One of every three community associations is financially unprepared for the future, believes Robert Nordlund, president of Association Insights. And home buyers purchasing a condo often don’t understand the financial risk for which they may be responsible through higher fees or special assessments.
Calabasas, Calif.-based Associations Insights created a report card to help buyers understand the risk. The service is designed to assess the financial condition of a community association and predict the probability of a special assessment, which could levy thousands of dollars in fees against a new owner’s townhouse or condo. Association Insights charges $89 for the report.
The report, known as the Risk eValulator, is compiled of 12 specific questions that determine the financial health of the association. The report also includes three key insights that tell a comprehensive story about the association’s history: the percentage of owner-occupied units, the percentage of 60-day delinquencies and the percentage of reserves funded.
“At the same time, we have been working with condominium management companies and attorneys to make sure we have attained a critical mass of agreement and compliance,” Nordlund said.
The service was launched in mid-2002 and since then the company has been pitching it to local real estate offices, adjusting information and data along the way.
“This report takes the liability off the agent’s shoulders,” said subscriber Scott J. Miller, director of real estate and finance for American Home Realty & Loans. “This provides research into the worthiness of a particular association that I might not be able to tell my buyer about (without it).”
Unlike a single-family home purchase, the buyer of a co-op or condo has fewer options when it comes to evaluating all the aspects of a shared housing situation. Potential buyers can find board member meeting notes and financial details of a particular community association, but the information can be costly and hard to pull together.
The single-page report from Association Insights also gives buyers information on earthquake insurance coverage, tax filing history and management capabilities, among other statistics.
“It answers questions consumers were never before able to get answered,” added Nordlund.
“Until now, association financial status has never been rated or interpreted for the consumer before. You know how much octane is in your gas and how much SPF is in your sunscreen, but there wasn’t much available in terms of the financial health of a community association,” he said.
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