Steps to take when selecting a professional management company, what to ask, and red flags to avoid.
Whether your board is newly turned over from the developer, or you’ve been self-managing your HOA or Condo Association, you’ve reached the point where you are ready to get help in the form of a professional management company. But how do you choose, and what do you look for? Are there gotcha’s you need to avoid? Let’s talk about it.
Get on the same page
Before you even start your search for a professional management company, be sure the board has agreed on what the community needs. It may be that you have an active board and a robust architectural committee, and so you only need help managing the books. Or you may find that you just want someone to take over the full day-to-day operation and be on hand to answer the board’s questions whenever you need them. Whatever your needs, you should be able to articulate them into a list, which will form the basis for your request for proposal (RFP).
Appoint a Selection Committee
The board should next appoint a committee of a small handful of community members. Make sure the treasurer is on the committee, along with 2-3 other active members. The committee should be small enough that they can easily jump on a call with prospective companies without taking a week of back and forth emails to align everyone’s schedules. The committee’s job will be to do the research, prepare and evaluate the RFPs and narrow down the results to 2-3 companies for the board’s consideration.
Do your homework
When evaluating ANY vendor, but particularly one as important as your HOA or Condo’s management company, it is critical that you do your due diligence. That means researching management companies in your area, reviewing their sales materials, reading reviews of their current clients, and then requesting a bid from at least three different companies that look like they may be a good fit. You can make a formal RFP, or you can schedule a call to discuss with the committee. The goal here is evaluating who will be the best fit for your community, so take the time to do this step right. Once you have narrowed down your selection, it’s time to schedule a presentation before the whole board.
What to Ask When Evaluating HOA Management Companies
Price is not the only factor
The first question most boards ask when it comes to selecting a professional management company is ‘How much does it cost?’. And while competitive pricing is one important factor, it’s not the ONLY thing your board should consider when evaluating management companies. Why? Because all association management companies are not created equal! A good management company may even cover the cost of their services in savings they bring to the community. This is where your RFP and careful research comes into play.
The Management Team
Your community will be relying on the management team to take on all of the work to keep the community running in tip top shape. So it’s important to understand the makeup of your management team. Will it be one manager doing everything? Will you have a back-office accounting team? How will community vendors and employees be managed? How will calls from homeowners be handled?
Most management companies use a range of software applications to assist in managing your community. It may not mean much to your board to learn the names of the technologies the management company uses, but you do need an understanding of the capabilities of the technology. Will the board have a way to log in to view the community’s status? How will homeowners make payments? Will the management company provide a website for the community? How will mass communications to homeowners be handled?
Because the management company works at the direction of the Board, the relationship needs to be tight, and communication between the management company and the board, as well as the homeowners needs to be frequent. Find out what your prospective management companies’ communication policies are. Will they attend all meetings of the board and designated committees? Will they provide frequent reporting to show the actions they are taking on the financial side? How frequently will they be on the property to handle issues?
Gotcha’s to Watch Out For When Evaluating HOA Management Companies
Decrypt the Fee Structure
Take the time to be sure you really understand the prospective management company’s fee structure. Most management companies charge a base rate, with a flexible fee addendum for items that fall outside of the contract. These addendum items are generally pretty simple, such as passing on the charge for postage on any letters they send on the community’s behalf. But sometimes, these small items can balloon up.
For example, they may charge a handling fee for every item they mail, in addition to the postage. These ‘nickel and dime’ line items can add up fast, and you may find yourself paying 2-3 times the base management rate each month, so it’s important the board is clear on the fee structure before you sign a contract.
Many management companies supplement their income by partnering with 3rd party vendors, or developing an in-house version of common services, such as maintenance or lawn care. There is nothing innately wrong with this practice, it generally means the management company can guarantee a certain level of services, and pass some savings on to you. However, it gets tricky when the management company REQUIRES their clients to work with specific vendors, or is squirrely about disclosing the fact that they have ownership in a company.
One example of this we’ve seen is with insurance. The management company steered the community to a specific insurance agency without disclosing their ownership stake in it. Not only did the community pay higher rates for their policies, when they attempted to change management companies, they discovered a whole slew of items were tangled up into that management contract.
Regardless of whether your management company offers a service, your community should always seek competitive bids to find the best match for you… much the same process as you are following here for selecting the management company itself.
Choosing a professional management company for your community association is a big decision with big consequences if you make the wrong choice. Take the time to do your due diligence so you don’t get caught a year or two down the road when you realize you made the wrong choice.
If your Utah community is looking for a professional management company, we would be honored to have the opportunity to respond to your request for proposal. HOA Strategies works with your board to develop and implement a strategy to create a successful future for your Utah Condo or HOA. Let’s talk today and see if HOA Strategies is the right fit for your association. Request a proposal