10 Questions to Ask Before Hiring an HOA Loan Advisor

Asking the right questions before you hire help with an HOA loan is the cheapest due diligence your board will ever do. Ten questions and a single call, and you can tell a firm that will work for your community from one that won't. We have been on both sides of this conversation since 2016, and the answers that should set off alarms are surprisingly consistent.

Use these in your next interview, and watch for the red-flag answers as much as for the good ones.

Question 1: How Are You Paid, and by Whom?

How a firm is paid shapes every answer that follows, so ask first and ask for it in writing: who pays you, when, and does what you earn depend on which lender wins? Our answer: The association pays our fee at closing, and it can come out of the loan proceeds. The fee is quoted up front in our engagement letter and doesn't change based on which lender wins. No lender pays us. If the loan doesn't close, there is no fee. For the longer version of this test, read what unbiased advice actually means in HOA lending.

Red-flag answer: "don't worry about it," or "the bank pays us, you don't need to know the amount."

Question 2: Which Lenders Will Look at Our Deal, and Why Those?

HOA lending is a niche business. It takes expertise, experience and underwriting know-how. Plenty of banks say they do it, but not all have the team or the experience behind it. Each lender underwrites differently, so the loans available vary from lender to lender, and the lender that fits one association can be the wrong one for the next.

So ask directly: which lenders do you expect to look at our deal, and why those? A good answer is specific to your association: its size, its location, the project and the state of its finances. Ask, too, who will receive the file before it goes out. A count of lenders tells you nothing on its own. A short list with reasons tells you the firm has read your file.

That is how we work. We take each file to the lenders most likely to approve it. We get an indicative yes or no from lenders before a full submission, so a decline doesn't damage your association's standing with other lenders.

That step matters because a decline doesn't always stay with one lender. Lenders talk to each other. Some applications ask whether the association has been declined before, and for some lenders a yes to that question means an automatic decline. Sending an application to too many lenders can taint a file that could have been approved.

Where more than one will compete for it, we bring the offers side by side. Sometimes that means several offers; sometimes it means the one lender that says yes after others have said no. For more on how that works, read why the lender network matters more than any single bank.

Red-flag answer: a promise of a stack of competing offers on every deal, or a lender count with no reasons behind it. Sending a file to every bank is not a strategy.

Question 3: What Happens If Our Reserve Study Is Weak?

This question separates firms that know HOA underwriting from firms that treat an association as one more commercial borrower. A reserve study more than three years old is generally considered outdated. A firm that knows its lenders has two answers ready: which lenders will look past it for the right file, and how each would price the extra risk.

Red-flag answer: "every lender is different, we'll figure it out." Real expertise names which lenders will look at the file and what the weaker study is likely to cost over the life of the loan.

Question 4: Can You Show Us What Terms Look Like for a Community Like Ours?

Before your board commits to anything, it helps to see what lenders are offering associations like yours: the rate, the term, how the loan is repaid, the fees and the prepayment terms. A firm that does this every day should be able to show you, once it knows the basics of your association.

After a few prequalifying questions, we can show your board a comparison of the typical rates and terms we're seeing for similar associations. It gives the board a realistic starting point before anyone applies.

Whatever you're shown, look for a balloon. A balloon means the loan matures before it is fully repaid, so the balance left on that date has to be refinanced at whatever rates are doing then. We don't place associations in balloon loans, and we help refinance associations out of them.

Red-flag answer: a specific rate promised before the firm knows your association's size, delinquency or reserves.

Question 5: Who Do You Walk Away From?

This is the question that surprises most firms, and the answer tells you whether the firm will protect your community from a bad deal. A firm that will close anything is not your advocate. The right answer names the deals it turns down, and why.

Ours: associations where delinquency is over 20%. If your delinquency is over 20%, it's still worth a conversation. Delinquency is often calculated incorrectly, or the aging report gets read the wrong way, and each lender reads that report a little differently.

We also turn down communities where one owner or entity holds a large share of the units; communities the developer still controls; and files where several weaker factors stack up, such as a small number of units, a small loan and some delinquency. Telling a board that early is part of the job.

Delinquency matters because the loan is repaid from assessments: when owners stop paying, the money behind the loan shrinks. Here is what happens if an association defaults.

Red-flag answer: "we do not walk away, we find a way." That is a sales line. A firm that has never walked away from a deal has either not done many or is willing to close ones the board will regret.

Question 6: Who Runs Our Deal From First Call to Closing?

The board should know the person running its deal: a name, a direct line and a direct email, not a case number or a rotating pool of associates. A loan takes weeks, and every handoff means re-explaining your association to someone new. At HOA Loan Services, Larry or Ben joins board calls when the board needs us.

Red-flag answer: "you'll be assigned a team." Ask who, by name, and whether that person stays through closing.

Question 7: If More Than One Lender Offers Terms, How Will We Compare Them?

Where more than one will compete for it, we bring the offers side by side. A useful comparison is one document, not a stack of PDFs: rate, term, amortization, fees, prepayment terms and the all-in cost over the life of the loan, so the board can decide in one meeting.

Red-flag answer: raw term sheets forwarded to the board with no comparison built.

Question 8: Can We Walk Away Without Owing Anything?

A board should keep the right to turn down every offer and owe nothing. Read the engagement letter for it: some firms advertise no upfront cost but add a minimum fee, a work fee or an exit fee if the board decides not to close. Ask directly: if we see the offers and choose not to proceed, do we owe you anything at all? The answer should be no, in writing.

Ours is no. If the loan doesn't close, there is no fee, and there are no retainers or cancellation fees. Our fee is the same whichever lender wins, and because we are paid at closing, we earn nothing when a board decides not to borrow.

Question 9: Will You Help Us Decide How Much to Borrow?

A good firm helps the board size the loan before anyone applies, not just place it. We have seen boards under-borrow because they used the contractor's bid number without adding a contingency. For how to work out the amount, the structure and the source, read how to choose the right HOA financing.

Question 10: Does Our Board Need Outside Help at All?

Not every association does. A board with a long banking relationship and a simple project can close cleanly with one quote. But most boards borrow rarely: we have placed hundreds of these loans, and your board is probably doing it for the first time. A competitive process can improve on the first offer, and if you go out on your own, get declined, and come back to us, we may not be able to go back to that lender. For how the two routes compare, read going direct to a lender vs. working with outside help.

Red-Flag Answers to Watch For

• The fee is discussed only verbally, or changes when you ask a second time
• No reason given for which lenders will see the file
• A promise of competing offers on every deal
• Offers arrive as a stack of PDFs with no comparison built
• The board is passed among several different contacts during the process
• The engagement letter carries a minimum fee, an exit fee or a work fee
• The firm won't say whether its fee depends on which lender wins

Any one of these is a warning. Two or more together mean the board is about to sign an engagement that will cost more and deliver less.

Putting It Together

Ten questions, one call. If a firm answers them specifically, you have someone worth a longer conversation. If it stumbles on more than one, keep looking. Send these questions to any firm you're talking to, and ask for the answers in writing.

If you want to put them to our team directly, Larry Kirschner and Ben Kirschner take inbound consultations, and we answer all ten on the call. Schedule a free consultation.