The more you get, the sooner you get it, the better off you are.” I felt my forehead scrunch in that familiar expression of confusion as those words rolled off my real estate instructor’s lips. “Come again?” I raised my hand. He then held up two bills: one a twenty dollar bill, and the other a ten. “Which one do you want”, he tempted? “The twenty”, I bit. “Let me ask it again”, he continued. “You can have the ten now, or the twenty in ten years. Now which one do you want?” You could almost see the bright cartoon ‘light bulb’ appear above my head. “That’s the ‘Time Value’ of money” he said, nailing down his point.
Today that issue strikes at the heart of how some HOA’s still depend on liening a property to collect past dues – when all the dynamics upon which that once-successful formula worked have changed. Properties aren’t selling, delinquencies are increasing, and costs to cure are rising. We’re now wedged between a rock and a hard place where buyers are insecure about the market, and lenders require the ability to leap tall buildings in a single bound prior to granting a loan. And it’s getting worse. For example, Fannie Mae and Freddie Mac Federal Lending Guidelines now require Condominium HOA’s to have no more than 15% of their properties 30 days or more delinquent on dues, in order for any property in that project to qualify for a loan. Do you see the vicious cycle? The more delinquencies rack-up, the less likely you’ll see your liens settle any time soon. Meanwhile properties are getting older and in need of more repairs. This is no time to not have time on your side.
Another downside often missed is that delinquent homeowners don’t care if their old property has a lien against it, because that only reflects poorly on the property – not them. What leverage do you have to get a delinquent homeowner to pay you if there’s no consequence to them? It’s far easier and less expensive to take simple steps to pursue the debtor, and it’s far more effective as well… but more on that in a moment.
Small Claims Court can work, but it can become expensive and requires a lot of time. Lawyers are costly, even when they “stack their fees on top”, because they’re essentially making the debt harder to collect – which makes that method a bit of a Trojan Horse for you.
In every piece of bulletproof glass there’s a tiny point requiring the slightest of impact to shatter that glass. Is there such a spot with delinquent HOA fees? Yes, there is. And there’s a most effective way to reach it. Using this method in context with other proven techniques is very effective, and can cost very little to do. There are rules and regulations that must be followed, but once credit reporting is enabled the delinquent homeowner has little or nowhere to run. That’s because even trying to rent an apartment today demands you have no record of owing any previous housing delinquencies of any kind. In fact credit reporting can adversely affect many aspects of a debtor’s life today – even employment. Having delinquent HOA fees on their credit report dictates they get back with you – sooner than later – to pay their debt. Even the mere threat of reporting can quickly generate a state of mind in prudent debtors to start paying you, and to do so now.
One other thing you must insist on in any service that provides the array of tools to facilitate HOA collections is: it must be a system where the debtor pays you directly – no exceptions! Allowing your money to go through anyone else’s hands first, opens the door for all kinds of problems; ranging from delays in receiving your money, to not receiving all the money you should.
There are a few other simple tricks of the trade that can be employed to expedite collecting your HOA’s money, but credit reporting is a must in any system. Without it your approach has no teeth. Coupling credit reporting with a systematic program including an attorney written demand, VOE, and phone campaign you’ll find is most efficient indeed. Solid, inexpensive and effective alternatives to high-cost methods to recover your delinquent HOA fees are available. Be sure they include the elements discussed here, and your results will dramatically improve.