When shopping for a condominium or town house, checking out living spaces is easy. But getting information about building maintenance or the inner workings of the association is much harder. Until now.
A new rating service from Association Evaluation scores community associations on their financial condition and adherence to recognized best practices for operation. It’s similar to a credit report for individuals or a Carfax vehicle history.
“Buyers fall in love with the floor plan and view,” said Sara Benson, founder and chief executive of the Chicago-based real estate data analysis firm. “But they don’t take a close look at the overall health of the association, which affects the buyer’s future in so many ways.”
A 30-year veteran of the real estate industry, Benson knows well the horrors of buyers hit with stiff special assessments soon after moving in or finding out too late that their beloved pet is not welcomed. She and her collaborators created a rating system to avoid such heartbreaks. It’s called the Private Association Rating, or PARscore.
Scores range from a low of 400 to a high of 900. Well-run, creditworthy associations earn higher ratings while risky associations plagued with difficulties such as low bank balances, delinquent owners, special assessments and lawsuits receive lower ratings.
The numbers are calculated using a proprietary algorithm that analyzes more than 140 data points. They include lawsuits, house rules, bank balances, special assessments, renters, environmental influences and the board’s policy on conflicts of interest.
Each evaluation includes a report that details the top five positive factors and the top five negative factors that influenced the score. A sample report for a 490-unit city high-rise, for example, gives a score of 784. Its positive factors included compliance with Chicago’s life-safety requirements, a current reserve study and no special assessments in the previous three years. The negative factors included a pending lawsuit and nondeeded parking.
Association Evaluation collects data from association records, personal interviews, on-site inspections, public records, corporate filings and other databases. Associations that refuse to provide requested information earn low scores.
“Our goal is to improve the quality of life for people who are living in community associations,” says Benson. “Associations should want to work harder to improve their scores for their members. If they are doing a great job, they’ll get a high score.”
The cost, depending on the size of the association, runs from $300 to $850. The firm targets buyers, sellers, associations, lenders, insurance companies and real estate brokers.
The evaluations offer peace of mind to buyers and lenders, said mortgage adviser Angela Watkins at Stonegate Mortgage in Downers Grove.
“It’s a really good product that gives way more information about the condo building and the association than what a lender typically looks at,” she said. “It holds associations more accountable because they are being graded.”
For real-estate brokers, the evaluations “make it easier when advising your buyers to have information that shows the building is well-run,” said Ron Ruby, owner and managing broker at Weichert, Realtors-First Chicago. “If I’m representing the seller, I’ll have an easier time marketing an association with a high score.”
Last spring Seth Condon wondered why the monthly assessments for a condo he considered buying were only $112 a month. The evaluation showed that building maintenance was up to date. The association keeps costs low and prefers to special assess when repairs are needed. That’s OK with Condon, who bought the unit.
“It seemed like a pretty normal situation,” he said.
Can a low score kill a sale? Perhaps, but it hasn’t yet, Benson said.
“We’ve made sales in buildings with low scores, but the buyers knew what they were getting into,” she said.
For more information about PARscore evaluations, visit associationevaluation.com.
