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.  Above all, 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 Springfield, 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 purchasers (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 repairs and other incidentals that occur during property management. Although the money is in our escrow account, the money belongs to the landlord. When the property management ends, that money is promptly returned to the real estate investor.

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.

Real estate investors 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.

 

Springfield Property Management Resources

Basics

Fundamental information regarding management services in Springfield.

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Getting Started

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Find A Tenant

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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 Springfield

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Vetting

How Nesbitt Realty checks the backgrounds of tenants for our clients.

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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

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Should you understand more about our area?

Our Guide to Real Estate is a helpful resource for anyone who wants to review important real estate information about Springfield and nearby communities.  The Guide to Real Estate compiles information about what has sold and what is on the market, as well as some surprising facts that you might not be aware of.  Also, our Guide spotlights quite a few of the assets of life in Springfield.  As a matter of course, most of this is interesting for buyers and sellers, but real estate investors and renters might also find this data to be very edifying.

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