What is a contingency reserve account?

Do you know the difference between contingency reserves and operating funds?

Operating funds are monies that our real estate brokerage uses to pay for our business. Operating funds are our money.  Conversely, escrow funds are different.  Escrow funds are monies that Nesbitt Realty is holding on behalf of tenants, landlords, buyers and sellers. Escrow funds are not our money, but they are monies that we are trusted to safeguard. At any given time, Nesbitt Realty has hundreds of thousands of dollars in escrow accounts.

In Northern Virginia, the Commonwealth of Virginia requires that all real estate licensees manage escrow funds in a particular manner. Most importantly the Commonwealth requires that escrow funds are properly accounted for at all times. In additional all escrow funds must be kept separate from operating funds.  The biggest portion of our escrow funds are tenant security deposits, but also hold deposits for buyers (and sometimes sellers) as we'll as contingency reserve funds for real estate investors.

Contingency reserve is a special type of escrow.

A contingency reserve account is money that is held in escrow to pay for maintenance and other incidentals that occur during property management. Although the money is in our escrow account, the money belongs to the real estate investor. If the property management ends, that money is promptly returned to the landlord.

When a repair bill arises we use money in the contingency reserve account to pay that bill.  When bills are paid in this manner the account is depleted.  When the account is missing funds, at the end of the month when new rents are paid, Nesbitt Realty replenishes the count with money withheld from this rent. As property managers, Nesbitt Realty prepares a statement each month to show if/when money is depleted and how/when money is replenished into the contingency reserve account.

Property owners do not pay us money to set up the contingency reserve account. Instead, Nesbitt Realty withholds money from the first month of rent in order to set up the account.

 

Northern Virginia Property Management Resources

Basics

Elementary information regarding management services in Northern Virginia.

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Getting Started

Learn more about getting started with rental property management

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Find A Tenant

Market your property to rent to find a reliable tenant in Northern Virginia fast.

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Accounting

How does Nesbitt Realty keep track of income and expenses for real estate investors?

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Cost

An overview of prices of rental management in Northern Virginia

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Vetting

How Nesbitt Realty checks the backgrounds of tenants for landlords.

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Reserves

What is a contingency reserve account?

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Territory

Where does Nesbitt Realty manage property?

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Clients

Who uses Nesbitt Realty management services?

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Contact

Call (703)765-0300 to speak to a property management specialist now.

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Do you need know more about our area?

Our Guide to Real Estate is a handy resource for everyone who wants to investigate real estate facts about Northern Virginia and neighboring communities.  The Guide to Real Estate compiles data regarding what has sold and what is currently listed, as well as a couple of surprising facts that you may not be aware of.  Furthermore, our Guide features many of the fundamentals of residing in Northern Virginia.  Definitely, all of this is interesting for purchasers and sellers, but rental investors and tenants will probably also find this data to be somewhat sobering.