Seven Keys to Finding the Right Reserve Study Firm
Your reserve fund helps your association anticipate and budget for the future. The reserve fund gives you the power to maintain the quality of your community by allowing for projects that are both necessary and expensive, including necessary major repairs or capital improvements such as a future roofing or paving project. According to Delaware Title 25, Section 81-315, the annual budget must include reserve contributions “sufficient” to achieve the level of funding noted in the reserve study. Minimum contributions to reserves vary based on the reserve study or a statutory formula based on number of common area components such as elevators, HVAC systems and swimming pools. For example, with four or more common area component categories, reserve contributions must be at least 15% of the total budget.
Setting up your reserve fund can be a complex task, but you don’t have to go it alone -- you simply need to find the right reserve study firm to help. Our seven tips to finding the right reserve study firm for your community will make the process seem much easier.
1. Be prepared.Any reserve study firm you may want to work with will expect a full profile of your community association. Take time to assemble a thorough description of your community that includes details such as location, number of units, description of buildings, list of amenities, assets, investments, accounts payable, etc.
2. Choose a firm.Reserve study firms abound. Ask friends on other boards, or ask your professional property management company for a suggestion of one from their list of qualified firms. The Community Associations Institute has directories of firms; you can find one by contacting your local chapter or searching online.
3. Be specific about your needs.It’s important to know what you’re looking for in a firm, and having that picture in mind will help you craft the right questions to ask as you’re evaluating reserve study firms. Consider criteria such as number of years in business, number of studies performed each year, company history and background, experience with communities similar to yours, funding methods, costs involved, turnaround time, association involvement and types of guarantees they provide. Knowing the factors that matter most to your community will help you narrow the list of candidates.
4. Get to know your firms.Make contact with your list of firms and ask for standard information, including examples of previous reserve study reports they’ve completed. When you have the opportunity, ask the questions you created earlier, recording the responses carefully. Don’t be afraid to clarify or follow up if the answer isn’t instantly clear. As you continue with the interview process, you may find that your questions evolve; if needed, go back to earlier interviewees with new questions so you have all of the information you need. Don’t forget to request three references from each firm you speak to.
5. Compare and contrast.Now that the research is done, it’s time to compare your firms. One easy way to do this is to make a matrix on a spreadsheet. List your hiring criteria in the left-hand column, in order of importance if possible, then list your candidate firms across the top, horizontally. Use your research to fill in the boxes, checking off which candidates fulfill which criteria. While this is being completed, ask your community association’s accountant to review the samples provided by each firms and to make sure they meet federal filing needs. When the spreadsheet is complete, eliminate the firms which meet the fewest of your criteria, then continue to evaluate the rest.
6. Make your reference check.Each reference check should be a short conversation, consisting of no more than 10 simple questions about the firm. Ask things such as how similar the association is to yours, how satisfied the association was with the firm’s work, how the final costs compared to expectations, if the study was completed on time, how many firms they considered before choosing this one and whether or not the association would hire this particular firm again. Always be friendly, efficient and respectful of their time.
7. Make your choice.You have all the tools to make an informed decision, so now is the time. You’ve gone through all the steps: chosen candidates, interviewed them, completed a matrix of their desirability and checked their references. All that’s left is to make the final call and hire the best reserve study firm for your association.
Partnering with the right reserve study firm can have a huge impact on the future of your association. Follow these seven steps and you’re certain to find yourself working with a professional firm that meets your expectations. For more help, contact FirstService Residential.