HOA management companies play a crucial role in the success of homeowners associations. Unfortunately, there are many misconceptions and little-known facts about how these companies operate. Board members should familiarize themselves with these to better understand and leverage their position.
What are HOA Management Companies?
An HOA management company is a company that professionally manages homeowners associations. The HOA board is responsible for hiring an HOA management company after going through a rigorous selection process. Although fee structures can vary, an HOA management company typically charges a rate for its services.
Common Myths About HOA Management Companies
Many HOA boards feel apprehensive about hiring a professional management company to assist with day-to-day operations. This is because there are a lot of misconceptions surrounding management companies. It is important to clear up these misconceptions so that board members can better understand how these companies operate.
Here are the common myths about HOA community management companies.
Myth 1: HOA Management Companies Control Everything
Perhaps the most common misconception about HOA management companies is that they control everything. Some mistakenly believe that management companies receive all the power and authority once they are brought on, essentially reducing the board to figureheads.
This is far from the truth. When an HOA board hires a management company, they are not handing over the reins and letting the company decide on all matters. The management company still acts on the board’s direction. The company does not receive unilateral power.
Sure, the HOA board may give the management company some authority, but the final say will still usually come from the board. Communities still rely on volunteer homeowners, who are actual stakeholders, to make decisions in the best interest of the association.
Myth 2: Board Members Don’t Have to do Anything Anymore
Although it is true that HOA management companies can alleviate some of the board’s burden, it doesn’t mean that board members are left with nothing to do. Management companies typically take over administrative work. They also assist the board with collections, financial management, reserve planning, maintenance, and legal compliance.
While the management company shoulders a lot of responsibility, the HOA board is still in charge of decision-making. The management company can’t hire a vendor, proceed with a project, or raise dues without the board’s green light. The HOA board is still responsible for general oversight and making sure the management company performs its duties well.
Myth 3: All HOA Management Companies Offer the Same Services
Although HOA management companies can seem similar, their services are not always the same. Many management companies offer services that others don’t.
Some offer full-service management, which involves on-site appearances and participation. Meanwhile, others offer remote management services, helping communities from a distance. There are also companies that only offer financial services or administrative support.
For this very reason, board members must first evaluate the needs of their HOA before deciding on a management company. That way, they can avoid wasting time on companies that don’t offer what they’re looking for.
Myth 4: HOAs Can’t Negotiate Fees and Contract Terms
It’s no secret that management companies charge a price for their services. Many HOA boards don’t know that these prices and fees are negotiable. Some are afraid about speaking up and asking for a discount, while others are simply unaware that there’s room to bargain.
Apart from management fees, contract terms can also be negotiated. Board members can ask for certain adjustments to the agreement to better suit their needs. Management companies are always open to meeting each other halfway.
Myth 5: Vendor Relationships Don’t Influence Costs
Another thing about HOA management companies is that their preferred vendors may impact pricing and quality. Some HOA boards think that prices tend to be fixed because the company already has an established network of vendors and suppliers. The truth is that vendor relationships do influence costs and even the quality of work.
Industry Secrets HOA Boards Should be Aware Of
Here are some industry secrets that HOA management companies might not share.
Secret 1: Hidden Fees and Additional Charges
Some HOA management companies won’t disclose additional charges for certain services. For example, a company may have hidden fees for document preparation or emergency calls. There are also companies that charge extra fees for on-site visitations or board meeting participation.
To avoid these hidden costs, board members must ask candidates about any additional fees they may have. It is equally important to review the management contract before signing. The contract should outline any additional charges for exclusive services.
Secret 2: Commission Structures With Vendors
It is common practice to earn commission from referrals, but many HOA boards don’t know that management companies do this, too. Some companies have existing agreements with vendors to receive a percentage of sales for successful referrals.
It is important for HOA boards to be aware of this as their management company might not be recommending a vendor based on merit but because of what they stand to gain. Board members should speak to their management about this and clarify if they have similar commission structures.
Secret 3: Staff Turnover and Experience Levels
Everything might look swell from the outside, but some management companies are barely keeping themselves above water due to high staff turnover. A high turnover rate can severely affect the quality and continuity of service. If board members notice that their managers seem to be changing often, they should start asking questions.
Secret 4: Not All Managers are Certified or Experienced
Management companies hire HOA managers and assign them to handle specific communities. Unfortunately, not all managers are made equal. Some have less experience than others and don’t possess the same certifications.
Board members should manage their expectations and understand they might not always get veterans in the business. To ensure quality, the HOA board can ask the company about the types of certifications their managers have. Certified Manager of Community Associations (CMCA) and Professional Community Association Manager (PCAM) are good examples.
Homeowners Association Management Qualities to Look For
When hiring HOA management companies, boards should take the following things into consideration:
1. Experience and Certifications
It is important to have managers who possess sufficient experience and relevant certifications. These help ensure that managers can take on any problem that they encounter. Board members can verify these qualifications during the interview process.
2. Transparent Fee Structure
Board members should emphasize the need for clear and detailed contracts without any hidden fees. All fees should be discussed and presented upfront. There is no room for surprise costs, especially for associations that run on a tight budget.
3. Customized Service Plans
It is best for HOA boards to choose companies that tailor their services to suit the needs of their clients. Not all communities have the same needs, structure, and amenities, so a one-size-fits-all approach to management won’t cut it.
4. Strong Communication and Responsiveness
4. Strong Communication and ResponsivenessBoard members should look for HOA management companies that prioritize effective communication. Communication is the key to a successful relationship and operations. If a company isn’t responsive enough, it can cause significant delays and problems.
A Push for Truth
There are a lot of myths and secrets that shroud HOA management companies, making it difficult for boards to make a decision. Hopefully, this would have cleared up most of these misconceptions. Board members should also make a habit out of asking questions and not be afraid to seek clarification from their management.
Graham Management offers exceptional HOA management services to Houston communities. Call us today at (713) 334-8000, request a proposal, or contact us online to learn more.