How Do Well-Funded Reserves Affect Your HOA?

An HOA board has a duty to ensure that its community runs smoothly, and with financial stability. A well-funded reserve fund can affect many things, such as the ability to implement necessary repairs and upgrades, which ultimately affect the market value of the property. Market values can directly impact homeowners and whether or not they become long-term members. Not only should and HOA reserve be well-funded to comply with governing documents and state laws, but it is also for these four essential reasons.

1. Perception. Homeowners will have peace of mind if they know that the HOA and its board members are responsible enough to have a well-funded reserve fund. It makes them feel secure in case something should happen that would require a significant replacement to the property, ensuring there are no unexpected increases in HOA fees.
2. Planning. A well-funded reserve fund reflects an HOA that does proper planning and budgeting. While having a reserve study completed by an engineer is not difficult, contributing appropriately to the reserve fund shows a commitment to planning for the future success of the HOA. This planning allows projects to be outlined and done on a rotating as needed basis.
3. Lenders. Certainly, any financial institution that is going to lend money to a homeowner will want to verify that the HOA has financial stability. Keeping well-funded reserves assures the bank that the property has the funds necessary for capital replacement projects that will maintain or enhance home values. A lack of a reserve fund could make it more difficult for prospective buyers to obtain financing.
4. Buyers. Attracting buyers ensures that the HOA and community will continue to operate indefinitely. Financial stability in the form of well-funded reserves gives buyers the confidence that their property investment is stable and they won’t be hit with special assessments for necessary projects.

The financial responsibility of the HOA’s board members is significant, and a well-funded reserve fund may just be the key to its success. AR Management is here to help your HOA with financial management and more! Contact the team today.