Is Your Association Up to Par?
PARSCORE™ RATES CONDO & HOMEOWNERS ASSOCIATIONS TO CUT BUYER RISK
By DeBat Media News Service
May 12, 2014
CHICAGO—”Private Association Rating”—or PARScore™—is the new way to evaluate the purchase of a condominium or residence controlled by a homeowners association (HOA) in advance during the home-shopping process.
“PARScore™ is a revolutionary new fact-based, data-driven analytics process that evaluates the quality and credit worthiness of more than an estimated 324,000 homeowner associations across the United States,” said Sara E. Benson, CEO of Association Evaluation, LLC, a Chicago-based real estate data-analysis firm.
There is incontrovertible proof that properly calculated scoring mechanisms reduce risk and take the guesswork out of decision-making. PARScore™ is based on a similar set of standards and protocol that have been used for decades by credit-rating companies, including FICO, Dun and Bradstreet, Standard & Poor, Experian, Equifax and Transunion.
All of these companies improve prudent lending, insurance and investment decisions by calculating ratings based on quality data.
Today, one in five Americans—an estimated 63.4 million residents—live under the rule of a homeowners association (HOA), which includes condominiums, cooperative apartments and many multifamily and single-family residences.
An estimated 90-percent of these associations are self-governed. According to Evan McKenzie, author of “Beyond Privatopia: Rethinking Residential Private Government,” one point cannot be overemphasized: “The entire institution of common interest housing rests on the volunteer directors, yet they are unpaid, untrained, often unqualified, and almost entirely unsupported by the governments whose work they often are doing.”
Often these directors struggle with balancing their own check books, and are overwhelmed with managing their share of an industry with budgets estimated at $90 billion a year.
A September 2011 survey conducted by the Community Associations Institute (CAI) found that more than half of the nation’s homeowner associations now face “serious financial problems.” In 2013, 72 percent of association-governed communities were underfunded, according to Association Reserves, a California-based company that helps associations with budget and operational issues.
“A problem is emerging,” noted McKenzie. “Significant numbers of community interest housing developments are failing to carry out their basic responsibilities or becoming insolvent.”
Through a proprietary algorithm, PARScore™ provides a standardized rating between 400 and 900. Financially healthy and well-run associations will receive higher ratings while risky associations plagued with low bank balances, non-paying owners, special assessments and lawsuits will receive lower ratings, Benson explained.
“PARScore™ turns guesswork into facts and empowers purchasers, lenders and insurance companies in their decision-making process,” Benson said. “PARScore™ reduces risk and liability to all involved parties.”
Depending on the size of the association, initial pricing—including a site visit, complete Viability Study and PARScore™ rating is between $300 and $950 per transactional report. Reduced bulk pricing is also available.
• PARScore™ Purpose. In an age in which information has become the universal currency, PARScore™ will help home buyers, banks and insurance companies substitute facts for guesswork in their decision-making process. The Association Evaluation Registry Report and Viability Study will provide the most extensive homeowner association database in the country, covering all 324,000—and growing—communities.
Every association is assigned a unique Permanent Identification Code (PIC). More than 140 data sets are analyzed and scored against the coded individual associations by using the patent-pending PARScore™ point system.
“Collected data includes direct investigations and interviews with association directors and property managers, as well as on-site inspections of the communities,” said Michael Reilly, Chief Operating Office of Association Evaluation, LLC. “Additional data sources include monitoring corporate filings such as lawsuits, judgments and bankruptcies.”
Financial reporting includes verification of operating and reserve-account monies. Associations are required to sign bank verification statements in order to receive a rating.
Board minutes are examined for adherence to standard accepted business protocol procedures and to ensure against unexpected and costly special assessments that have been discussed by the association’s directors, but not yet levied at the time of sale.
A check for date of last reserve study and date of last financial audit also serves to greatly reduce risk. News, Internet and media sources are consistently monitored for each association.
The Association Evaluation Registry Report and Viability Study’s analysis of the data will result in a PARScore™ rating. The highest achievable PARScore™ rating will be 900 and will indicate the most creditworthy and healthy associations. Lower ratings will reflect associations with the following problems:
- High assessment delinquencies;
- Excessive foreclosure rates;
- Excessive non-owner occupancy rates;
- Pending lawsuits;
- Low financial reserves;
- Known unabated health hazards (mold, radon, lead, etc.)
Association Evaluation, LLC, utilizes the results of the report to assign a Private Association Rating (PARScore™) to homeowner associations for use by home buyers, lenders, private mortgage insurance companies and insurance carriers in order to minimize loan-default risks and claims risks.
“Transparency, when applied broadly, levels the playing field for all,” said Benson.
PARScore™ is a registered trademark, patent pending and fully insured. For more information on the PARScore™, call Association Evaluation, LLC, at 844-PAR-SCORE (844-727-7267), or visit: www.AssociationEvaluation.com.