Reserve studies are reports about the condition and likely useful life of all the major components in your building or community. In a high-rise, major components include garage gates and access systems, elevators, trash compactors, and boilers; in a homeowners association, they might include the gate system, pool pumps and clubhouse HVAC system. The reserve study also contains a recommended schedule for repairs and replacements (capital improvements) that will be needed over the next 30 years, estimated costs for these projects and a recommended funding plan. All of this information allows your board to set aside money, year over year, so you can pay for the work when the time comes.
But how do you get a reserve study to begin with? Reserve studies are carried out by specialized firms. A reserve specialist from the firm will tour the property with members of your board and your property manager, documenting major systems and their ages and conditions. Then they will generate a report that helps you plan your capital improvements. Finding the right reserve study firm is crucial to your association’s financial health; if the firm’s projections are off, you might find yourself having to levy a special assessment or take out a loan to cover an unexpected project.
In addition to keeping financial reporting in mind, when looking for a reserve study firm, follow these steps:
Paint a picture of your association.
Any reserve study firm is going to need basic information about your building or community: age, type, square footage, number of units, amenities, maintenance records, age of all mechanical components, and any replacements you’ve already made.
Identify possible firms.
Ask your property management team for recommendations. A quality company will have both the contacts you need and the buying power to help your board get the best value for your money. A large management company will also be able to tap into its network and get opinions from other boards about their experiences before you ever talk to a single reserve study firm.
Know what questions to ask.
Be prepared to interview the reserve study firm representatives by having a list of questions ready to go. Standard information you’ll get from the firms may answer a lot of these questions. Once you know what you want to ask, set up your interview. Of course, you know to get the basics you’d ask of any vendor. Beyond that, there are a few special questions you’ll want answered.
- What time commitment does the firm expect from your board? You have to put in the time to walk through the community with the reserve study firm. If a firm rejects that collaboration when you ask how much time they want from you and says they’ll do it alone, it’s not the right firm.
- How much time will the firm spend on the site inspection? You need to know how long you can expect the reserve specialist to be onsite and how many times they will come back to check information.
- What’s included in the reserve study price? It’s important to find out how many revisions the firm will make to the study before adding fees.
- What will the study look like? Get sample copies of the firm’s reports. Different communities prefer different formats, and you need to be comfortable with theirs. In addition, some states have laws requiring reserve studies; check with your association attorney and accountant to make sure that the firm’s sample reports meet state criteria.
Check their references.
Once you’ve met the firm and feel like they might be right for your community, the next step is to check their references. Talk to at least three other communities for each firm you’re considering. Don’t be shy about getting in touch with other properties they’ve worked with to get their opinions about the quality, price, and speed of the work. How many other firms did the board consider? Why did they make this final choice? Did they wish the firm had done something differently? What did the firm excel at?
Compare and contrast.
Create a matrix with everything you want on the columns and what the firms offer on the rows. Who comes in at or under your budget? Who will get the job done on your timeline (or sooner)? Which firm expects the same amount of board and management involvement that you want to provide? Once you have your matrix completed, it becomes a simple chart of pros and cons. Any firm that doesn’t meet your criteria gets dropped and the others are contenders.
After your reserve study is finished, you should feel confident about financial planning for your community. A thorough study will help you set up your maintenance plan, save for repairs and replacements when needed and help keep your community or building financially healthy for years to come.
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