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.  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 Luray, 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 property owners.

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 rental management. Although the money is in our escrow account, the money belongs to the landlord. 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.

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.

 

Luray Rental Management Resources

Basics

Fundamental information about what property management in Luray.

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Getting Started

Learn more about getting started with property management

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Find A Tenant

List your property to rent to find a reliable renter in Luray fast.

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Accounting

How does Nesbitt Realty keep track of income and expenses for property owners?

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Cost

An overview of fees associated with rental management in Luray

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Vetting

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

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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 manager now.

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Should you know more about our area?

Nesbitt Realty's Guide to Real Estate is a free tool for anyone who wants to learn more about Luray and nearby communities.  The Guide to Real Estate compiles data regarding what has sold and what is currently listed, as well as many compelling facts that you might not be aware of.  And, our Guide has some benefits of living in Luray.  Of course, most of this is helpful for purchasers and sellers, but owners and tenants may also find these tools to be somewhat informative.