The Pros and Cons of a Self-managed HOA
June 22, 2023
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A Guide to Self-Managed HOAs
When it comes to HOAs, it can be difficult to decide between keeping the management in-house or hiring a property management company.
A self-managed HOA relies on board members to oversee the community.
This requires a lot of time and effort.
Thus, it’s important to weigh the pros and cons of this management method.
An HOA management company may be a better option for certain communities.
In this article, though, we’re going to focus specifically on the benefits and downsides of a self-managed HOA.
Let’s start with the benefits of a self-managed HOA.
Money is obviously a critical factor. Community association management companies are a substantial operating expense. And homeowners must pay higher fees to cover the cost of their services.
HOAs, on the other hand, prioritize breaking even and keeping a reserve fund large enough to cover projects that the community may need in the future. Often, managers are volunteers and turning a profit isn’t the major focus.
Self-managed HOAs encourage community members to band together and achieve common goals. Thus, most self-managed HOAs lead to closer communities than HOAs run by professional companies. HOA management companies are typically more focused on profits and rules. Self-managed HOAs focus on the community and people.
When people are more involved in what’s going on, they tend to form closer relationships. This leads to an enhanced sense of community. Things like negotiating projects, cleaning up debris, voting on bylaws, and resolving disputes can strengthen a community’s bond.
Most of the time, community-run HOAs set up fewer rules than those run by professional management organizations. Why? Because outside companies prioritize property prices and traditional practices. Examples of these kinds of rules include:
- Limitations on where cars can park or how many can sit in a driveway
- Restrictions on subletting and short-term rentals
- Limitations on animal breeds and pets per household
- Rules determining who homeowners can sell properties to
- Rules on landscaping and paint colors
Strict rules and a profit focus can negatively impact community morale and homeowners’ patience which often leads to turnover.
Self-managed HOAs tend to be more flexible and in tune with homeowners’ desires because of their frequent interaction.
Self-managed HOAs allow communities to set rules and figure out how to enforce them. As we mentioned above, rules set up by communities generally work better for homeowners.
This approach also helps the board address issues with nuance to better serve community members. Closer relationships often help bring about more equitable resolutions to problems. When a management company gets involved in issues, board members often struggle to reduce tension between upset residents and demanding managers. This can lead to community-wide tension and on-going issues for everyone.
Lastly, community members can put their skills to more direct use when an HOA governs itself. Because profit isn’t the main goal, people can act in ways that best benefit the community.
Now that we’ve looked at some positive aspects of self-managed HOAs, it’s time to look at the other side of the coin.
The first problem with self-managed HOAs is a lack of management experience. A professional management company brings a lot of experience and expertise. They know what it takes to manage an HOA. They have the skills and tools to keep things running. Some states like Florida even require continuing education classes every year for professional community association managers.
Certain HOAs have volunteer retirees or homeowners who stay at home. That said, most HOA volunteers must fulfill their duties while working full-time and juggling family obligations. Thus, self-managed HOAs can suffer from disorganized management. Professional management companies have the advantage of being fully invested in the job at hand.
Furthermore, self-managed communities may struggle with outdated bookkeeping practices (I.e., excel spreadsheets, handwritten records, software not meant for property management).
Something that often helps self-managed HOAs overcome this issue is exceptional software. If a self-managed HOA finds the right HOA management software, this can alleviate many problems we’ve talked about and save valuable time.
Different laws regulate HOAs depending on the location of the HOA. When people purchase property in an HOA, they become accountable to any of these laws. And HOA leadership must follow certain guidelines when enforcing regulations.
Some laws relate to the formation of HOAs, the development of bylaws, and necessary documentation. It can be difficult for a self-managed HOA to navigate these tricky legal waters. Professional management companies, on the other hand, tend to be very familiar with the legalities of HOAs.
A self-managed HOA can mitigate risk by keeping a lawyer on retainer. This is often a wise idea because legal matters often require someone extremely familiar with the ins and outs of the law.
Strengths can often turn into weaknesses, and this remains the case with self-managed HOAs. Because self-managed HOAs foster closer relationships between members and a greater sense of familiarity between those members, this can sometimes cause ongoing issues in communities. Community members may use the HOA to compete or get back at others in the community. Rivalries on the board may impact peoples’ decision-making and then impact the entire community.
Professional management companies won’t have the personal investment that may lead to a lot of these emotional conflicts. They may have a more business first approach.
Decreased Property Value
Potential homebuyers don’t always trust self-managed HOAs. The board has a lot of power in these communities and that can scare potential buyers.
Beyond that, a disorganized HOA can make someone’s life ten times more difficult than it needs to be. HOAs that take absurd time to return calls or make decisions about large repairs can make it harder for current members to sell properties.
Thus, it’s important that HOAs are well-managed no matter who’s in charge. The negative impact of a poorly managed HOA is substantial and widespread.
As with anything in life, there are pros and cons to self-managed HOAs. Some of the cons, though, can certainly be mitigated by sound decisions and responsible management.
If you’re thinking about managing an HOA or moving into a community like this, it’s important to research the benefits and downsides. Articles like this one will help you make the best decision possible.