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 fund our business. Operating funds are our money.  Still, 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 Warren County, 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 repairs and other incidentals that occur during rental 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 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.

 

Warren County Rental Management Resources

Basics

Basic information about what property management in Warren County.

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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 renter in Warren County 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

A list of fees associated with rental management services in Warren County

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Vetting

How Nesbitt Realty vets 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 the local real estate market?

Nesbitt Realty's Guide to Real Estate is a free resource for everyone who wants to learn more about Warren County and nearby communities.  The Guide to Real Estate has information about what has sold and what is on the market, as well as some compelling facts that you might not be aware of.  In addition, our Guide features quite a few of the fundamentals of living in Warren County.  As a matter of course, most of this is interesting for purchasers and sellers, but real estate investors and renters will likely also find this information to be very enlightening.