Communicating Assessment Increases

One of the most beloved characters in the Star Trek franchise is Mr. Spock. As a Vulcan, Spock had a logical brain that was able to separate emotion from fact. This led to him being able to stay focused in highly emotional situations and make decisions based on all of the data he had collected.

But Spock was also part human. His logical, rational Vulcan side was pitted against a passionate, emotional human side – ever trying to find a balance.

Homeowners and Board members face a similar struggle, especially when faced with a volatile decision like an assessment increase.

Homeowners Don’t Realize They Are Shareholders Too

As a manager or board member, how many times have you been confronted by a disgruntled homeowner who was upset with one of the Board’s decisions? Often, this upset is not based on fact, but an emotional reaction.  Whether they’re angry about increased assessments or frustrated about how the association budgets its funds, their passionate, emotional reactions can be hard to reason with.

Unfortunately, many who buy into a community association don’t fully understand that along with a new home, they are also buying into a business. And that business (the community association) has assets (like roofs, roads, elevators, and HVAC systems) that need to be maintained in perpetuity. And that part of their job as a shareholder is to make sure the business has the funds to take care of its assets.  (By the way, this is the reason community associations exist in the first place.)

Homeowners React Negatively When They Lack Information

Homeowner dissatisfaction is frequently based on inaccurate information. Not only do homeowners not understand where their money is going, they also don’t understand why – leading to emotional responses that cause a lot of heartburn.

Homeowners may assume, because the association has $200,000 in reserves that it is well-funded enough to weather any storm. Or they might think a condo community will have no problem paying for expensive repairs simply because of its large operating budget.

So when the elevators fail in the condo and it turns out nothing was saved for that, or the roof needs replacement immediately, but it actually costs 2 million dollars, homeowners are caught off-guard. Then they learn that now every homeowner is getting a special assessment for more than the cost of a new car.

Homeowners need greater transparency into the community’s financial health in order to correctly be able to assess the community’s financial position. It’s the same level of financial transparency that board members need to be able to make accurate decisions on the community’s behalf.

Data Quality Matters: Garbage In, Garbage Out.

It all starts with the quality of your data. If your board is making decisions based on a reserve study that has not been updated in 3 years, or you’re saving based on ‘guestimates’ or ‘hunches’ because you don’t even have a reserve study, you’re doing yourself and your community a disservice. If your decisions are based on poor-quality data inputs, the outcomes are likely to be just as poor.

In the early days of computing, an engineer at IBM coined the phrase, “Garbage In, Garbage Out” (GIGO). The idea is that if you input poor (incomplete, outdated, or inaccurate) data into a computerized system, you are going to get a poor result in the output. This concept is still true today, and when it comes to your reserve study and your community’s financial position, it’s critical that the data going in is accurate, up-to-date, and complete, meaning the projections can be tested and validated.

At SmartProperty, we have built our entire business around the vision of helping boards make better decisions with better-quality data. Fighting GIGO is at the heart of that vision.

We help communities maintain updated reserve study data that is structured and integrated with accounting systems of record so you can analyze your projections versus your actual accounting. When you combine this in a living record that displays not only your real-time data but also historical data based on past actions, you are able to benchmark and compare the results.

This gives you better data so you can make better decisions, and it makes it easier to justify those decisions (like raising assessments) to your homeowners.

How To Be Transparent About Raising Assessments

An assessment increase is an unpopular decision for any board member to make.

But what if the board were able to be fully transparent about their community’s financial health? Not just giving an arbitrary number of what was saved, but being able to show visually, the future needs of the community and what the community’s true financial position is using quality data.

If homeowners could see how by paying an assessment increase of $15 per month now, they could prevent a $15,000 per owner bill in the form of a special assessment 5 years from now, would they react differently?

With quality data homeowners can believe in, they are more likely to trust when faced with making difficult decisions. This helps them understand the consequences of a decision, and increases the likelihood of the logical choice being selected

Objective Data Makes It Easier to Get Homeowner Backing

Objectivity is the key.

When a homeowner is upset about a leak in the roof, a broken elevator, a too-high assessment bill or other factors, they react emotionally. And managers and board members are at risk to respond to an emotional response with one of their own.

The way to combat an emotional response from a homeowner is to communicate logically, using data in an objective manner. Bring your homeowners into your decision. Show them via the data how the current path is going to lead to failure and show them the options you have considered to prevent that from happening. Show why the board’s decision to increase assessments is rational and justified so they have a reason to get on board with it.

Putting it all together, quality data presented in an objective way takes the blame for hard decisions from the board members’ shoulders and places it on the data itself. This means better decision-making for the board, a more obvious and easy-to-understand position to present to homeowners, and a sustainable plan that protects the community’s future.

Quality Data + Objective Presentation = Smarter Decisions AND Homeowner Buy-in

It’s a formula so logical, Mr. Spock would be proud.

The Living Reserve Study™ provides the annual financial health report – a perfect way to show your membership your community’s true financial position to help them see the board’s decisions objectively through real data, especially when an assessment increase is called for.  See for yourself how The Living Reserve Study™ can help your community.