What is a contingency reserve account?

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

Operating funds are funds that our real estate brokerage uses to pay for our business. Operating funds are our money.  However, 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 repairs 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 property owner.

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 Rental Management Resources

Basics

Elementary information about what management services in Northern Virginia.

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Getting Started

Learn more about getting started with 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 landlords?

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Cost

A list of fees associated with rental management services in Northern Virginia

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Vetting

How Nesbitt Realty vets renters for landlords.

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Reserves

What is a contingency reserve account?

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Territory

Where does Nesbitt Realty manage rental investments?

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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 manager now.

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Do you want understand more about our local real estate market?

Our Guide to Real Estate is a free resource for anyone who hopes to find out more about Northern Virginia and neighboring areas.  The Guide to Real Estate includes facts about what has sold and what is currently listed, as well as many surprising facts that you might not know.  Furthermore, our Guide features many of the elements of life in Northern Virginia.  Of course, most of this is useful for buyers and sellers, but property owners and tenants will also find this information to be somewhat enlightening.

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