Blog Posts

Budgeting and Forecasting

How to Use Historical Data to Create This Year’s Budget Imagine being able to gaze into a crystal ball, where your association Board could see the future clearly and accurately predict next fiscal year’s income and expenses. Well, there’s no crystal ball. But the next-best option is carefully interpreting your association’s historical data so you can create a fairly accurate model for the coming year’s budget. With a little practice and just a few tips from WPM’s President of Association Management, Barry Yatovitz, you, too, can learn to “see the future.” And it’s a lot less expensive than hiring a fortune teller. Forecasting 101 Predicting the future begins with a thorough understanding of the past. Yatovitz recommends that associations dig deep into past financial reports to understand not only what happened, but analyze the numbers to get the full story of why it happened. “Boards should review the details behind each line item on the financial statements to understand exactly what went into each account. Sometimes, these details will remind you of events you’ve long-since forgotten. Sometimes, you’ll find they’ve been miscoded and should be reclassified, so as not to skew your future expectations. Some larger expenses may even warrant establishing a new expense line on the general ledger, so you can more accurately anticipate large recurring expenses or isolate non-recurring expenses from subsequent budgets.” And it’s important to interpret historical data in the context of current-year information. For example, a line item expense for “elevator repairs” might be decreased or temporarily removed, if the elevator was recently modernized and the elevator has been placed under warranty. But don’t forget to put a note in the budget to remind yourself to reinstate that line item when the warranty is set to expire, or when repairs might become necessary again. Planning for Variables and Contract Changes Yatovitz also warns associations to carefully plan for variable expenses. “It’s important to analyze trends over several of the previous years to understand why a line item might be trending up or down. Budgeting for a variable expense like snow removal might require making an educated guess (especially in the context of the mid-Atlantic region’s unpredictable weather) despite years of preexisting data. But a careful analysis of historical trends helps justify the proposed budget number.” Yatovitz also recommends that associations review their vendor contracts well in advance of their budget planning process. “Look at all contracts and determine if they are accurate for the upcoming year. Determine with the Board if there is a need to bid out any of the current contracts, and if there is, initiate the request for proposal process as soon as possible. Initiating your contract reviews well in advance of the budgeting process helps to ensure your Board has enough time to review competitive bids and investigate the suppliers. Moreover, the incoming proposals will provide more current cost ranges for your contracted services, and your budget can reflect those updated rates.” Building a Budget After you’ve analyzed historical trends and accounted for variables and contract changes, you can begin to build your budget. Here again, Yatovitz offers some useful suggestions… “Start with a simple litmus test for each line item: ‘In light of everything we’ve learned, does this number seem reasonable?’ Next, review your association’s reserve study to find the recommended reserve contribution for the annual budget, and be sure to account for a sufficient contribution to keep your association on track with the study’s recommendation. (The contribution amount and the reserve study’s recommended year-end reserve balance will drive your reserve contribution.) Last, and only after all of the expenses have been determined, your amount of income needed figure will become clear.” Above all, Yatovitz advises associations to use common sense when planning their budgets. “If a line item is not easily explainable and justifiable to a Homeowner who is not on the Board, some additional analysis may be needed. Remember that a budget is a guide committed to paper, not an unyielding document carved in stone. We’re trying to tell the story of the Association through the budget.” With careful planning and a little bit of hard work, your association’s budget should keep your finances on track, even without that crystal ball.

Three Things Your Condo or HOA Should Look for in a Property Management Firm

Selecting a good property management firm is one of the most important decisions that your condo or homeowner association will make. Your new firm will be responsible for managing everything from daily tasks, like maintenance and assessment billing, to long-term strategy considerations, such as budgeting and capital improvements. As surely as a complacent firm can detract from the appearance and operation of your property, a proactive firm can add value, leading to satisfied Boards, owners and tenants. So given the importance of this crucial decision, what should you look for, when shopping for a property management firm? WPM Vice President and Director of Business Development James Dahlgren offers advice about three of the most important things your new firm should offer. According to Dahlgren, your property management firm should: Be present and proactive. Walking the property allows managers to get the true picture of how the property is operating. It also puts the onus on the property manager to make adjustments and repairs, instead of merely waiting and reacting to complaints from the Board or owners. “You can’t manage from behind a desk,” explains Dahlgren. “Managers need to do regular walk-throughs in order to get a real sense of what is going right or wrong with the property. Properties are tangible assets that need to be seen to be fully understood. If renovations or repairs are taking place, a property manager ought to be a regular presence to ensure that the association is receiving the full benefits of the contracted service. That’s why our managers are ‘out more than in.’ Technology allows them to stay connected while being physically onsite at properties. This is crucial.” Leverage Technology. Good management firms utilize existing technologies that allow them to push data, financial reporting and other news to residents and association boards in real time. “WPM uses the web platform SenEarthCo,” says Dahlgren “It’s a helpful portal that enables owners and property managers to communicate quickly about property information. For example, boards can receive real-time payment status on a resident’s account and have access to financial statements. This technology helps boards to make the most of their volunteer time.” Provide accurate and timely financial reporting. Meticulous and timely financial reporting is imperative for several reasons: It enables associations to collect dues on schedule. It gives boards the full financial picture so that they are armed to make good decisions for the community. It helps associations understand the short- and long-term needs of a property, to guide its strategy and budgeting. “At WPM, we take our fiduciary responsibility to our properties very seriously,” says Dahlgren. “Our accounting team boasts extensive experience and training. And as we manage many institutional clients, which require the highest level of financial statements, that standard of excellence translates to our clients across the board.”

The Purpose of a Board Meeting

Community Associations are far more likely to succeed if their Board meetings are organized and productive. But how do you ensure that your Association is making the most of its Board members’ time? Below is a discussion about the purpose of a board meeting, as well as some tips for making sure your Association’s Board is optimizing each meeting. According to David Grant, Community Association Manager for WPM Real Estate Management, the primary purpose of a Board meeting is to review important issues and for the Board to make decisions on behalf of the community. “At any given time,” says Grant, “the Board faces a number of decisions that affect the well-being of the entire community. These may include entering into contracts with vendors, addressing owner complaints, financial planning and more.” The Board’s job, Grant stresses, is to review the most pressing matters and make decisions that benefit the Association as a whole. This brings up an important consideration: how does the Board decide which matters are the most urgent? In many cases, Grant suggests, the key to a successful Board meeting is pre-planning. Effective Board leadership teams may have several meetings or discussions about the Board meeting agenda before convening the entire Board. This carefully planned agenda then becomes the road map for the meeting, ensuring that members do not stray off topic, discussing less urgent matters. And yet, despite the best of planning, discussions often veer off course. Sometimes less urgent matters gather the Board’s collective interest more than the pressing matters at hand. So how does a proactive Board Officer get the meeting back on track? Once again, the answer lies in a carefully planned agenda. The Board Chair should feel no reluctance to interrupting the conversation and requesting that it continue off line or in a future meeting. Finally, there is one other trait that often separates effective Board meetings from ineffective ones: civility. The overall tone of the meeting ought to be one of mutual respect and professionalism as well as keeping in mind that the Board meeting is a business meeting. Disagreement among Board Members is expected and even helpful for arriving at the best outcomes for the community. But disagreements among members must never become discordant. Remember, the Board of an association often comprises neighbors and friends. Civil Board meetings are not only imperative for smooth operation, they also set a tone of mutual respect that permeates the entire community.

Resale Disclosure Packages

Are you selling or buying a home that is part of a community governed by a Condominium or Homeowners Association? If so, you will need a resale disclosure package. Read on to learn more about this important set of documents. Resale disclosure packages are essential in the sale of any property governed by a Homeowner or Condominium Association (“Association”). The seller is legally responsible per the Maryland Condominium and Homeowners Association Acts to provide the package to the potential buyer, and the Association is required to produce it. More specifically, the Acts require the seller to purchase and provide a Resale Disclosure Package to any potential buyer, no later than 15 days prior to closing if the unit is in a Condo Association and 20 days prior to closing for a Homeowners Association. The resale package is a safeguard that protects both the buyer and seller. This crucial package provides all of the documentation buyers will need in order to fully understand their obligations to the Association, and the Association’s responsibilities to them. The resale packet should disclose the Association’s: Financial position. The packet will include a current budget, balance statement, income and expense statements, and disclosure of capital reserves. Amenities. Some Associations offer a unique set of community benefits for residents, such as maintained common areas and may also include amenities such as a clubhouse and pool or play areas, etc. The resale packet introduces the buyer to the value that their Association provides to the community. Pending litigation or actions. The Association is legally responsible to disclose to the buyer any building or health code violations, pending or existing lawsuits against the Association or any special assessments that the Association has passed. Governing documents. The Association’s governing documents outline all community rules and regulations, such as number and type of pets allowed and parking guidelines and restrictions. It also details the community’s architectural guidelines. This informs the new buyer what they can and cannot do with their property. For example, the governing documents will stipulate when the homeowner needs to submit an Architectural Modification Form for approval by the Board of Directors for any exterior changes. Previous Owner Violations. The resale disclosure packet provides information that is specific to the unit being sold. It will reveal if there are any existing exterior violations against the unit or property and detail what needs to be done to correct these violations. The package also outlines the unit’s financial information. This is to ensure that the buyer is buying a property with a clean financial slate and will not be responsible for anything owed to the Association from the previous owner. The resale disclosure package is not static, but must be updated for each new potential owner because: the monthly financial records for both the Association and the unit change on a monthly basis; the Association’s budget may have changed, which means that the unit’s fees would have increased or decreased; the governing documents may have been amended; and the unit may have recently become out of compliance with the Association’s guidelines and the newly reported violation would need to be disclosed. Each resale package must be meticulously prepared typically by the management company on behalf of your homeowner or condominium association. It’s an important service that benefits and protects both the buyer and the seller.

Are You a Snowbird?

Tips for Winterizing Your Home Every year, as autumn’s Technicolor brilliance fades into winter’s gray and white, a great migration occurs: “Snowbirds” head south for the winter! And if you’re among these sun-seeking (mostly) retirees, you know that preparing your home for its “hibernation” takes preparation. Here are some tips for winterizing your home, so that it can weather the cold months ahead and welcome you back again, in the spring. Protect Your Pipes WPM President of Commercial Management and Construction Services, Mike Klein, advises you to completely turn off all water-using systems. This includes the washing machine, dishwasher, hot water tank and ice maker. You may also consider having your water supply completely turned off. If, however, you opt to keep your water supply on, be certain to leave your furnace on so that your home’s plumbing remains relatively warm to keep pipes from freezing and bursting. “I strongly advise residents to set their home’s temperature no lower than 60 degrees,” says Klein. “I have experience with many residents who set the thermostat at 40 or 50 degrees, thinking that they were saving money and energy. Their homes’ pipes ended up getting too cold and burst, causing a great deal of damage.” Other safeguards to consider for your plumbing are a water flow sensor and a low-temperature sensor. These sensors can relay information to a 24-hour alarm center or can even be monitored right on your smart phone. An alarm notifies you about freezing pipes in time to do something about them, before the problem becomes far more costly. Protect Your Home A vacant home is a vulnerable home. Burglars and vandals are keen to the signs that show that no one is home. That’s why it’s key to make sure that your home looks continuously occupied. First, make sure to address obvious signs that the home is vacant: stop all mail and newspaper deliveries. Contract with a snow removal company to clear your sidewalk and driveway whenever it snows. Klein also suggests programming several of your interior house lights with five-position auto-timers, to turn lights on and off throughout the day, giving your home the illusion of continuous residence. A good alarm system and sturdy door dead bolts are also essential for safeguarding an unoccupied home. Before you leave town, be certain to test that all alarm systems are functioning and have been activated. Perform Routine Maintenance Murphy’s Law states that anything that can go wrong, will go wrong. That’s a good adage to remember when preparing to leave your home! Help your home avoid unforeseen issues by proactively performing routine maintenance. Have your furnace inspected and serviced before you leave. Ensure that your electrical system is functioning properly. Remove dead trees or low-hanging branches that are near your home. Clear the gutters and drains of debris to reduce snow and ice build-up. Replace the batteries on all smoke detectors. If you’ve been putting off small house projects, tackle them before you leave for the winter. Prepare for Emergencies No matter how carefully you protect and maintain your home, emergencies may still arise. These can range from catastrophes—such as fires, burst water pipes, flooding, fallen trees and natural weather disasters—to less urgent mishaps. Klein advises homeowners to designate a trusted friend or neighbor, or to hire a property management company, to be your onsite contact. Give them access to your home, so that they can regularly monitor its heating, electrical and water systems. With their help and your careful preparation, your home will be waiting for you, as you left it, when you migrate northward once again.

What Does it Mean to be a Board Member?

So you’ve just been elected to serve on the board of your community association—congratulations! You are about to embark on an exciting journey. You have been entrusted with a lot of responsibility. (To learn more about those responsibilities, take a look at WPM Blog “ Responsibilities of a Board Member ”.) And you have also been given an opportunity make your voice heard and have a valuable impact in your community. It’s a thrilling prospect. So what does it mean to be a board member? Beyond the list of “to-do’s,” what are the key ways that joining your community’s board empower you to make a difference where you live? To answer those questions and more, let’s take a look at the four top goals of community board members: Goal #1: Protecting and enhancing property value The ultimate goal of a community association is to add value to the homeowners’ investment: their property and its surroundings. All of the remaining goals work together to achieve this aim. Goal #2: Providing services and amenities Community services and amenities add value for all members. Homeowners who could never afford on their own an Olympic-sized pool, a private secured gate or acres of lush, green fields and other common areas can take advantage of these amenities, thanks to their community association. And it’s your job to oversee the maintenance and beautification of these amenities. Goal #3: Respecting and hearing the collective rights and interests of homeowners An HOA or community association is the most local form of government. As a board member, you were elected by your peers to serve their interests which, given the fact that you also live in the community you’re representing, might very well mirror your own interests. It is your job to keep an ear to the ground and solicit and welcome feedback from other owners. You are their advocate. Goal #4: Cultivating a sense of community One of the most impactful and rewarding ways that you can make a difference is by fostering a sense of community among homeowners. Neighborhoods in which individual owners experience a deep sense of belonging do a better job keeping existing and attracting new homeowners. When more people choose to stay put, that means that there are fewer vacant homes available for the people clamoring to get in. And as the law of supply and demand dictates, this drives up the prices of available properties. So a sense of community is not just a nice thing to have, it also supports Goal #1: adding value.