One year after Surfside collapse, two California startups create Carfax-like reports for HOAs – Orange County Register

As family and survivors commemorate the one-year anniversary of the deadly Surfside, Fla. collapse on Friday, June 24, two Southern California companies are offering new tools to help condo buyers and owners assess the strength of their own owners’ associations.

Their goal is to avoid pitfalls like those that may have contributed to the tragedy last June, when the 12-story South Champlain Towers collapsed in a pile of rubble, killing 98 people.

News reports showed that the Champlain Towers board had argued for years over how to pay for $15 million in much-needed repairs. Repairs started too late.

With a federal investigation into the cause of the collapse not expected until 2024, the Miami Herald reported that construction flaws coupled with years of deferred maintenance caused a pool deck to move away. deterioration of the foundation, toppling pillars and causing the building to fall. like a house of cards.

In May, Association Reserves, a Westlake Village company that had Champlain Towers South as a client, unveiled a new product to help buyers, owners and board members assess the financial and physical health of their “ community associations”.

“We looked at condo associations across the country, and really, it’s bad,” said Christopher Gardner, founder of new consumer product, CondoFax. (Photo by Hans Gutknecht, Los Angeles Daily News/SCNG)

Called Perspectives of the association and market placeor AIM, it seeks to create a database covering the country’s 370,000 “association-governed” communities, including condominiums, co-ops and townhouses.

HOAs are recruited to upload their information to the database, which will then be used to create reports on maintenance reserve funds, finances and the physical condition of buildings, said Robert Nordlund, CEO of the Association. Reserves and co-founder of the new AIM product.

Reports are free to participating HOAs and their members, but will cost buyers $50.

Additionally, AIM creates a FICO-like score for each complex, called the FiPhO score. Had the score existed before the Champlain Towers collapsed, the Florida Towers would have received a 45 out of 100, Nordlund said — a low score.

“We’re here to change the whole community association industry ecosystem,” Nordlund said.

Nordland and the founder of another new HOA reporting company, Condofax, said they hope their products will become the condo industry’s version of Carfax, which provides used car reports to car buyers. cars.

Founded last November, Condofax charges $299 for reports based on a deep dive into an HOA’s documentation. Like AIM, it produces a brief report and its own version of a credit-like score.

“We’ve looked at condo associations across the country, and really, it’s bad,” said Christopher Gardner, founder of Condofax and an executive at FHA Pros, which helps condo resorts qualify for home mortgages. Federal Housing Administration. “One way or another, condominium associations have largely escaped scrutiny. It’s pretty amazing, and we hope to change that.

A third California organization, based in Oakland HOA Transparency, a non-profit organization, provides free HOA reports. A fourth company, based in Indiana InspectHOA.comprovided $189 reports for 2.5 years to companies such as securities companies, iBuyers and real estate investment groups.

“What created momentum was many institutions buying houses,” said InspectHOA chief executive and co-founder Vishrut Malhotra. “(But) our customers started asking more questions after the Champlain Towers incident.”

Tool for buyers

The new products will be a boon to potential buyers who are now virtually flying blind when buying a home that is part of an HOA, according to product developers and real estate agents.

“It’s brand new. This is something we’ve never seen before,” said Lisa Dunn, regional sales manager for Century 21 Award, who led an Orange County Association of Realtors task force encouraging more HOAs to qualify for FHA mortgages.

The Westlake Village condo complex in Thousand Oaks where Robert Nordlund, founder and CEO of Association Reserves, lived is seen Tuesday, June 21, 2022. Nearly a year after the deadly collapse of Champlain Towers South Condos in Florida, Nordlund unveils a scoring system for homeowners associations that works like a credit score.  (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG)
The Westlake Village condo complex in Thousand Oaks where Robert Nordlund, founder and CEO of Association Reserves, lived is seen Tuesday, June 21, 2022. Nearly a year after the deadly collapse of Champlain Towers South Condos in Florida, Nordlund unveiled a scoring system for homeowners associations that works like a credit score. (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG)

“I’ve never seen a service like (these new) reports,” added Veronica Hicks, a broker for Condos Etc. based in Irvine. “No one can be certain of…the financial health of a community, the culture of the community, and the quality of board management and oversight. That would be a very beneficial report for a buyer, for an association of owners as well as for members.

A bundle of HOA documents provided during escrow should be enough to determine the strength of an association, said Dawn Bauman, vice president of government and public affairs for the Community Associations Institute, an HOA educational organization. Provided, that is, a buyer takes the time to read and understand all that paperwork.

But agents and product vendors say the association’s documentation, which can be up to 300 pages or more, often comes late in the escrow process and is so intimidating that many buyers don’t read it.

“They just don’t know what they’re looking at. They don’t know how to analyze a condo association,” Gardner said.

“If you’re thinking of spending $500,000 on a condo, $50 is one of the cheapest things and one of the wisest things you can do. … It just helps the buyer know what they’re getting into,” Nordlund said.

Special Assessment Risk

The Champlain Towers board received bad news about the condition of their building nearly three years before the June 24, 2021 tragedy. The once-luxurious towers needed major repairs totaling $15 million. To pay for this, the council had to impose a “special assessment” on unit owners, ranging from $80,000 to at least $200,000 each. But the co-owners resisted.

Report providers claim that their products can help buyers assess the risk of an association of a future special assessment, which is paid in addition to monthly assessments.

“If we find that (an HOA’s) reserves are low and the roof needs to be replaced shortly, you can expect a big increase in fees,” InspectHOA’s Malhotra said.

Kelly Richardson, a Pasadena-based HOA attorney and weekly contributor to the Southern California News Group, said Association Reserves’ AIM product is “the company’s first legitimate effort in this regard.”

But the product is far from ready. The AIM database requires thousands of HOAs to log into the company’s website and upload their data.

Nordlund says the company’s report will typically be 11 pages, covering an HOA’s financial health, property maintenance history, and good management of the association.

About half of HOAs have sufficient reserves to pay for necessary maintenance as their buildings age, Nordlund said. Co-owners tend to elect board members who promise to control monthly dues, which often compromises the financial strength of an association.

AIM seeks to give condo owners a “virtuous goal” of improving their score, rather than the destructive incentive of lowering their HOA dues and deferring maintenance.

The Condofax report covers six categories, including state law compliance, HOA financial condition, maintenance reserves, mortgage options for buyers, and insurance.

Robert Nordlund, who runs a company that helps HOAs build reserves for future maintenance, hopes his new AIM database will become the Carfax of the condo industry.  For $50, buyers will be able to purchase a report card showing the financial and physical strength of a homeowners association.  (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG)
Robert Nordlund, general manager of the Reserves Association, wants to encourage condo owners to pay more dues for the maintenance of their properties. The Westlake Village HOA expert designed the FiPhO score to assess the financial, physical and operational health of each association. (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG)

Transparency HOA provides a one-page report focusing on the financial aspects of an HOA, along with a score. The volunteer-run organization does not charge for its reports, although donations are welcome. Co-founder Amber Gill maintains her team is more willing to share bad news about an HOA because it’s independent.

“I find it hard to believe that (commercial suppliers) are going to bite the hand that feeds them,” she said.

Richardson said he’s not sure the reports are enough to fully assess an HOA.

“I fear that the information, while useful, is exaggerated in its importance,” he said. “HOAs can change quickly, and I’m concerned about how the reported data would be kept up to date.”

He also doubts that these reports alone will be enough to prevent future tragedies like the collapse of the Champlain Towers. But the collapse highlighted “how bad condos are” and the need for condo owners and buyers to have better access to information, suppliers said.

“That’s why the world changed,” Nordlund said of the Surfside tragedy. “That’s why we spent a lot of time and money (to develop this product). The future could therefore be different.

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