One of the biggest challenges facing HOA’s is collecting funds from delinquent homeowners. If you are like most HOA’s regardless of your location, owner profile, or age of construction you probably have been affected by the nationwide economic downturn. HOA’s unlike some businesses only have one source of income, Homeowner Dues. Most budgets are developed barely making operating expenses with hopefully a reserve contribution for future repairs. Without everyone paying their fair share, the Board is faced with few choices, most of which are unpopular, impractical and sometimes, because of voting requirements, impossible.
Obviously, the best solution is collect what is owed.
Since the beginning of HOA collections there have been few if any choices. Pay a law firm upfront for collection services, hoping to recoup attorneys fees along with the past due assessments. HERE’s the problem! In this economic environment, foreclosures are at epidemic proportions. In years past there may have been funds left at the Trustee’s sale to at least recoup some of the owned assessments and attorney fees. In this market, not a chance, and foreclosure is usually followed closely by personal bankruptcy by the homeowner, removing any chance of recouping past due amounts. Not only have you lost the past due assessments, you have lost all the up front legal fees you have invested in the collection process. In some cases this is equal to or more than the actual assessments themselves.
There is a better way!
APM recognized very early, as the market changed, that collections might become the make-it or break-it scenario for many of our clients. We immediately began investigating ways to streamline the process in-house as well as developing aggressive water restriction programs that can be implemented even before the legal process begins. The better way! Partnering with industry professionals several programs have been developed to offer various types of cost saving collections and one of the most successful and widely used is:
Contingency Based Collections = No Up Front Cost to the HOA
This is not percentage (%) based collections The attorneys are going after 100% of what is owed to the HOA and their fees are added to these amounts. What an incentive for the law firm to not only aggressively pursue, but now their money is attached directly to their performance. The HOA is no longer the income source, the homeowner is. When they collect, you collect.
We are not saying that you can get blood from a turnip. Money will still be lost via the foreclosure process and bankruptcy, but now it will just be the past due assessments and the loss will be shared by the law firm. Do you think this makes them perform better? We certainly do!