Why does my HOA always get ripped off?

I'll tell you why.

Every HOA that I've always lived in always goes with the lowest bidder. Faced with a bunch of bids, we can help but get sucked into choosing the lowest one.

Do you know who submits the lowest bid? It's always either an incompetent or a crook.

The incompetent gets in over his head, realizes that he underbid the job and either cuts corners or bails out completely. We end up losing any money that we paid him, then have to pay somebody to rip out his terrible work and, finally, pay somebody to do the job right. We also lose time which is bad because we usually need something fixed pretty darn soon, otherwise, we'd delay the expense.

The crook knows he won't get any money if he doesn't get the job. So, he does whatever it takes to get the job. Promises, low bids, whatever. He knows that he's not going to keep any promises and will just wring whatever money out of us that he can. Once he gets the job, he asks for a down payment. If we give him no down payment, he says, "Ok, I'll start the job on Saturday," and then doesn't show up. Or he shows up and does a terrible job and then tries to hit us up for a down-payment, installment payment, milestone payment or whatever. If we don't give it, he just strings us along, promising that he'll be there next Saturday, giving us some sob story. Whatever to keep the process going. Eventually, we end up losing any money that we paid him, then have to pay somebody to rip out his terrible work and, finally, pay somebody to do the job right.

If we had any sense, we'd wonder why the lowest bidder is the lowest bidder. Did he invent some fence building robot that dramatically cuts his costs such that other builders can't compete? Does he have special access so he can hire Oompa-Loompas (like Willy Wonka) who just work for chocolate bars, not money, so he can afford to build things for less? Of course not. These guys all have the same cost structure, the same (grey market) workforce. There's no good reason that a low bidder is a low bidder, only bad reasons.

Anybody in the same predicament?

Roger,
Your comments should be taken seriouisly as they have merit. Just the same as the advice a good manager is better than a bad manager and a good board is better than a bad board. In addition, or maybe I am repeating what you said, but some circumstances, especially in large associations where decisions cost big bucks and expert knowledge is needed to conduct a big contract thru the process. However, many of our posters can't afford a consultant or a professional manager and frankly there may be only rare instances where big money and complicated decisions have to be made. Certainly the day to day operation of an aswsociation with less than 100K budget for a condo, and maybe half that for a small HOA can do a pretty good job if the are able to cull some capable people from their association. Which brings up the fact if the board is ineffective at any level HOA they are just not going to do a good job. But, I would not advocating ignoring the Board. Our HOA after years of Board management hired a capable professional as the CEO and it has worked out great from where I sit. The Board still controls the organization but the CEO runs it. Our condo has been all over the place with a manager and hands on Boards (after a fashion), right now we operate pretty well.

There are bad managers also. Ones that pay ridiculously high prices for shoddy work.We even had one unit here that was a rental and managed by a property manager. There was an issue with the water heater she contracted someone to replace for that unit. He forget to turn off the drain valve completely and it leaked into the unit below. Later we found out the contractor she called to replace the water heater had listed as his specialty on the state L&I website "Landscaping" Anyway association's do tend to be easy marks One reason I think is the mere setup of them Volunteer board members are elected from the neighborhood, often because they are the only ones willing to step up. They are generally expected to know everything about everything from handling delinquents accounts to knowing the best way to handle repairs. They often have full time jobs of their own. And basically they are not qualified to handle all the responsibilities that are thrown at them. I put myself in that category also It has been a learning experience and looking back there are things I would have done differrently if I knew then what I know now. To this day I still get confronted with situatuions that are completely new and have to figure out what to do.

Roger,

Not all assn's can afford, or may just be too small to contract with a mgmt co. IMO, common sense should prevail, but of course not all board members -- nor all people in general -- possess it. As John Arbuckle said "You get what you pay for" and, of course, our volunteer board members are not paid!

Robert, No it was not said with malice. I am a volunteer board member and I said it. But sometimes board members are just expected to do too many things with a limited amount of time, money, and prior experience and expected to do them all perfectly

Roger,

Thank you!

I have served as Treas of a small self-managed HOA(49 single family homes) which now is forced to contract for the financial services. I agree some small HOAs do need the services of a mgmt co -- or at least a bookkeeping service. Even the larger assn's have problems getting members to volunteer to serve on the board.

I am now on the Advisory Comm. at my current HOA. This is a great position as I am just like a board member except that I cannot vote and don't get any flack from the members.

I certainly didn't mean to denegrate volunteers in my last message. Just stating a fact -- volunteers are not paid and oftentimes you do not get what you bargained for. However, many volunteers are well-qualified to do the job and they do it quite well. The BOD of my HOA is a good example and you will be pleased to hear that we have the most wonderful manager anyone could hope for. She not only works 9-5 in the office and about the community's she serves, but she also devotes many hours in the evening driving around the HOAs looking for violations - she also manages a number of other assn's in my community. She is tireless.

On a side topic, I've lived in both self-managed and professional-managed HOAs and I'd say that, from what I've seen so far, it's a wash.

Professional management costs more (of course) and you do, on average, have a bit better run HOA, all things being equal. If I was buying into an HOA again, I would not insist on being professional-managed nor would I insist on being self-managed.

I would say that a dysfunctional Board cannot be fixed and won't be fixed by a good manager. I've seen enough Boards and seen enough managers to know that a good manager will not be able to prevent an HOA from becoming a train wreck.

I think that's why I always reject these "a good manager will..." arguments that Roger always comes up with. It's tempting to think that a solution to an HOA's problems is a good manager. But, from what I've seen, the solution to an HOA's problems is always a good Board.

I think that, in this case, most HOAs just get lousy work done. It's too easy to do the wrong thing and very hard to do the right thing, no matter what Board or what manager you have. The forces in favor of being cheap and dumb are far stronger and more consistent than being value-driven and wise, even with fairly good Boards and fairly good managers. But, of course, you still have to try.

A Director on a Corporate Board has a Fiduciary Duty whether they are paid or not.

F/Y/I: Virtually ALL Board of Directors are UNPAID VOLUNTEERS .... It is the CEO and/or management who are paid .... reason being that management requires skills that most people do not have ....

IMO: The fact that one has VOLUNTEERED raises one's duty to an even HIGHER level than if one were merely a paid 'flunky'.

If you can't handle the heat, get out of the kitchen AFTER hiring someone who can.

eg. It does not require management skills to decide a reserve fund is necessary ...
It does require skill to draw up bidding documents and sort through the paperwork
involved in finding the lowest QUALIFIED bidder for any expenditures which have been
authorized by the volunteer directors.

"I did the best I could" does not mean one's Fiduciary Duty has been performed.

A good test of the 'business judgement rule' would be:
Would you have done the same things if it were your personal home and your personal money?

Would you have gotten professional (legal, architectural, engineering, arbhorist, etc) help and/or advice before spending your own money?

If not, are you prepared for the long term effects of the resulting sub-standard work .............. or would you take the attitude: "I may not be here tomorrow?"

To all,
Anyone see an answer that will serve our readers from all this? I applaud each and every one of you that have sacrificed and worked their butt off for your neighbors. But sad to say, nonw of this is new and has been repeated many times on this site. I do think we owe our posters our knowledge and our opinions about their specific issues.

I am not pointing any finger at anyone, I am just as active as anyone in all these threads, and great things have come out of this thread, but, for me personally, I am not so sure I did a good job providing guidance.
It is simply, over time, these things develope minds of their own and they will roll along for eternity.
Some of these threads have no real answers, just guesses because unless you are under the gun standing in the posters shoes, you have to guess. Plus, nearly always posters do not provide enough information and it comes piece meal, confusing the issues. We also have some new active members and I am sure all welcome them. They show great knowledge and major concern for HOA's. It is now and will remain an uphill battle to be involved at any level in the operation of an HOA.

Helen,
You have nothing to apologise for and your posts show intelligence and experience. Just like this one, it would be hard to find fault with it. I was making an observation, it may not fit at all, it may not do much good, but maybe it will prove to be a help. We have a lot of "good guys/women posting on this site, it is seldom the bad guys/women hang around. Keep up the good work. What is said on here. for the most part, should be considered, vent or no vent, but, little of it is all right for all times.

If you want to nit-pic:

"What a person in a like position ...................................."

A 'like position' (at least in South Carolina) would be a Director of a Not-For-Profit Corporation registered with the Secretary of State of S.C.
(this is governed by state law, not my/your opinion)

My (perhaps poor) analogy was intended as a common sense 'rule of thumb'

Did you mean: "I was not trying to nit-pick,"?

GOTCHA!