Few people buy a used car without reviewing and paying for a “Carfax”. It provides a detailed history of the vehicle including accidents, title issues, service records and other factors that could affect the vehicle’s value, safety, reliability and desirability. The average used car costs nearly $35,000, but if the Carfax reveals issues related to that car, it might sell for much less. If the Carfax is “clean” it helps avoid costly surprises and more importantly, the buyer makes a more confident purchasing decision.
And yet, the average price for a condominium in California is $670,000, almost 20 times the cost of that used car, and there is no comparable report for buying that property in a homeowner’s association. Until now. As a long time, Realtor and an association management company owner, I recognized the need to create an easy to read and “at a glance” to help buyers navigate a purchase of property in an association, a report for sellers to promote their property in well run communities, and a tool for boards and owners to benchmark their association. With Artificial Intelligence (AI), we can collect, curate and prioritize the critical information of an association. Here is why an HOASnapshot report is crucial:
- Financial Health: The user receives a proprietary FiPho score of the association. From “A” down to “F” a score is assigned to the community. The FiPho Score ranges from 0 to 100 and is based on a proprietary algorithm that distills the financial, physical, and operational health of an association-governed community into one number. The higher the score, the healthier the association. The lower the score, the more likely that the association is struggling in one or more areas.
- Key Property Information: The name, number of units, monthly dues and age are assimilated. It also calls out any “critical” issues facing the community such as special or emergency assessments, active litigation or insurance problems.
- Reserve Study: Both the funding level (percent of fully funded), reserve balance for each owner and the financial impact for each owner is shared.
- Insurance Information: The current insurance company, the percent of replacement value insured, the deductible for each claim and whether earthquake insurance is included.
- Dues Inclusion: The common areas that are covered by the dues. Also, what the rules and regulations are for the community.
- Management Company: If professionally managed, the name of the company, a phone number, email and link to their Google reviews is provided.
The report is designed to reveal any “red flags” about the association and help buyers buy with confidence or negotiate differently depending on the contents of the report. Owners now have an additional tool to hold their boards accountable. Management companies can provide a benchmark for decision making and a baseline for improvements.
The California Association of Realtors (CAR) prefers this report to be “on demand”, that is, it can be ordered and produced at any time for an eligible party. Management companies have been slow to adopt the report because they like the way things are and resist change. Real estate agents, buyers and boards love the report and the clarity they gain from its availability.
Whether it is HOASnapshot, or another version of this, there is little doubt in my mind that it will be widely used because there is a huge need for greater clarity for owners and buyers in associations. The AI horse has left the barn, and this report is an example of what AI does best: it distills an abundance of information into bite sized pieces.
For the past 30 years homeowner associations have flown under the radar and the only concern a buyer might have is the rule not allowing them to park in the street overnight. But now, with insurance companies refusing to ensure associations unless the coverage is radically changed or the premium increased significantly; with mandated balcony inspections uncovering issues; and the cost to maintain and update the common areas having increased greatly; a buyer needs to be better informed of potential special and emergency assessments or imminent increases in the monthly dues. HOASnapshot is the tool to create transparency in the association industry. It is meant to “raise the bar” and reduce the risk of buying in a homeowner association. It is good for all that interact with associations: boards, owners, buyers, agents and management companies.
