Seven Tips for Choosing the Right Reserve Study Firm
Determining the amount of money you need in your reserve fund is not easy to do on your own. Fortunately, you can hire an experienced firm to conduct what is known as a reserve study.
What does a reserve study accomplish and why should you get one? A reserve study aims to minimize surprise expenses. It identifies your predictable common area repair and replacement projects and allows you to prepare financially for their costs over a number of years. A reserve study firm evaluates your anticipated needs and provides a plan for your HOA to pay for those expenses.
The quality of reserve study firms can vary significantly, however. So we have provided these tips to help you find the right one.
1. Create a profile of your community.Any quality firm you consider will want to know details about your HOA. Be prepared by putting together a complete description of your community. Include details such as the location, number of units, type of buildings, amenities, etc.
2. Identify potential firms.It should be easy to get the names of several reserve study firms. A good community management company will maintain a list of qualified firms, so check with your community manager for guidance and recommendations. You can also check with the Arizona chapter of the Community Associations Institute (CAI).
3. Prepare questions.Think about what’s important to your community and how you will evaluate candidate firms. Some of the questions you should ask are:
• How many studies do you perform each year?
• How long do you take to complete a typical study?
• What is your experience with communities of the same type and size as ours?
• What methods do you use to determine funding? Pricing?
• What kind of guarantees do you provide?
• What is your company’s background?
This last question can be especially important. Many reserve study specialists have plenty of financial expertise but no engineering background. They fail to estimate the costs of individual components and assume that a piece of equipment will reach its expected maximum life. Knowing what to ask and what to look for when it comes to hiring a firm for your HOA will help you narrow down your list of candidates.
4. Make contact.Call or email potential firms and ask them to provide samples of previous reports, as well as three references. Ask the questions you prepared earlier, and carefully record the answers. With each firm you interview, you may find that your questions evolve. Go back to earlier firms if needed to ensure you have a complete profile for each one.
5. Do a comparison.Once you have completed your research, you will want to see how the firms stack up against each other. One way to do this is to make a chart with your hiring criteria down the left-hand column, in order of importance, and the names of each firm you are considering across the top. If a firm meets the criteria, check it off based on the answers you received. When the chart is complete, eliminate the firms that don’t meet your basic requirements. Ask your accountant to look over the sample reports from the firms that remain to make sure they meet your basic federal filing needs.
6. Talk to references.Contact your finalists’ references, and ask no more than 10 questions of each one. Consider questions such as whether the association was happy with the firm’s work, whether their HOA is similar to yours, if the study was delivered on time, when the study was performed, if the study accurately estimated costs, if there was anything the firm should have done differently, which, if any, other firms they considered hiring, what criteria they used to choose this firm and whether or not they’d hire them again. Be courteous and respectful of their time.
7. Choose a firm.You’ve identified firms. You’ve interviewed them. You’ve compared them. You’ve narrowed down your list. You’ve spoken to their references. Now you have everything you need to make an informed choice. Select the firm that meets the majority of your criteria and in whom your board has the most confidence.
Hiring the right reserve study firm can have a significant impact on the future of your HOA. Follow these steps and you’re sure to be working with a quality firm that meets your expectations.
For more on how a good community management company can help you choose the right reserve study firm, contact FirstService Residential, the leading community management company in Arizona.