Condo Media - November 2010 - 36

COVER STORY

“We should have said to boards, ‘if you want e-mail communications on the hour and if you want us to manage the community’s website and to be accessible via Blackberries all the time, we will do all of that, but those are added services, and we’re going to

prerequisite for an FHA-insured condominium loan — requires, among other documentation, plats and plot plans — no easy assignment, especially in an older community, Kansky says. “The last time I went to the town hall to do a search, everything

The downturn has filled the market with unemployed people, who say they can provide association management services for a lot less than others charge.
charge for them.’” Instead, Carroccio says, “managers fell into a trap,” adding the service without increasing their fees, and feeding the mindset, already widely shared by boards, that managers should charge $100 “but provide $150 worth of service.” Changing that mindset has been, and remains, among the most difficult challenges for association managers and the challenge has grown during the recent downturn as the demands on their time have increased incrementally. was so old and moldy, I had a major allergy attack.” “It is becoming absolutely ridiculous,” McNabb agrees. Trying to understand the requirements is hard enough, but “there’s no consistency. When you think you’re getting a handle on what you need, they change the requirements.”

Adjusting Attitudes and Fees
Most managers say they are charging for completing lender questionnaires and obtaining FHA certification for their communities. But they can’t charge for all of the additional work the financial downturn is creating, Carroccio says. “Our management fees were based on a different economy that [didn’t require] the services we’re providing,” he points out. Managers are helping attorneys with foreclosures, working on collections, responding to owner bankruptcies, “and nothing in our contract says we can charge for this work.” Increasing management fees is an obvious solution, but hardly an easy one. For boards looking for ways to slash expenses in order to hold the line on common area dues, the management fee is a large and attractive target. Managers have to work harder to justify their fees, Alexis agrees, and “we have to help boards find creative ways to manage their budgets” to avoid potentially damaging cuts in services — including the services provided by

More and More
New underwriting requirements for condominium loans have become an unwelcome symbol of this trend. Mortgage lenders are now demanding reams of additional information to meet the requirements for loans insured by the Federal Housing Administration (FHA) or purchased by Fannie Mae and Freddie Mac. “It’s a huge pain in the neck,” Thayer says of the questionnaires managers are being asked to complete and the documentation they are being required to provide. His complaints are widely shared and oft-repeated by industry executives, who say: The questionnaires pose questions that are often impossible to answer, require documentation that is difficult to amass, create liability risks managers don’t want to accept and consume untold hours of management time. Obtaining FHA certification for a condominium community — a

their managers. “You have to educate the board,” she says. “You have to explain that if they keep the manager’s fee level for two or three years, they will be effectively reducing the manager’s compensation.” That’s an argument managers can make successfully, she believes. “Boards are looking to their managers to help them get through these difficult times,” she says. “They appreciate the work we’re doing. They don’t want to do anything to hurt their managers, or [reduce their effectiveness].” But boards also don’t want to increase association fees. So when managers push for higher fees, boards are likely to push back. And many managers are finding they can’t push very hard in return. Even in much better economic times, competition keeps a tight lid on the fees they can charge. That lid is tighter today, managers say, because the downturn has filled the market with unemployed contractors, property managers, real estate brokers, appraisers and other real estate professionals, who say they can provide association management services for a lot less than others charge. “If you want qualified management, you need qualified managers,” Thayer says. “But if Uncle Jim wants to call himself an association manager, all he has to do is advertise [lower fees] and someone will hire him.”

The Technology Solution
Industry executives must find ways to respond to these cut-rate competitors without reducing their already slim profit margins. Technology is a big part of the solution many have identified. “We’ve devised more efficient means of running our business,” Carroccio say, by “harnessing technology” to produce information automatically. Because computer programs rather than employees generate many reports, his firm is able to provide the increased information clients want without increasing its labor costs.

CONDO MEDIA • NOVEMBER 2010

Condo Media - November 2010

Table of Contents for the Digital Edition of Condo Media - November 2010