted By MelissaP1 on 03/15/2020 2:40 PM
Yes most buyers are financially ignorant. Why assume they are not? Remember the real estate bubble burst? Those people weren't able to afford loans yet they were given them. Why? Because they were fed they could afford it at a low interest rate that blew up on them. So those who bought homes with variable rates got burned and put under in their homes. Mostly because they were not financially smart on home buying.





So then the owner who wants the HOA to spend 30% of the association's funds on raising the perimeter wall because he/she thinks it will raise property values must be financially ignorant?
MelissaP1
(Alabama)

Posts:9127


03/15/2020 3:01 PM  
I do not see how a 30% increase to build a wall will increase anyone's home values. It just looks good. Does it add how much exactly to one's home? The amount they paid into the assessment? Like what $100? They do NOT correlate or related. It's just a maintenance expense. It has no property value on a person's individual home.

Former HOA President
MelissaP1
(Alabama)

Posts:9127


03/15/2020 3:04 PM  
Let me put it this way. If you tell me that if I pay in an extra $100 for a special assessment for a wall to be fixed/improved my home will sell for an extra 1K? How would you know that my home or my home value would go up 1K if I spent an extra 100 dollars today? How can you add an actual dollar figure onto the value of one's home because of that improvement/change? This is why I say REAL #'s. Otherwise you just added $100 in extra home value...

Former HOA President
MarkW18
(Florida)

Posts:706


03/15/2020 3:10 PM  
I have read my share of Home Appraisal Report and nowhere is there a place to write in the height of one's wall. Nowhere.
JohnT38
(South Carolina)

Posts:233


03/15/2020 3:26 PM  
Posted By NpB on 03/15/2020 2:25 PM
Posted By JohnC46 on 03/15/2020 2:21 PM
Posted By NpB on 03/15/2020 2:20 PM
Posted By KerryL1 on 03/15/2020 12:50 PM
So, NpB, your hypothetical sellers will not want to spend from reserves??? But that's what you claimed. But, they WILL want to add items paid for out of your operation budget? So what? Just say no. You're also speculating that "they" would want to expend more on some reserve items than they're current estimated value is, e.g., raise the height of the perimeter fence. Again, so what? What, btw, is the estimated value of that fence? What is its remaining useful life (RUL)?

I have a feeling you're not really comfortable about what are reserves components and what aren't. You do have a pool and they need to be resurfaced, their pumps need to be replaced, the decks around them needs to be repaired or replaced, etc. That's not chump change. I'd asked for you to name your reserves items and I guess you won't or don't know how. Are you sure all components you should reserve for are in your reserve study? When was the last time you had one done?






Reserve study conducted in 2019. HOA is very well funded. Pool (heat pump, decking, resurfacing, motor, etc.) roads, painting, common walls are reserve items. I only claimed that having a well funded reserve is critical to maintaining high property values and attracting buyers.




Only if they know what to look at...LOL





Are you assuming that most buyers are financially ignorant?




About a month ago I asked our property manager how many times perspective buyers had asked him for financial information or a copy of our rules and regs. He said he could remember 3 people over the last year. There have been approximately 20 sales during that time. When I bought I was ignorant and didn't ask. I'll never make that mistake again but my experience here is that the vast majority of buyers and even owners are clueless. Sad but true. We are an older community and I have no idea if that plays a part in the problem.
MarkW18
(Florida)

Posts:706


03/15/2020 3:44 PM  
I worked for the largest mortgage company in the world. Prior to moving in, I had never even bothered to read the governing docs. I had no idea what I was getting into.

I then owned a HOA management company.

Fool me once, shame on me!
JohnC46
(South Carolina)

Posts:9299


03/15/2020 3:52 PM  
Posted By NpB on 03/15/2020 2:25 PM
Posted By JohnC46 on 03/15/2020 2:21 PM
Posted By NpB on 03/15/2020 2:20 PM
Posted By KerryL1 on 03/15/2020 12:50 PM
So, NpB, your hypothetical sellers will not want to spend from reserves??? But that's what you claimed. But, they WILL want to add items paid for out of your operation budget? So what? Just say no. You're also speculating that "they" would want to expend more on some reserve items than they're current estimated value is, e.g., raise the height of the perimeter fence. Again, so what? What, btw, is the estimated value of that fence? What is its remaining useful life (RUL)?

I have a feeling you're not really comfortable about what are reserves components and what aren't. You do have a pool and they need to be resurfaced, their pumps need to be replaced, the decks around them needs to be repaired or replaced, etc. That's not chump change. I'd asked for you to name your reserves items and I guess you won't or don't know how. Are you sure all components you should reserve for are in your reserve study? When was the last time you had one done?






Reserve study conducted in 2019. HOA is very well funded. Pool (heat pump, decking, resurfacing, motor, etc.) roads, painting, common walls are reserve items. I only claimed that having a well funded reserve is critical to maintaining high property values and attracting buyers.




Only if they know what to look at...LOL





Are you assuming that most buyers are financially ignorant?




Ys they are especially those first buying into an association. Most do not have the foggiest idea how an association budget, reserves, assessments, etc. work.

NpB
(Arizona)

Posts:188


03/18/2020 12:19 PM  
Posted By JohnC46 on 03/15/2020 3:52 PM
Posted By NpB on 03/15/2020 2:25 PM
Posted By JohnC46 on 03/15/2020 2:21 PM
Posted By NpB on 03/15/2020 2:20 PM
Posted By KerryL1 on 03/15/2020 12:50 PM
So, NpB, your hypothetical sellers will not want to spend from reserves??? But that's what you claimed. But, they WILL want to add items paid for out of your operation budget? So what? Just say no. You're also speculating that "they" would want to expend more on some reserve items than they're current estimated value is, e.g., raise the height of the perimeter fence. Again, so what? What, btw, is the estimated value of that fence? What is its remaining useful life (RUL)?

I have a feeling you're not really comfortable about what are reserves components and what aren't. You do have a pool and they need to be resurfaced, their pumps need to be replaced, the decks around them needs to be repaired or replaced, etc. That's not chump change. I'd asked for you to name your reserves items and I guess you won't or don't know how. Are you sure all components you should reserve for are in your reserve study? When was the last time you had one done?






Reserve study conducted in 2019. HOA is very well funded. Pool (heat pump, decking, resurfacing, motor, etc.) roads, painting, common walls are reserve items. I only claimed that having a well funded reserve is critical to maintaining high property values and attracting buyers.




Only if they know what to look at...LOL





Are you assuming that most buyers are financially ignorant?




Ys they are especially those first buying into an association. Most do not have the foggiest idea how an association budget, reserves, assessments, etc. work.









Then in today's society, where everyone is overly sensitive, if you inform ignorant owners about CC&Rs, Bylaws, Reserve Studies, Rules and Regulations and how they should have read them before they moved in, they will get upset and "offended."
KerryL1
(California)

Posts:7036


03/18/2020 12:49 PM  
Be gentle-they'll appreciate the education. If they don't, so what?
JohnC46
(South Carolina)

Posts:9299


03/18/2020 1:31 PM  
Posted By NpB on 03/15/2020 2:25 PM
Posted By JohnC46 on 03/15/2020 2:21 PM
Posted By NpB on 03/15/2020 2:20 PM
Posted By KerryL1 on 03/15/2020 12:50 PM
So, NpB, your hypothetical sellers will not want to spend from reserves??? But that's what you claimed. But, they WILL want to add items paid for out of your operation budget? So what? Just say no. You're also speculating that "they" would want to expend more on some reserve items than they're current estimated value is, e.g., raise the height of the perimeter fence. Again, so what? What, btw, is the estimated value of that fence? What is its remaining useful life (RUL)?

I have a feeling you're not really comfortable about what are reserves components and what aren't. You do have a pool and they need to be resurfaced, their pumps need to be replaced, the decks around them needs to be repaired or replaced, etc. That's not chump change. I'd asked for you to name your reserves items and I guess you won't or don't know how. Are you sure all components you should reserve for are in your reserve study? When was the last time you had one done?






Reserve study conducted in 2019. HOA is very well funded. Pool (heat pump, decking, resurfacing, motor, etc.) roads, painting, common walls are reserve items. I only claimed that having a well funded reserve is critical to maintaining high property values and attracting buyers.




Only if they know what to look at...LOL





Are you assuming that most buyers are financially ignorant?




Ignorant?, No. Not know what to look for in nor understand in an HOA Budget? Yes especially first time buyers.

BobB31
(Florida)

Posts:178


03/18/2020 1:45 PM  
Posted By NpB on 03/15/2020 2:25 PM
Posted By JohnC46 on 03/15/2020 2:21 PM
Posted By NpB on 03/15/2020 2:20 PM
Posted By KerryL1 on 03/15/2020 12:50 PM
So, NpB, your hypothetical sellers will not want to spend from reserves??? But that's what you claimed. But, they WILL want to add items paid for out of your operation budget? So what? Just say no. You're also speculating that "they" would want to expend more on some reserve items than they're current estimated value is, e.g., raise the height of the perimeter fence. Again, so what? What, btw, is the estimated value of that fence? What is its remaining useful life (RUL)?

I have a feeling you're not really comfortable about what are reserves components and what aren't. You do have a pool and they need to be resurfaced, their pumps need to be replaced, the decks around them needs to be repaired or replaced, etc. That's not chump change. I'd asked for you to name your reserves items and I guess you won't or don't know how. Are you sure all components you should reserve for are in your reserve study? When was the last time you had one done?






Reserve study conducted in 2019. HOA is very well funded. Pool (heat pump, decking, resurfacing, motor, etc.) roads, painting, common walls are reserve items. I only claimed that having a well funded reserve is critical to maintaining high property values and attracting buyers.




Only if they know what to look at...LOL





Are you assuming that most buyers are financially ignorant?




Depends on what definition of ignorant you are using.
1. lacking knowledge or awareness in general; uneducated or unsophisticated.

Yes seems to fit this one except for the sophistication part.

2. lacking knowledge, information, or awareness about a particular thing.

Absolutely, many buyers seem to fit this definition

3. INFORMAL
discourteous or rude.

Nah, this one is out.

Unfortunately, ignorance has taken on a stigma of being the same as stupidity.
JohnC46
(South Carolina)

Posts:9299


03/18/2020 2:43 PM  
My problem is I have always believed the word ignorant to be demeaning. I do not like it nor will I use it. In our discussion I would say inexperienced when it came to HOA matters and let it go at that.

HOA's aside, most people are to excited about their "new place", especially if relocating and/or retiring at the same time, to "pay attention" to details. The details can be the killer.

A side story. A friend of mine went to work for a company as VP of Sales & Marketing. A position he had held at several other companies. The bank foreclosed on their loan and the company went belly up. It took him some time but he found another job and was relocating. He put his home up for sale. Turned out NH had a lien on his house for unpaid NH Workers Compensation. He was dumbfounded. Hired a lawyer. The lawyer explained the difference between being an Executive of a company versus being an Officer of the Company. Lawyer also told him that he was the only "Officer of the Company" that lived in NH so they liened him. In the end it all worked out but he had a good sized legal bill.

This fellow was a very wise, smart, experienced business executive. He could read and understand contracts with the best of them. He made low 6 figures a year with unlimited benefits and perks. Was he ignorant? Not by a long shot. Was he unfamiliar with the difference between an Executive of and an Officer of a Company? Yes.
GenoS
(Florida)

Posts:3664


03/18/2020 3:52 PM  
Posted By JohnC46 on 03/18/2020 2:43 PM
My problem is I have always believed the word ignorant to be demeaning. I do not like it nor will I use it.

My understanding of it has always been "uninformed", or just "don't know". I've never thought the word was demeaning and I use it all the time in a non-demeaning way. If people have a problem with that, then that's not my problem. Maybe it's a regional use thing.
KerryL1
(California)

Posts:7036


03/18/2020 4:55 PM  
I'm with Bob & Geno. But I'm careful when I use "ignorant" for fear the other might think I mean "stupid."
AugustinD


Posts:2906


03/18/2020 5:15 PM  
Posted By JohnC46 on 03/18/2020 2:43 PM
This fellow was a very wise, smart, experienced business executive.
As evidenced by what? I do not think salary correlates at all to smarts. The pay gap between low income workers and executives has exploded. Does that mean executives have become proportionately smarter? Of is this just the machinations of corporate America?
Posted By JohnC46 on 03/18/2020 2:43 PM
He could read and understand contracts with the best of them. He made low 6 figures a year with unlimited benefits and perks. Was he ignorant? Not by a long shot. Was he unfamiliar with the difference between an Executive of and an Officer of a Company? Yes.
I would call him ignorant.
GeorgeS21
(Florida)

Posts:2299


03/18/2020 5:19 PM  
Yeah ... being ignorant of the meaning of the word ignorant might make someone feels stupid ....

Wait, that’s not possible, since the ignorant person wouldn’t know they were ignorant, right?

Had a few moments of fun with this. 😅
JohnC46
(South Carolina)

Posts:9299


03/18/2020 8:31 PM  
Enough of the semantics on the word. I am done with that part of the post.
GeorgeS21
(Florida)

Posts:2299


03/19/2020 5:56 AM  
Gee, John, OK.
Please login to post a reply (click Member Login on the menu).
Forums > Homeowner Association > HOA Discussions > High Reserve Amount and Unexpected Expenses



Get 1 year of free community web site hosting from Community123.com!

Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.







General Legal Notice:  The content of forum messages are from the posting member and have not been reviewed nor endorsed by HOATalk.com.  Messages posted by HOATalk or other members are for informational purposes only, are not legal or professional advice and do not constitute an attorney-client relationship.  Readers should not act upon this information without seeking professional counsel.  HOATalk is not a licensed attorney, CPA, tax advisor, financial advisor or any other licensed professional.  HOATalk accepts ads from sponsors but does not verify sponsor qualifications nor endorse/guarantee any sponsor's product or service.
Legal Notice For Messages Posted by Sponsoring Attorneys: This message has been prepared by the sponsoring attorney for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Readers of HOATalk.com should not act on this information without seeking professional counsel. Please do not send any sponsoring attorney confidential information unless you speak with the sponsoring attorney or an attorney from the sponsoring attorney’s firm and get authorization to send that information to them. If you wish to initiate possible representation, please contact an attorney in the firm of the sponsoring attorney. Sponsoring attorneys that post messages here are licensed to practice law in a specific state or states as indicated in their message signature or sponsor’s profile page. (NOTE: A ‘sponsoring attorney’ is an attorney that is a HOATalk.com official sponsor and is identified as such in the posted message or on our sponsor page.)

Copyright HOA Talk.com, A Service of Community123 LLC ( Homeowners Association Discussions )   Terms Of Use  Privacy Statement