Not long ago, while house hunting, my wife and I observed several properties proudly proclaiming no HOA on their sale signs! It seemed, at first blush, a benefit, no HOA fees, no restrictive CCRs (Covenants, Conditions, and Restrictions), no domineering, rogue HOA board members. However, we also observed no gated entrance, no sidewalks, no community center, golf course, or tennis courts upon closer inspection. Realizing we enjoyed the benefits of manicured common areas, walking trails, a community pool, and a security guard at the gated entrance to the community, we decided to opt for a home with an HOA.
Most homeowners realize that in addition to the amenities, an HOA also increases property values, but those dues. Homeowners who would never miss a mortgage payment are not nearly so diligent about paying their HOA fees on time. They realize a late mortgage payment can adversely impact their credit rating, but HOA assessments don’t seem as important.
HOAs – not for Profit, but not Tax-Exempt
Although many HOAs are organized as not-for-profit entities, that doesn’t mean they are tax exempt. Non-paying homeowners burden the entire community as the services provided and taxes that must be paid are still incurred, still due, and payable. So how does the HOA address non-payers?
HOA Remedies for Non-Payment
Typically, the HOA's CC&Rs determine the collection methods that the HOA can employ, including:
- Late fees and interest
- Demand letters
- Restricting access to amenities
- Legal action
- Placing a lien
Each of the above methods creates additional time and expense for the HOA, some significant. There is, however, a better way. There is a more proactive method to incent on-time payment behavior, one that will resonate with homeowners and motivate them to be on time every time with their HOA dues.
The Proactive Way to Ensure Prompt Payment of HOA Dues – Reporting Payment History to the Credit Bureaus
How Assessment Payment Reporting Helps Your Credit Score - Sperlongadata. Many homeowners don’t believe HOA fees are reported to the agencies - but once they learn that their HOA payment history is reported to the credit bureaus, it elevates their dues obligation to the same level of importance as the mortgage, auto loans, or other consumer loans and credit cards.
Once you notify your homeowners that you will be reporting their payment history to the major credit bureaus, delinquencies will decline dramatically. You’ll need to resort to the above methods and remedies for non-payment far less frequently, and you gain leverage for dealing with past due amounts. Your cash flow improves, the cost of collection activities declines, and you are in a far better position to recoup past non-payments.
The Sperlonga Solution for HOA Assessment Reporting
Just like rents and other non-bank obligations, many times, HOA fees are unreported. Some smaller HOA organizations are unaware of the benefits of reporting, their ability to report, or the process seems too time-consuming and unwieldy.
The Sperlonga Data and Analytics system simplifies the administration for the HOA, reduces the number and frequency of delinquent accounts, and helps recover past-due balances. Our technological expertise and system’s flexibility allow integration with other platforms easily and quickly to empower the HOA organization. Sperlonga software does the heavy lifting, enabling reporting to the four major credit bureaus.
Our case studies indicate that HOA Assessment reporting results in a dramatic reduction of delinquencies, up to 30% in the first ninety days. Your homeowners remitting on time will benefit from an improved credit score, while delinquent homeowners will be adversely impacted, in much the same way as those not paying their credit cards or car loans on time.
Navigating homeowner relationships and managing and maintaining your community while administering other legal and regulatory items requires a sophisticated approach and solution. For best practices and to simplify HOA Dues credit reporting, visit the experts at Sperlonga Data – Sperlonga can help!