The answer is simple – Results and communication. Not all collection agencies are the same. Checking with your local Better Business Bureau is recommended. Additionally, selecting a firm is equally as important.
As a full service collection agency, our primary success comes from two separate but distinct approaches. Our first focused approach is to be proactive rather than reactive. Our second focused approach is pursue the owner individually for recovery, whenever practical – skip the foreclosure route all together and seek a “money judgment.”
Collection agencies can do just that. Provide results. To use a familiar phrase, it’s “Show me the money.” Not to compete with law practices, but rather to compliment their services, when necessary, collection agencies utilize a lawsuit as a means to get to the desired result – payment.
Asking these questions and having a collection plan when a file first becomes delinquent can result in positive cash flow back to the association. You too can implement these processes to increase your cash flow and decrease your outstanding accounts receivable.
The results will vary from file to file and association to association, but the steps are almost always the same. There are key indicators, that when reviewed can determine the overall collection processes to be followed to recovery.
- Is the property protected by homestead exemption?
- Is the property currently occupied by the owner, a rental tenant or empty?
- Has a Lis Pendens been filed on the property?
- Is the property mortgaged for more than the current appraised value? If yes, what is the difference?
- Is the homeowner paying their other bills? i.e. credit cards
In reviewing these answers, a targeted collection approach can be designed. In most cases, it’s a matter of educating the homeowner of their obligations as well as to the options of the association. Most homeowners are not aware that they are in “breach of covenants” and that the association may have a right to file a lawsuit against them individually.
The biggest misnomer from homeowners is that they are in bank foreclosure and do not believe they are responsible for association fees – even if still residing in their homes. Banks are not foreclosing and associations are stuck holding the bag.
Let’s talk about the cost of collection without the use of a lawsuit. Most collection agencies will work on contingency fee basis. NO RECOVERY, NO FEE. IT REALLY IS THAT SIMPLE.
If you have recorded Claim of Lien, turn it over to a collection agency. The association really has nothing to lose.
The biggest obstacle to overcome with boards and property with boards and property managers is the cost of collection vs. the result. Most collection agencies will provide all the services on a contingency fee basis.
Communication is the next tool. Collection is a process. In every case, it’s methodical and detailed. The same steps have to be repeated file by file. Based on the availability of information, research time can take hours for each file, then the files have to be reviewed by a collections expert and a specific plan determined for each file.
Collection agencies manage a collection process. Law firms manage a legal process. Let each professional work for you as a team in the respective fields. The two can work very well together to reach the desired result – putting the “check” into your association.