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1) What are reserves?
Reserves provide the funding necessary to maintain, repair, replace or restore major common area components (such as paint, pavement and roofs) in the future. Ideally, all future reserve item expenditures will be covered by those funds currently set aside in segregated accounts as reserves.
2) What is a reserve study?
The reserve study is a budget planning tool which identifies the current status of the reserve fund and a stable and equitable funding plan to offset the expected future major common area expenditures. The reserve study consists of two parts: the Physical Analysis and the Financial Analysis.
3) In Washington State, do Homeowner and Condominium Associations have to perform a reserve study? In January, 2012 HOA's and Condominium Associations with significant assets must have a reserve study.
4) Does a
Condominium or Homeowner association have to commission a reserve study right away?
If they meet the criteria for having a study, they have to comply in 2012.
5) The reserve study looks
simple, can we do it ourselves?
No, the law requires that a reserve study professional such as the Reserve Study Analysts from Pacific Crest Reserves perform the study. In reality the reserve study is complex and requires a 30 year outlook. Most association members don't have the background or tools to accurately create the study. Our analysts have construction and building inspection backgrounds. The studies conform to the requirements developed by the Community Associations Imitative (CAI)
6) What is the hardship exclusion, do
In the 2012 changes to the law an association with significant assets must have a reserve study. "Significant assets" means that the current total cost of major maintenance, repair, and replacement of the reserve components is 50 percent or more of the gross budget of the association, excluding reserve account funds.
7) What is the physical analysis?
The physical analysis is a component study of the major common area components. It consists of:
8) What is the financial analysis?
percent funded (strength indicator)
cash flow analysis (projection or forecast- a test of the allocation)
11) What funding methods are
utilized to determine the reserve allocation?
Various funding methodologies have evolved to determine this allocation, however, the component method dominate most reserve study reports.
13)What are the funding goals
established in the plan?
Independent of methodology utilized, the following represents the basic categories of funding plan goals:
14) What are
the different levels of service provided in a reserve study report?
A) Level 1 Reserve Study (Full)- A Reserve Study in which the following five Reserve Study tasks are performed:
B) Level 2 Reserve Study (Update, With-Site-Visit/On-Site Review)- A Reserve Study update in which the following five tasks are performed:
C) Level 3 Reserve Study (Update, No-Site-Visit/Off-Site Review)- A Reserve Study update with no on-site visual observations in which the following three tasks are performed:
15) How often should a reserve study be
The state of Washington stipulates a cycle of reserve studies and updates. These necessary updates provide statutory compliance and allow for adjustments due to actual year-end reserve balance and the unpredictable nature of the lives of many of the reserve components under consideration. Professional reserve study analysts have to perform onsite updates at least every three years to be in compliance with the law.
16) How much do reserve
There is no set prices as there a number of variables that determine cost: number of units, what common assets are there, age of buildings, location, time of the year and type of study. For a very small association with few assets the price could be as low as $1,500 to $3,500 for a large association with assets such as pools, weight rooms, tennis courts, laundry etc. Prices increase with large assets, of different types, with more history to review and reconstruct, the difficulty factor begins to increase. We prefer to do reserve studies in the slower times and offer discounts and incentives in the "off-season" (Dec - April).
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