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Curb Appeal During this Protracted Recession
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Minnesota Community Living November/December 2011

Curb Appeal During this Protracted Recession

By Ted Salgado, Reserve Advisors, Inc.

My wife and I have enjoyed condominium living for more than 20 years. We’ve both served on a couple of boards for different associations and at this time of year we look forward to enjoying the fall season. Our community association looks great with all major projects having been completed. This year our association invested (spent) about $1,000 of exterior maintenance on each of the 16 townhome condos including pavement repairs. So we are looking at a place that has lots of curb appeal. How did we get here and how best can we keep that curb appeal?

Active Involvement – Our community association was built 11 years ago. Essentially, it’s a small business. We’ve been fortunate to have several owners who took an active interest in running the business. Not all, author included, have served on the board during these 11 years. That’s not what’s meant by active involvement. Sometimes it’s being a sounding board for the actual board and other times it’s serving on a committee. Like all associations, there is a very small minority group of owners who actively participate, and enjoy participating in making the difference. I suspect you are reading this because you are one of these folks. Active involvement is the key component to ensure the curb appeal of your community association. Without it, nothing else happens and the investment in your home will suffer.

Maintenance – You might have noted my mentioning the $1,000 per home spent on maintenance this year. Maintenance is usually the most expensive line item in our budget. That’s pretty typical for us but it can be as low as $500 per home. Your experience will be different but we have set a fairly high maintenance threshold in the budget to ensure a policy of sustaining our common elements ahead of replacing them. Insurance or management is often the most expensive item for other community associations but this year during your budget deliberations, consider maintenance as a line item worthy of this level of attention. Without maintenance, its nemesis (deferred maintenance) causes even higher management and association fees, special assessments, and a waste of your time chasing problems. The side benefit of aggressive maintenance? You guessed it – curb appeal.

A maintenance committee is a useful tool to implement a policy of sustaining your common elements instead of replacing them. Aside from homeowner "complaints,” maintenance committee members frequently walk the property with their grandkid or dog looking for budding problems and talking with the neighbors. But at this time of year, a close inspection will help determine key maintenance (and replacement) projects for 2012. Fall is the best time to identify these projects by visual observation and re-visiting your reserve study. Your reserve study should pre-identify possible replacement projects and give your association the opportunity to weigh the possible pecuniary advantage to defer replacements through aggressive maintenance.

You may have heard the phrase "a reserve study is a snapshot in time.” A credible reserve study has an in-depth narrative condition assessment of your common elements at that point in time. Conditions change from year to year so budgeting for an "update” of the reserve study every two or three years is important to help maintain the curb appeal of your community association. The reserve study provides an important independent third-party opinion of the condition of your common elements. The engineer’s opinion is independent from that of any committee, board member or contractor looking for work. The reserve study update also considers how changes in local material and labor costs have affected future replacement cost estimates. There are national trends in petroleum based prices which also affect your original reserve study. Additions and deletions to the association property, fluctuations in construction costs, and unpredictable events such as harsh weather can all significantly affect the accuracy of reserve funding levels. And is your community association "on-track” with its reserve savings plan? During budgeting season, we look at where our year-end reserves should be and where they actually are. Significant differences indicate the need for a reserve study update. Accountants and community managers agree that updating the reserve study is essential for the financial well-being of an association. Updating keeps the funding and repair/replacement schedule on track and assures the curb appeal of your community association.

FHA Financing – The FHA has not affected your community association’s curb appeal until now. FHA has only played a minor role in mortgages for condominiums; however, that changed with the housing crisis and today, FHA accounts for up to 30% of all condominium mortgages, through FHA’s condominium mortgage insurance program. CAI’s web site has lots of information about how the FHA has impacted the ability of your association’s members to market their condo units during this protracted recession. For starters, FHA guaranteed loans are not available unless your association in total is "approved.” There are myriad new rules that affect requirements concerning reserves, insurance, number of rentals, number of homes in foreclosure, to name a few. It’s best to get your "house in order” before a potential buyer says that FHA is denying their loan and the sale falls through. Read more on this entire subject by searching for the keyword "FHA” at

Curb appeal is affected by the appearance of your property and now by the new FHA rules governing your association. CAI National is your advocate, but let them hear from you with your thoughts. Contact your congressperson too. The appearance or curb appeal of your community association is the result of your active involvement, aggressive maintenance, professional management, and a credible, up-to-date reserve study. I hope that your budget for 2012 considers these key elements of a plan to maintain and improve your community’s curb appeal.

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