Every community association reaches a point where they need to decide whether to soldier on with self-management or to hire professional help. Such a decision can be difficult to make, especially when you don’t know the difference between self management vs professional HOA management. Learn the pros and cons of each option below.
In this article:
Self Management vs Professional HOA Management
Choosing an HOA property management company is without a doubt one of the most crucial decisions that a board of directors can make for their association. Some states now mandate that associations have a property manager, with a few even going as far as to require that the property manager meet a certain certification.
In almost all cases, association managers guide and inform the board of directors which they serve. As we will see, the specific roles that come with managing a community can change with each scenario, but the manager always serves to assist the board.
What Is a Self-Managed HOA?
Self-managed community associations utilize volunteers — specifically, the board of directors — to do all the work. Everything from the management of the association’s daily routine tasks to the enforcement of rules is done by volunteers from within the association.
This is obviously much cheaper in the sense that the association does not pay a management company. The board members act as managers working for free.
However, board members often work day jobs and have a limited amount of resources to dedicate to the association. The responsibilities that come along with this type of association management also tend to cause burnout among officers of the organization. For this reason, many HOAs turn to professional services.
What Is Professional HOA Management?
With professional homeowners association management, the board hands over most, if not all, HOA duties and responsibilities to a third-party company. This much-needed assistance comes with a cost, though. Associations will have to pay their management company in exchange for performing crucial services. Meanwhile, for homeowners, this will mean higher assessment dues each month.
However, considering the experience and expertise that HOA management companies bring with them, it’s a worthwhile expense. It’s something that can help your community thrive and grow.
But, what does an HOA professional management company do? Though the list of services will depend on your agreement with an HOA management company, here is a list of their duties and responsibilities.
A large part of an HOA’s day-to-day operations is administrative work. These tasks are often tedious and time-consuming but are essential nonetheless.
With a professional HOA management company handling administrative services, the board members can focus on more important community matters. Administrative services may include:
- Answering phone calls, texts, and emails from board members, homeowners, and vendors
- Follow-up on homeowner questions, issues, and concerns
- Maintain HOA database for homeowners and vendors
- Enforce HOA rules and regulations
- Send invoices, reminders, and newsletters to homeowners
- Process violations, fines, late charges
- Collect architectural review applications and forward them to the board
- Maintain the HOA website and homeowner portal
- Coordinate HOA common area schedules and reservations
Another benefit of having professional HOA management is that they can guide the board members on the finer and often more complex aspects of community association management. Board assistance may include:
- Scheduling board meetings and preparing board meeting agendas
- Attend board meetings and follow-up on action items on the agenda
- Prepare and distribute board meeting minutes
- Provide board members with financial documents, management reports, and other documents
- Advise board members on financial, legal, policy, and insurance matters
- Acts as a liaison to the HOA board
- Train new board members
- Oversee annual board meeting elections
A major responsibility of the board is to ensure the financial stability of the association. This can be extremely difficult if your board members don’t have experience with financial management. Thus, it helps to have an experienced and knowledgeable management team handling financial tasks, including:
- Maintaining financial records (account ledgers, balance sheets, bank reconciliations, income statements, etc.)
- Manage HOA bank accounts, reserves, incomes, and expenditures
- Prepare annual HOA budget, tax returns, audit reports, and other financial documents
- Schedule and coordinate reserve study
- Collect HOA dues and monitor delinquencies
- Ensure proper insurance coverage for HOA
To preserve or enhance property values, professional HOA management companies will also handle the maintenance needs of your association. Essential property maintenance tasks include:
- Create maintenance plans and ensure that they are being followed
- Manage maintenance requests and work orders
- Properly delegate maintenance tasks to the responsible parties
- Collect bid proposals and screen new vendors
- Ensure that vendors are properly licensed and insured
- Oversee work performed by vendors or third-party service providers
- Conduct routine inspections of common areas or shared assets
There are some services that associations may need from time to time, which professional HOA management companies can readily provide. These may include:
- Handle HOA disagreements through dispute resolution, mediation, or other legal means
- Serve as legal representation for the HOA board in case of lawsuits
- Develop risk management and disaster management plans for HOA
- Plan recreational activities, fundraisers, and other social events
- Develop the HOA website and manage online accounts
As you can see, a professional HOA management company can handle a large scope of responsibilities. Keep in mind, though, that despite having the authority to perform these different tasks, they do not make decisions for the HOA. They may compile all the necessary documents or information, but it is still the HOA board that decides on behalf of the association.
Types of Professional HOA Management
When it comes to professional HOA management, it’s important to choose the right type for your community. Evaluate your needs and what you require from a management service. It’s also important to consider your association’s budget and whether or not you can accommodate such an expense. From there, you can make a decision.
There are three general types of professional HOA management. Let’s break them down one by one.
1. In-House Management
Some associations with many members may choose to retain a property manager directly, meaning the association hires the manager as an employee. This is known as in-house management.
In-house management is cheaper than paying for full-service management from a professional company. An in-house manager can also be a volunteer. However, in-house management can have its disadvantages.
If your manager goes on vacation or gets sick, who will step up to fulfill this person’s responsibilities? Also, who is the manager accountable to? With all of the headlines in the news about in-house managers taking money from their associations, one must act with caution.
2. Financial-Only Management
The next step up from in-house management is financial-only management, where the association’s board of directors makes the big decisions but leaves the financial functions to a management company.
Tasks such as pulling reports for financials, collecting and processing HOA dues, and cutting checks to pay bills are all handled by the financial management company. They can also offer guidance on decisions and direction for a board of directors.
3. Full-Service HOA Management
Full-service HOA management removes as much of the burden of the board of directors as possible, making it the most expensive type of management. However, full-service management can also help reduce expenses through better budgeting and more streamlined processes.
With full-service management, the management company does all the same things they would under financial management, plus much more. They usually help enforce violations, coordinate with vendors to complete maintenance issues, and help to establish reserve funds. As an added bonus, a professional HOA management company has a check and balances system that strongly inhibits theft from the association.
If the community wants, the management company will usually perform drive-by inspections to ensure compliance with the association’s covenants. Each association is also assigned a community manager who works directly with the board of directors and attends annual and regular board meetings. But, just as important is the experience and guidance that a professional community manager can offer.
Self-Managed vs Full-Service HOA Management: Which One Is Better?
Now that you know the difference between self management vs professional HOA management, you can choose whether to stick to the former or make the switch to the latter.
The decision normally isn’t an easy one, especially since change is often scary. Additionally, every community has different needs, so there is no right answer.
To help you make a choice, here are the pros and cons of self-management.
The Pros of Self-Management
- The HOA board has full control over the association and decisions
- Saves money in the short run
The Cons of Self-Management
- Board members often lack the time, causing burnout
- Not all board members have the necessary skills and expertise, which leads to inadequate or inefficient work
- Limited resources
- Not much experience
Meanwhile, here are the pros and cons of HOA management companies.
The Pros of Hiring a Full-Service HOA Management Company
- The HOA board can learn the best management practices from professionals
- Frees up time for the board to focus on more important issues
- A team of highly skilled experts to do the job
- All-around work, including maintenance, financial management, collections, insurance, homeowner communication, vendor relations, payments, and the like
- Access to a wide range of resources, connections, and professionals such as lawyers and accountants
- An unbiased third party can work as a mediator of conflicts and deters fraud
The Cons of Hiring a Full-Service HOA Management Company
- The HOA board doesn’t have full control over the association and decisions
- More expensive in the short run
Self Management vs Management Company
Self-management usually works for smaller communities because the size makes them more manageable. Larger communities, on the other hand, typically call for expert hands due to increased workloads.
Every association is different, though, which means there’s no blanket answer to whether or not you should hire an HOA management company.
However, when deciding between self management vs professional HOA management, remember to take the community’s needs into account. After all, the main goal of an HOA is to maintain the community and its property values.