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 fund our business. Operating funds are our money.  But, 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 savings to pay for maintenance and other incidentals that occur during rental 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.

Landlords 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

Basic information regarding rental managment 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

List 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 property owners?

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Cost

A list of fees associated with rental management in Northern Virginia

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Vetting

How Nesbitt Realty checks the backgrounds of renters for landlords.

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Reserves

What is a contingency reserve account?

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Territory

Where does Nesbitt Realty manage rentals?

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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 understand more about this area?

Our Guide to Real Estate is a free resource for everyone who needs to investigate real estate facts about Northern Virginia and surrounding areas.  The Guide to Real Estate compiles information about what has sold and what is on the market, and some shocking facts that you may not be aware of.  In addition, our Guide features many of the assets of residing in Northern Virginia.  Naturally, all of this is useful for buyers and sellers, but landlords and renters should also find these tools to be quite edifying.