A variety of scoring systems impact the housing market, particularly FICO scores that provide an assessment of a home buyer’s credit and can make the difference between a mortgage loan approval or denial and influence the mortgage rate offered to borrowers.
Now a new score, labeled “FiPHO,” has been introduced to help buyers and homeowners evaluate a condominium, co-op or homeowner’s association. FiPHO, which stands for Financial, Physical and Operational health, is a score from one to 100 that provides a snapshot of the association and its work. The higher the score, the stronger the association.
The score, developed by Association Reserves, an organization established in 1986 that has provided more than 70,000 reserve studies for associations, is part of a new database called Association Insights & Marketplace (AIM). The database has identified more than 400,000 associations.
Boards of directors of these associations can upload financial, physical and operational details of their associations to generate a FiPHO score. The financial health score is based on a review of documents to evaluate whether the finances of the association are sound. Additional records are required to generate a physical health score that reflects how well-maintained the community is, and an operational health score, which focuses on whether the association is running smoothly.
The board of directors of an association must complete their profile on the AIM site (for no charge) to have a FiPHO score generated. Ideally, associations will want to be transparent with owners and potential buyers. While the FiPHO score and AIM reports are free until Labor Day, eventually buyers must pay $49.99 for an in-depth report. The cost of the report is income for the Board of Directors, which is an incentive for associations to participate.
Buyers in condo, co-op and homeowner associations must be provided with association documents for free after their purchase offer is accepted. However, some buyers may want to review documents and discuss them with their lender, real estate agent and attorney before making an offer.
The idea for the FiPHO score started with the collapse of the Champlain Towers South condo in Surfside, Fla., in 2021, which brought to light the potential danger of condo associations that mismanaged funds and delayed maintenance.
“Last year’s tragic collapse of Champlain Towers South Condominium in Surfside, Florida is the most extreme example of what can happen when deferred maintenance is combined with an underfunded reserve account, and the Board of Directors and Owners are working at cross purposes,” Robert Nordlund, AIM’s co-founder and the founder and CEO of Association Reserves, said in a statement.
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