Why should an HOA save money?

Building machinery and large elements, such as roofs, have to be redone periodically, no matter if we've made financial arrangements. We are better served to plan and allocate funds now. Reserve funds are not an added expense - they are just a way to even out the cost. Here are other urgent reasons that association funds are placed in reserve each month:

1. Legal, professional and fiduciary needs such as:
- Secondary mortgage markets that the association is engaged with (such as VA, FHA, Fannie Mae or Freddie Mac);
- Regulations, statutes and court rulings set by the State;
- Community Association governing documents
2. Major repairs/replacements that will eventually be needed. Owners living under or in the immediate area of a roof, even one as old as 25 years, should contribute towards its replacement.
3. Minimized need for borrowing or special assessments. This is the biggest justification for a reserve fund among most association members.
4. Enhancement of resale value. Lenders and real estate agents know the consequences of insufficient reserves for new buyers. Several states mandate that associations reveal the contents of their reserve funds to anyone planning to make a purchase.
5. The American Institute of Certified Public Accountants (AICPA) also demands that community associations show the amount of their reserve funds as part of their financial statements.