The founder of Association Reserves, Inc., Robert Nordlund, conducted a study to see if property values were affected by the strength of an association's financial reserves. He compared the sales price (measured in price per square foot) of units in 100 comparable condominium associations to the their reserve fund strength (measured in % funded). He found that market values were 12.6% higher in associations with strong reserves (over 70% funded) than in associations with weak reserves (under 30% funded).
In general, the following factors are indicators of an unhealthy community association:
- Deferred Maintenance
- Special Assessments
- FHA Lending Restrictions
- Lower Home Values
Recommendation: Associations with weak reserves should make a concerted effort to build strong reserves and, at the same time, raise the maintenance levels in the development. Doing so will increase property values.
ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.