When a community decides to create a homeowner’s association, self-management may seem like the obvious first choice. After all, why would homeowners want strangers to dictate how they run their communities or have to pay hefty fees? While it does make sense at a first glance, many HOAs have decided to hire professionals to manage the association. Ultimately, communities need to weigh the pros and cons to determine which option may better suit their needs. It is fairly common for communities to manage their own association, especially small HOAs. Are the benefits enough to make HOA self-management a worthwhile option for you?
The Pros of HOA Self-Management
Usually, the self-management route falls well within a community’s resources and abilities. Hiring an outside management company is simply overkill for communities with fewer than 100 units and fairly simple amenities. HOA accounting software can streamline many HOA self-management tasks into a much lighter workload for HOA volunteers.
An obvious advantage of self-management of HOAs is that communities get to set their own rules and determine how to enforce them. When rules emerge, while not everyone will agree with them, the rules may better reflect the general consensus. Self-managing your HOA gives you the power to address violations with nuance and the understanding that only comes with living in your community.
Association self-management also provides an opportunity for community members to use their skills to better improve the neighborhood by serving on the board. They’re in it for the good of the community, not for the money. Communities that are concerned about exclusivity and privacy may prefer this option most of all.
In most cases, community-run HOAs tend to have fewer rules than those managed by property management companies. This is because third-party property managers tend to make determinations based on community suggestions and what it takes to keep property prices high. Subsequent decisions often lead to tone-deaf policies that create more problems than they solve. These are some of the stricter rules you tend to find at professionally managed communities:
- Restrictions on where to park cars or how many can occupy a driveway
- Bans on subletting and short-terms rentals
- Restrictions on animal types/pets per household
- Limits on how quickly a buyer may sell the home
- Rules dictating who homeowners can sell properties to
- Restrictions on landscaping, exterior home colors and even garage doors
Rigid rules and inflexible enforcement practices can become a hassle for homeowners, leading to dissatisfaction and turnover in the neighborhood.
Paying professional property managers to take over an HOA can be pricey. These professionals need to make a profit to run a viable business, and they can easily cost your community tens of thousands of dollars each year. Their approach prioritizes profits, not what’s best for the neighborhood. In contrast, HOAs focus more on breaking even and maintaining enough funds to tackle large projects over time. Managers tend to volunteer for the position and profiting is not a focus. For these and other reasons, self-management may lead to lower costs and more affordable dues for community members. You could see a monthly membership price variance as wide as $250 per month versus more than $1,000.
When professionals manage HOAs, community members feel less compelled to work together to achieve common goals. Community-run HOAs have no choice but to pull from local talent to get things done. HOA self-management creates a stronger sense of community, where people are more likely to know each other by name. Familiarity happens naturally while working together in the office, negotiating contracts, voting on bylaws and resolving disputes.
The Cons of HOA Self-Management
Unfortunately, self-managed HOAs have developed a bad reputation, over time. An HOA has a lot of moving parts and can compose several challenges. However, many obstacles can be addressed by using software made for self-managed HOAs.
Laws regarding HOAs differ by state. In general, these bodies do have legal rights and can enforce them. When people purchase properties within an HOA-regulated area, they also become party to these laws. Even so, HOA leaders must follow specific guidelines when enforcing rules. There are also laws regarding the formation of HOAs and the creation of bylaws and other documentation. When professionals do not handle these processes, it can lead to compliance issues. Self-managed HOAs may mitigate compliance risks by keeping an attorney on retainer.
When professionals manage HOAs, it’s their full-time job. While some communities enjoy retirees and stay-at-home homeowners who volunteer, most HOA volunteers fulfill their duties around their full-time jobs, families, and other obligations. This can lead to sloppy management. Deadlines may pass by, missed payments may go unnoticed, receipts may go unaccounted for and phone calls often go unanswered. When disputes arise within the community, it may also become more difficult or take longer for community members to find a solution.
Many self-managed communities hinder their own efficiency by using out-of-date bookkeeping methods, like excel spreadsheets, budgeting software not built for HOAs, or even plain ink and paper. Empowering volunteers with the right tools can help them stay organized and on top of their duties.
Unfortunately, when community members work closely together and get to know each other, friction can occur. Some individuals may either begin to compete with each other or make complaints against each other. Rivalries may become especially prevalent when electing people to serve on the board. This may lead to personal problems filtering into the management of the HOA. Hiring professionals eliminates this problem because outside property managers rarely live within the actual community.
However, residents can easily find fault with a third-party management company who may issue too many violations or create rules they don’t agree with. Outsourcing HOA management doesn’t guarantee homeowner satisfaction, and displeased homeowners may still blame the HOA board for their grievances.
Because of these issues, potential homebuyers may feel wary of communities with self-managed HOAs. They may have questions about the way the neighborhood is run, but a disorganized HOA is likely slow to respond to phone calls and emails, intensifying the doubts of potential homebuyers.
Consequently, homeowners who wish to move out of the community may struggle to sell their properties. In some cases, they may feel so desperate to sell that they accept far less than the actual worth of the property.
Self-managed HOAs may reduce this problem by hiring professional secretaries to man the office and by ensuring they have up-to-date information for prospective buyers.
The Bottom Line
There is no one prescription that works best for all situations. HOA members need to take some time to determine what their priorities are and what pain points they hope to address. From there, it becomes much easier to choose an appropriate course of action. With the right tools, self-managing is much easier than HOAs may initially think. Try PayHOA risk-free for 30 days to see if self-management is truly within your community’s capability.