Kevin Davis: 0:00

Things change, and that makes it a problem for community associations. The good news for us is that, and this is

what we do: 0:05

we give advice to board members. We want to put them in a defendable position, and that's what we're doing today. Our job is to say, listen: if you're buying into a community association, if you do this job, if you do your job correctly, then guess what's going to happen? You may you may get in trouble. You may get in trouble. Somebody might come after you because you didn't meet these requirements, but you did your job the best you could do. So now, of a sudden, you have insurance to back you up. You're you being well taken care of.

Announcer: 0:33

HOA Insights is brought to you by five companies

that care about board members: 0:35

Association Insights and Marketplace, Association Reserves, Community Financials, Kevin Davis Insurance Services, and the Inspectors of Election. You'll find links to their website and social media in the show notes.

Kevin Davis: 0:48

Hi, I'm Robert Nordlund of Association Reserves, and I'm Kevin Davis, the president of Kevin Davis Insurance Services,

Julie Adamen: 0:55

and I'm Julie Adamen, the president of Adamen Inc. And this is HOA Insights, where we promote common sense

Robert Nordlund: 1:00

for common areas. Well, welcome to episode 180, where for us we're having a special episode of all three co-hosts together. So I'm joined by insurance expert and regular co-host Kevin Davis and expert management consultant and regular co-host Julie Adamen. We're all together for this episode because we wanted to tell you about our experience recently being resources for a Wall Street Journal article, and the reporter Veronica Dagger is one of our growing number of podcast listeners, and so she was writing a story addressing some of the challenges of selling a condominium unit in today's market, and she wanted to know what questions a prospective buyer should ask. So she thought of the podcast, and she reached out to the three of us. She thought our responses were relevant and included them in her article. So that was kind of fun, and we'll include a link to that article in our show notes. Well, if you're a new listener, we're here weekly with episodes to help you with the hard work of being a board member. Week after week, we bring you fresh content from our regular co-hosts, subject matter experts, or board heroes-we're so proud of those board heroes. They are the examples of people doing it well, doing it right, and doing the hard work. And you can catch all our prior episodes on our website hoainsights.org, on any major podcast platform, or on our YouTube channel. And if you like the show, by all means, subscribe and join us in our mission to improve board member leadership all across the country, one association at a time. Subscribers and positive reviews boost the show's location in search engines, making it easier for more board members to find the Common Sense for Common Areas podcast and get hold of a rescue line to help them with their association. Well, if you haven't been to hoinsights.org, you'll find we have some great merch for sale, like this mug that I have here. We all oh great we all have mugs. We've got some great things for sale like mugs and some great free stuff there like board member Zoom backgrounds that you can download for free for your next online meeting. It's worth a quick visit. Well, we enjoy hearing from you, responding to the issues you are facing at your association. So, if you have a hot topic, a crazy story, or a question you'd like us to address, you can contact us at 805-203-3130, or email us at podcast at hoa insights.org, but today's episode is on us. So, Kevin and Julie, what was it like being interviewed by a Wall Street Journal reporter?

Kevin Davis: 3:31

When you get that phone call or you get an email from the Wall Street Journal, you go, "Wow! I mean, I panicked first because it's like that's usually bad news, but it turned out to be a lot of fun. I enjoyed it. What about you, Julie?

Julie Adamen: 3:41

Oh, it was great. My contact was via email, and we went back and forth. I gosh, four or five times. I had sent her links to articles I had written over the years when she asked about you know buying in HOAs, which is what the article is about. Yeah, it was great. It was real fun. I was surprised that I actually got quoted. Quoted. Yeah. Well, this

Robert Nordlund: 4:00

is a reporter that I first spoke to right after Champlain Tower South, so she remembered me from that. Maybe she learned of the podcast that way. I'm not sure, but usually when I get a call from the New York Times or Wall Street Journal, I'm suspicious they just want to sell me a subscription. Yeah, I don't get all hot and bothered about that. It's like because I think I'm on a well anyway a minimal subscription just so I can see things online. But I thought it was fantastic to see the the system at work because we're trying to serve community associations, we're trying to help board members, and we're trying to help our community association industry. And it was nice to see that the was it the Fourth Estate?

Julie Adamen: 4:42

It's the Fourth Estate. That's right. Is

Robert Nordlund: 4:45

doing its job and finding out things and trying to figure things out. So, Kevin, did you correspond with? Did you speak to Veronica? Tell me what you guys talked about.

Kevin Davis: 4:56

Yeah, you know what? The timing was perfect for our conversation. Because right now, the when you go in to buy a community association, either condo or a home in a homeowner association, the number one problem they have is two people have to be approved. I have to be approved as the buyer, but the association has to be approved also. And the problem is today is that when the lenders or the mortgage companies go in there and look at that community association, they get denied. And when they get denied, the number one reason, a third of the reasons why they are denied, is because of inadequate insurance. That's the number one thing that I tried to present in that article, but didn't get out as much as I would like to. That is number one problem right now facing community associations is they don't have adequate insurance when it comes time to having a loan approved. Simple as that.

Robert Nordlund: 5:49

Okay, well let me let me back us all up because I remember when I first bought my first home purchase was a condominium unit, and I had my parents had told me make sure you have a good credit score. Get your credit card and pay your bills on time. And I had a strong credit score, and that was all I needed to do. But now we're talking about both parties need to qualify. Is that the deal?

Kevin Davis: 6:12

That's what it is, and it's such an important thing right now because again, there are like four or five different things that a lender will look at mortgage company, but it's surprising today. And again, it's been since Champagne Towers went down. The lenders are looking at insurance, and there's a third of the reasons why your your loan has been denied.

Robert Nordlund: 6:32

Okay, so you can have a a good score, 800, and all of a sudden, and you you or you and your spouse, or whoever you and your family are all getting ready. Oh, we found this unit. It's going to be great. We got a new job in a new town, whatever it is. And all of a sudden, you realize no, the loan fell through. Yeah, and you have to start. You have to start over.

Kevin Davis: 6:54

Well, not only that, you have to start over, but now the seller there is upset because the seller is shocked because the seller didn't understand that in order to you know get a to get her house approved that the board ahead of time has to know. So again, when we had this conversation with the Wall Street Journal, there like a lot of inform a lot of information that she picked up on. But that one area that kind of said, well, we have to be careful when you buy a community association, you have to have adequate insurance. Period. The

Robert Nordlund: 7:23

association has to have adequate insurance. So, and I

Julie Adamen: 7:27

would say, chime in. I'm going to ask Kevin. So now the buyer would have to disclose that right up front, wouldn't they?

Kevin Davis: 7:33

Yes.

Robert Nordlund: 7:34

And if if they're trying to sell their condo for 500,000, and now they realize that nobody is going to be able to buy it, get a mortgage on that. Then they're looking for an all cash buyer, and that case buys your lowers your buyer. Well,

Kevin Davis: 7:48

it's it's more than that. It's not you won't get a conforming loan. You won't get a you know a a good loan. You have to get now. You have to pay more interest. You may add cash. The terms are different. So, but what happens is is that when you in the community association end up going to Fannie Mae and Freddie Mac, who buy loans. That's their job to buy these loans. And when they go to buy the loans, they have requirements that you have to qualify as an individual association to qualify. Also,

Robert Nordlund: 8:13

got it. Okay, so it's really that's fascinating,

Julie Adamen: 8:15

Cam.

Robert Nordlund: 8:16

Yeah. So you, as a buyer, you like the place. It's a nice two bedroom. You have a view. It's in the right school district. It's affordable. You can you've bought it, and all of a sudden you realize that is that the board hasn't done their job, or they are just in a jam and there isn't enough insurance for the association.

Kevin Davis: 8:34

Well, it's it's a little bit more complicated because two things can happen. The board could have done their job perfectly, but then Fannie Mae and Freddie Mac lending institutions' guidelines have changed. So, effective August the first, all of a sudden they say, for now one, instead of needing three things, we need five things, and that board has no idea that you need five things or even three things. So you got the best, well-run, well-managed association, and all of a sudden, I'm ready to buy into Julie's association, and I can't get in there because all of a sudden, effective August the first, now they require you know X than Y. And for example, for you, your reserve studies and reserve practices, you know, all of a sudden they change that you need X number percentage other than this percentage of it. So things change, and that makes it a problem for community associations. The good news for us is that, and this is what we

do: 9:23

we give advice to board members. We want to put them in a defendable position, and that's what we're doing today.

Our job is to say, listen: 9:29

if you buy into a community association, if you do this job, if you do your job correctly, then guess what's going to happen? You may you may get in trouble. You may get in trouble. Somebody might come after you because you didn't meet these requirements, but you did your job the best you could do. So now, of a sudden, you have insurance to back you up. You're you being well taken care of.

Robert Nordlund: 9:50

You have your D and O insurance, and so you can say that I did everything to the level best.

Kevin Davis: 9:55

I have a defendable position. All you want to do is be in the defendable position, saying that I. I'm aware that we're on the black list, or we're on this list. I don't want to call it a black list. We're on this list that we're ineligible. So now, of a sudden, we did the job to get off of it. We're doing the things that necessary. So all we can do is say we're sorry about it.

Robert Nordlund: 10:14

So are there board members across the country now scrambling because, on average, they had sold-not they, but on average, they had let's say one new homeowner a month. Okay, 12 a year. So one fell through because the association, the the buyer, and therefore the seller learned that the association doesn't qualify. All of a sudden, the board is rushing to try to get the information, or get the paperwork, or get the the coverage. Is that's what's going on?

Kevin Davis: 10:43

It is a lot of that. A lot that's happening right now. It's getting more complicated because as insurance market has changed over the past several years, is harder to get the adequate coverage that they need. That's the problem. Is the word adequate coverage? And adequate coverage has a different meaning to me as it does to somebody in Florida versus somebody in in New York or New Jersey is it gets complicated.

Julie Adamen: 11:06

I have a question that I didn't know was going on. So you're saying that the the boards are not notified. Obviously, I would think Fanny and Freddie would they definitely would not be sending emails or whatever out to individual boards. But wouldn't their general counsel have some idea? Aren't they keeping track of that, or their insurance provider?

Kevin Davis: 11:25

No, no. There's a blacklist out. However, the blacklist has been stopped. Last year they stopped the blacklist. So right now, the only well, there's a couple ways you can find out, but it's most associations don't know until you apply for a loan, and then all of a sudden the loan is denied, and then when they find out that way, now all of a sudden I have a down payment. You and I have a contract, and all of a sudden I can't get a loan, not because I don't qualify, but because association doesn't qualify.

Julie Adamen: 11:52

Right, but the association was never notified. But

Kevin Davis: 11:56

exactly, association has no idea,

Julie Adamen: 11:58

but they do now. No, if it's denied, I guar I guarantee you that homeowner is not going to keep that to himself. Yeah,

Kevin Davis: 12:05

they have knowledge. They have knowledge. Yes, and that's the key. Once they have knowledge, they have to do something about it. They don't get in trouble until they have that knowledge. So

Robert Nordlund: 12:13

we're talking this ineligible list is a few 1000, a handful of 1000s, and we're talking about an industry where there's better part of 400,000 associations, and so the ineligible list is maybe 1% something like that.

Kevin Davis: 12:30

I have a list of 5000. That's why it's called a black

Julie Adamen: 12:32

list. Yes, no way, however.

Kevin Davis: 12:34

But it's only Fannie Mae list. Freddie Mac doesn't have a list, and they no longer. It's no longer list anyway. So we can say that if Fannie Mae had 5000 names on there, Freddie Mac could probably have 5000 names on me also. Because if I go to Fannie Mae to decline it, I'm gonna go to Freddie Mac because he might get it. So

Robert Nordlund: 12:53

they have the same. Well, they have the same rules, but they may. We're not. This isn't the blacklist discussion. The blacklist

Kevin Davis: 13:00

is going to be in four weeks from now, so I recommend it to be. I think it's 184 episode 184. 184. The black list. Yes, this is more about when you buy into a community association.

Robert Nordlund: 13:12

The whole point is that, and I want to get to Julie talking about is it an association that you want to buy into? But Kevin, your point is that you may not be able to get a loan not because of anything you haven't done, but because of something the association may not have done. Julie, there's a lot of-is it accurate to say-a lot of bad press about community associations at this time, and evil board members, and things like that. So, how do you discern in in the article? They call it the vibe. How do you look into the association and try to get a sense of is this an association I would even want to be involved in?

Julie Adamen: 13:53

Yeah, in terms of that, which she and I discuss this back and forth via email, and I think people don't realize that once you're in one, you may realize it, but when you're out on the outside looking at bikes, where you're like, "Oh, what's the vibe? And no, oh well, I don't know, but I'll buy in. I'm sure it's fine, but no, associations really have their own personalities. I think both of you would agree with this. And over the years, the personality doesn't really change. Usually, it's the same. I mean, there are the pit bulls? These are the really tough associations. The board may not be adequate, or they may be bullies, or a lot of the homeowners are that way. It's really interesting, and they seem to attract more people like that. So there's the pit bulls, I call, and then there's the little yappy dogs. They may be okay, but they're all the time. You know, you're getting the

notice: 14:39

don't park your car there. Don't let the dog poop, whatever that is. And then there's the best ones, which are the golden retrievers, which are always seem to be happy. Now I am lucky right now. I live in a golden retriever association. Very, very good. Yes. Oh, it's terrific. But I will tell you. Here's how you figure that out, because I think a lot of folks are like, oh my God, I bought another wrong. Place these people are terrible. I don't fit. It was in the Wall Street Journal. I mean, you really have to understand where you're moving in. And so, my advice is to walk around the project and talk to people, talk to homeowners, talk to people who are walking their dogs. If you live in a, if it's a larger scale one that maybe has some large amenities like golf or food and beverage and all that, I would absolutely go in and have dinner at the club or lunch at the club, and and see what it's like, and you can really get a feel for it, and then talk to people there, even talk to the staff members, and see what they think. and And I will tell you, when we looked here, and I looked at, believe it or not, when I was looking, I looked at 18 houses in one day. Wow! And I know, I know, me and my realtor, it was so terrific. She said. She said. She told her the people in the real estate office that she was going to go look at all these houses with me, and they said how many? And she said 18. And she goes, "You'll never do it. Not only did we do that, we had lunch and then we had a happy hour afterwards. So we were able to do all of it in one day. But you certainly got a vibe when you went and had lunch at the club, which is exactly what we did, and and just driving around, you can get a feel for it. You really can. So we ended up buying here, and there we are.

Kevin Davis: 16:08

Hey, Julie, let me ask you a question. Is there any one thing that will stick out more than anything else,

Julie Adamen: 16:13

as far as buying about the vibe? But the vibe. Well, the thing actually is the people and talking to the people, and I this place where I live, and it's a you know 55 and better community. If you're walking down the street or driving, people wave to each other. I mean, I'm in Arizona. I'm not like out in the middle of nowhere, but there's people here from all walks of life all over the country because it's very you know it's very well known place in the 55 plus sphere, and and but people they're always waving. You walk, people are waving. Always really nice, and you wouldn't necessarily see that in other places. So if they're grumpy, they're not waving. That's for sure. And I will tell you, we have a sister association, and I don't see so many wavers over there. It's kind of interesting. There and they're definitely different. Definitely have different personality, and we're right up against each other, and we share amenities. So, but if you're, you know, if you're there with them in the whether they're in your restaurant or you're in theirs, they're all very nice people. But there's definitely definitely a shift. It's not horrible. I just say it's just different. It's fascinating.

Kevin Davis: 17:11

You know, it's interesting. You talk about the grumpy people because if they're grumpy, automatically and you live there, you feel like they're hiding something. Grumpy people, they're hiding something. You feel like not communicating. They feel like not being open, and that's the problem that we see. You know, when we see those kind of claims, meaning that I don't feel I've been heard. I feel like I haven't gotten the attention I should have gotten because those are the kind of quote grumpy associations where people just don't feel that they belong. They feel like they're attached. So I agree. If they're waving at you, the communication is probably just a better place to live, so I agree. That's that's a great idea. Fascinating,

Julie Adamen: 17:45

isn't it? Though, and I think the Robert, did we need to take a break or something? Because I was going to add,

Robert Nordlund: 17:50

we we got some time. I got a couple things I want to do before we take a break, and we'll we'll turn the corner

Julie Adamen: 17:54

quickly. I'll say the one thing, and what I also told her, and I think it came out in the article, was that you want a place that is well managed as well? You know, people are happy. That's the vibe. But you want somewhere that is well managed, and if that means by the board and by staff, if it's in-house staff or it's a management company, doesn't matter. But if you're looking around, look and see what the place is like. Is it are the yards tidy? Whether the homeowner takes care of them or the association does, you want to make sure things are tidy. The roads look like they've been taken care of. You don't want it to look at all like it's fallen into disrepair. Any kind of disrepair, that's a red flag. I mean, if you can noticeably see that the tennis courts have big cracks and the and are deteriorating, no bueno. That's something you really want to look at. And and the other thing is, is that well, that yeah, the disrepair. I think they'll just go with that one for now, and I'll let you go ahead and go, Robert.

Robert Nordlund: 18:45

I want to break into two more topics, but I look at the clock, and you were right. It is time to take a break.

Julie Adamen: 18:50

It felt like it. I could feel it.

Robert Nordlund: 18:52

So let's do that. So to everyone, thank you for watching. Now it's time to hear from one of our generous sponsors. After which we'll be back with more common sense for common areas. Is

Russell Munz: 19:02

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Robert Nordlund: 19:34

And we're back. Well, Julie, right before the break, you spoke about prospective buyer may want to walk around the association and talk to people, see what they have to say. What if a prospective buyer bumps into you, a board member? Do you have a different role in that kind of situation?

Julie Adamen: 19:52

Well, you do in the sense that as board member, you number one have to act in the best interest of the association. You're a fiduciary. Trustee, right? And someone says, "What do you think about it here? And you say, "I hate this place. I don't even want to be here. What are you thinking about moving here? That would leave you open for some liability. Kevin, am I right on that?

Kevin Davis: 20:11

Yeah, and it's interesting. And we go back to the grumpy association. You said before, if you're a grumpy association, somebody says, "You know what? I want to move in this place. It looks great. A grumpy person can say that. Well, you know what? Sure, you want to do that? Does it make sense? Now, all of a sudden, once you say that, guess what happens to that? Guess how happy that seller is going to be. Yeah, they're gone. And if that seller loses, that seller loses that sale. They're going to hold that board member responsible because again, that board member has that fiduciary responsibility to act in the best interest of the association. So that board member either has to say, "Well, good luck. I hope you live here, or just you got to be positive, or else you have that responsibility.

Julie Adamen: 20:50

Absolutely. I mean, remember, Ed Robert, we've talked about this in many of the podcasts. Is that as the board member, you're an ambassador, and you're not just an ambassador in the meetings. You're an ambassador the whole time you're on the board. That's just the way it is, and you always want to project something positive and say something positive about the community. Oh yeah, this is great. We would love to have you here. If you really don't feel that way and you think things are a mess, I think Kevin gave you a pretty good diplomatic way to say it. Well, I think you know. I think you'll love it here, or not that you'll love it here. How about I wish you the best of luck and would love to see you here. Something you know positive, but well, you want to stay in here.

Kevin Davis: 21:28

I think you'll fit in in really well. Fit

Julie Adamen: 21:29

in, yeah. I hate to think about that. That board members despise where they live. I've known some that do, and that's why they're on the board because they want to make changes to however it is. But still, you're the ambassador, you're the fiduciary, and you don't want that seller to lose a sale because of something you said or your personal feeling. You know your personal feeling. So yes, board members, honestly, you should always be out there shaking hands and kissing babies. That's really what you have to do. You're a politician, and you're a politician for the community.

Kevin Davis: 21:59

And again, it's important that we go back to the grumpy. To me, there's two associations. I love what you're saying with the golden retriever. I mean, those are guys not even worry about. It's those grumpy associations where they, yeah, they're the ones who feel like you know I'm doing a good job and they don't appreciate me. So all of a sudden, a new buyer comes in and they start talking about themselves, how wonderful they are! How we want to we want to pair all the roofs, or we want to retake care of the trees, and they don't let me. I mean, you're right. You are an ambassador to the association. Act as such. That way, again, if a buyer comes in, you want them. You want to help the seller at all costs.

Julie Adamen: 22:38

Yes,

Robert Nordlund: 22:39

I like that. Facilitate the home sale because even though it's the seller that's selling their unit, you as the board want to facilitate that happening. So the two bedrooms go from 500,000 to 510,000 to 520,000, whatever the numbers are at your association. You want to have a healthy environment, Julie. I want to go back to something you talked about as you're walking around, you spoke about it being a tidy place, no disrepair, and I was thinking about an association I went to where I used to play a bunch of tennis, and I went to this one place that had a crack down the middle of the tennis court that was like an inch and a half, and I was thinking, not only am I going to stumble, but the ball is going to jump sideways, and I'm not playing a lot of tennis at this point in my life. But what does that tell you? And what do you where do you learn more about that?

Julie Adamen: 23:29

Well, what you know, it tells me that hmm, hmm, maybe this place doesn't have the money. Maybe they don't have the foresight to get it fixed. Maybe they're going to get it fixed, but it's just not yet. So, what would I do? I would actually ask for a couple of things and ask them from your seller, because the seller will easily get them or should easily be able to get them. I'd ask for about a year's worth of the last minutes, not the you know. So, just the last minutes. I would also ask for a copy of the reserve study, the most recent reserve study. Now, you may be able to get those through your realtor along with the governing documents. I'd get those as well, but and I'd read them. People, I know, I know you don't want to read them, but it's when people move into an association and all of a sudden they're like, "Oh my God, what do you mean I can't do this? It's because you got this big stack of documents that you didn't read. I mean, and you don't have to be a lawyer to read them, and you don't have to read all the preambles and all that stuff, but go through and read the stuff that is actually going to affect you, and then you'll be, you know, what is that? Forewarned, forearmed is for warrant, forewarned is forearmed. That's right. Sorry, backwards. My dyslexia. But I'd ask for all of those if I can get them, because if you read the minutes, you might see that for the last three or four months they have been getting bids to have those repaired, and when's it going to happen? Or they may be talking about yes, we're going to have that done next summer, and we're going to pay for it with our reserves. Then you get an idea what's going on. Also, another thing about getting the minutes, it can give you a huge insight into what the community is actually like. Another thing about the part of that vibe. The even reading how they actually are done, if they're done well, if the minutes have typos, I mean that could be nothing. But are they actually recording things that should be recorded? Are they recording all kinds of other stuff? So it's it's it would be a give you a huge window into it. And again, the vibe.

Robert Nordlund: 25:18

Yeah, because you're looking for a place that is being run as a clean nonprofit corporation, and not just randomness here and there. But I think looking at those minutes, you'll find out just like you say, we are getting ready to paint, we are getting ready to roof, we have these projects going on, and we have negotiated that we're going to do this big asphalt project in September or whatever the number is, and we're hearing about the tennis court, but we're letting it go because we're going to turn them to pickleball courts next year. There may be good answers, and you want to find that out.

Julie Adamen: 25:51

Good or bad answers, you want to find them out absolutely,

Robert Nordlund: 25:53

and they're they're laid out right there for you.

Julie Adamen: 25:55

They're right there. What I want to say is that what you want to look for is if your association is being run very mom and popish, that gives me a little bit of pause in buying in a community association. Self-managed ones can run really well, and they can run professionally. But if you're trying to look for minutes and they don't exist, or you can't find them, or they're in somebody's you know desk at their home but they're gone for the next seven months, that kind of gives me pause. And one last thing, and I'm going to push this over to you, Robert, is that when you ask for the reserve study as a potential buyer, and I know a lot of you are board members out there, but a lot of you are not. A lot of you just regular homeowners listen to this. So, what are they looking for, Robert, in that reserve study?

Robert Nordlund: 26:39

Yeah, a couple things. Look at the date on the cover. You want to see a reserve say that's newer than three years. If it's older than three years, it is not meaning. It's not meaningful at all. Number two, look through it. There should be an executive summary, so it should be near the front. Look for something that they call percent funded, and that is the measure of has the association been taken care of itself? A good association will be 70% funded or higher, and that's a that's a good thing. If an association is 30% funded or lower, then you can anticipate that there's a special assessment coming, and that may be a negotiation point with the seller that there is going to be a special assessment for that roof. It's going to be between five and $10,000 per unit, and therefore I want to get five or$10,000 off of the sales price. It doesn't mean it's a bad association; it just means that it gives you an opportunity to negotiate what you're going to pay for. Now, if they don't have a reserve study and there's, or if it's way out of date, there's another way around, and that's look at the budget. You should be able to get a copy of the budget and look to see how much they are funding reserves. Kevin mentioned it earlier. Fannie Mae and Freddie Mac have raised the minimum standard. It will be in effect January of 2027. That condominium associations need to be setting aside up from 10% beginning January 2027, condominium associations need to be setting aside at least 15% of budget towards reserves. Okay, that's a simple thing to look for. No reserve study. Look and see if they're in the right ballpark. Literally yesterday, I do quality reviews on the reserve studies we produce here. Yesterday, there was a reserve study that came through, and I was surprised at how big of a special assessment we were recommending. It was about a$14,000 per unit special assessment, and I'm nervous about that because I want to make sure we're giving good, wise counsel to our clients. And I looked, I found out, oh, it's an older association, and they've been funding reserves at 6% of budget, and when you're under funding reserves for year after year after year after year, it just means that the costs are going to be covered by a special assessment. They're not covering the costs in the the ongoing budget, so you have to be careful about that. So look for something above 15% That's a nice ballpark number-and that'll let you know that at least they're in the game. So those are a couple things to look for.

Julie Adamen: 29:09

I want to chime in on that just real quickly. Is that we've talked about this before in the podcast? Is that for board members? You know, you're fiduciary, right? You know, you're in charge of these monies and property on behalf of others, and you have to, you know, handle it like that. But don't forget, it's not just for you and where you are now. It's not just for that, you know, time period that you are on the board or you live there. You are fiduciary for the current owners and the future owners as well. So if you are funding, like you were just talking about, at 6% all that time, you are just handing the future owners a big pile of poo. Just you really need to understand that in the future, these people are same thing happened at Champlain Towers. I mean, they just only kept it where it was and which was zero for a long time because it benefited that group, the people down at the end that didn't work so well.

Robert Nordlund: 29:56

Yeah, reserves is all about it's like a usage fee. It's paying your. Fair share over time of what you're using, just like when you check into a hotel, when you rent a rental car, when you're at your gym, that's a usage fee, and you need to see reserves as a usage fee where everyone's paying their portion of the deterioration. And if you're not, if you're underfunding reserves, it's going to fall on the shoulders of someone in the future, and that's very unfair and unsettling to the association as a corporation. To the audience, I want to put a shout out to you. If you've got some ideas of what do you think are some nice distinctives, some great questions to ask, why don't you shoot them back to us at podcast at hoa insights.org. If you have a story about that, you bumped into a prospective buyer, what you said, what you were careful not to say, how you represented your association, Julie, Kevin. What does this whole idea mean for board members about trying to make sure your association is saleable, unit by unit.

Julie Adamen: 31:01

Go ahead, go ahead, Kevin.

Kevin Davis: 31:02

It's interesting for me because since we've been doing these podcasts, I look at three things. If you do these three things really well, you have a well-managed association. As we enforce the rules, maintain association, and control your finances, then you have a well-maintained association. That's to me is overall key. There are things you have no control over. You don't have control if you have adequate insurance or not, because it's up to us. The problem right now, overall, is that board members, you have lenders, you have insurance people saying, "Guess what? We want you to have skin in the game. We want to make sure that you are doing the best job you can do. I'm not going to loan you. I'm not going to insure you. That's where we at today. So it's up to these board members to understand that, so they can say, "Guess what? We're well maintained. We select our assessments and we enforce the rules.

Robert Nordlund: 31:48

Pretty simple, Julie.

Julie Adamen: 31:50

Yeah, it is. Well, I mean, it sounds simple, and it is that part is simple. But the problem, what we have, is that pesky people factor. Very, very pesky. You, you as a board member may know exactly what we need to do, but you need a 20% increase in assessments probably for the next five or six years. You know what needs to happen, but you still have to bring other people along with you, and that means other board members and the homeowners as well. So the people component is so difficult. It's like this is funny. I was just talking to somebody who's it's my son actually who's in the industry, and what they don't tell you when you get into being in the management side of it, it's very similar to the board side. When you're in the management side, you come in, you're a younger person. People say 30 to 28 to 35, whatever, and it's not the work. Though the work is very quick and fast, and things you have to do. It's the people and the people in our industry, managers, assistants, those kind of people don't get taught about the people stuff. Same with board members. You know, people who are your neighbors, they're great and they're waving at you as you go out. You become a board member and they not be may not be so great to you anymore. And that's a huge shock that board members find out pretty quickly, usually, especially in the pit bull associations. So, but it's or the yappy dog associations. So, if you're in a, you know, if you're in one that has is more friendly and your reserves are funded and the place looks nice, you're going to find that it's not so bad. But when you need to make changes, your most board members aren't quite ready for what's coming at them and how to look at that and how to process it. So that's the tough thing. Let

Kevin Davis: 33:26

me add to this. It's funny. My first condo I moved into, I got on the board. I mean, I we all loved each other. We were the happiest people to associate and waving everybody. It was a small association. And guess what? Up to my first annual meeting, and I was in shock. I mean, I couldn't believe that first annual meeting where it felt like we didn't do anything right, we didn't do anything we promised, and we were the worst guys in the world. I mean, that was-I had one year on the board. That was it. I'm done. I never served on the board again. But yeah, you're right. They were waving at me, but for that annual meeting changed everything. Well, were

Julie Adamen: 33:57

they waving with all of their fingers? Is that what I'm asking? Yeah, yeah,

Kevin Davis: 34:01

yeah. They were until that annual meeting, and all of a sudden, I only saw

Unknown: 34:05

one.

Robert Nordlund: 34:07

When the money's tight, then when there's scarcity, then things get weird. Yeah, we've spoken in the past about some of the the 4c's. You have to care about your association. Need to be curious. Need to have the courage to do what you need to do, and then to communicate that down through the homeowners, and you do that with committees. You do that through Julie, as you said, just always representing the association well, building community in your little portion here on Earth, and that's an incredible responsibility and an incredible opportunity. And we just want to encourage you all towards that. Well, Kevin and Julie, it was great having all three of us together on the program. It's a bit of a scheduling challenge, but it's a heck of a lot of fun when we do it. Any closing thoughts before we wrap?

Kevin Davis: 34:53

I enjoyed sharing that information to the Wall Street Journal, and it's nice. I send all my friends and family. I'm quoting the Wall Street Journal, so that was great, and I really enjoyed it. It was fun.

Julie Adamen: 35:05

Yeah, I agree. Yesterday, I got an email from my son who works for a management company in in Scottsdale, and the owner of the company just got a copy, just got a hard copy of it from her significant other, right? And she laid it on people's desks, and he took a picture of it and emailed it to me. I'm like, you know, it was quite a while ago. I almost forgot about it, and I go, this is cool. Yeah.

Robert Nordlund: 35:27

Time moves on. Well, we're here in this journey and this challenge also with you, and we certainly hope you learn some HOA insights from our discussion today that helps you bring common sense to your common areas. We look forward to having you join us for another great episode next week.

Announcer: 35:47

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