Credit reporting collects HOA dues better than liens and foreclosures combined. I just finished a call with an association’s Treasurer whose Board is using our services for the fourth time. I jokingly asked him if it was because he wanted to get reacquainted with his neighbors again. He affably replied, “You know, my neighbors swear they’ll pay their dues – but after a few months, if we don’t use you guys to remind ‘em they’ll be credit reported, they just drift off into never-never land and kind of forget about us!”
In the past he’s shared a few of the good-natured conversations he’s had with his neighbors (who were late on their dues), after they started receiving our letters and phone calls reminding them to get current. He recalls conversations starting with things like, “But we don’t use the pool – why should we pay dues, if we don’t use the community pool?” Or, “I don’t like how the pine needles get spread around here – so I don’t think I should pay my dues!” Now don’t get me wrong; there are some pretty valid reasons why some members are late on their dues, and this association has certainly had some folks deserving of the patience and mercy they were shown. But on the other hand, some of the excuses he’s heard have been really awe-inspiring.
Credit Reporting Works Where Liens Don’t
So why does credit reporting work? Well, there a few reasons why liens have lost their impact that we may want to discuss first.
Putting liens on property used to be like clock-work: it worked consistently, and predictably. But things change, and one of those things includes the fact that some homeowners are underwater in their property values. Those homeowners simply don’t care if there’s a lien placed. They won’t have to be concerned with a lien until they sell their house. Which, by the way, may have no real impact if they owe more on their home than it’s worth when they go to sell. There’s just something about being upside-down in a property that changes a person’s perspective.
Now granted, some ‘experts’ say that it’s wise to put a lien on the property “just in case they sell it before you collect your dues – then you’ll be protected”. But how often have you ever had that happen? Like never? I mean, how often do people sell their home and move out in the middle of the night, just to avoid paying their dues? Now if you see a ‘For Sale’ sign in their front yard, that’s another matter.
Credit Reporting Collects HOA Dues Inexpensively
Another reason credit reporting collects HOA dues better than liens or foreclosure is because liens cost a lot more money than the potential consequence of credit reporting. And some homeowners use that against their Board. They know that if the cost of a lien outweighs the dues they owe, there’s little chance the Board will incur the legal expenses involved in a lien, much less a foreclosure. Many, many Board Members know the pain of that predicament all to well.
When we say ‘the potential consequence of credit reporting’ we’re referring to the fact that credit reporting should be on the horizon, as a very real consequence of not making arrangements to pay late dues. You see, credit reporting collects HOA assessments best when used as an ‘ounce of prevention’, rather than a ‘pound of cure’. Foreclosure is a wrenching pound of cure, and should be reserved as a last resort for that very reason.
Credit Reporting — HOA Dues ‘Ounce of Prevention’
In contrast, impending credit reporting is the amicable, neighborly way to motivate homeowners to pay their delinquent HOA dues. In fact, data across nearly 20 states shows credit reporting collects HOA dues around 45% of the time; and in many cases, it collects dues at a much higher success rate. The earlier it’s used, the better it works.
So here’s the bright side. Credit reporting collects HOA dues for a one-time cost of only $25. Credit reporting collects HOA dues, because it impacts homeowners personally. A lien is not felt by the owner, or by the brick-and-mortar of their property. Credit reporting impacts things like a homeowner’s interest rates on their current credit card balances. And these days, it also can also impact their insurance premiums, their ability to open a checking account, and even their employability. Facing these potential consequences (early in the delinquency cycle) poses a far more formidable concern for delinquent homeowners than the mere thought of getting a few dollars less when they sell their house – someday.
Credit reporting HOA dues works. It’s simple. It’s inexpensive. It’s clean. And it doesn’t make your neighbor feel like you’ve declared war on them. And that’s why so many HOA’s are now using it.