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One of the most common questions we receive at Delta Appraisal is for clarification on the difference between a reserve fund deficiency or shortfall and the adequacy of a reserve fund. Many reserve fund planners utilize these terms in different ways, so the following applies only to studies done by Delta Appraisal. The easiest way that we have found of describing a shortfall in the reserve fund is that there is more estimated depreciation in the reserve fund components than there are available funds in the reserve fund. An adequate reserve fund is one that has sufficient cash resources to fund the estimated potential repairs and replacements, including contingencies and some unforeseen events. At Delta Appraisal, we don’t apply a set percentage to determine the adequacy of the reserve fund; we look at each property on an individual basis. Some of things that we take into consideration are; the current age of the property, overall general condition, recently completed capital expenditures, maintenance practises and estimated upcoming expenditures. Having a reserve fund shortfall or deficiency does not necessarily mean that a reserve fund is inadequately funded. This is where we at Delta Appraisal apply our expertise to determine whether or not the reserve fund is adequate. We work with property managers and board members at Delta Appraisal, to set realistic budgets and to prioritize maintenance and repair projects. Our Reserve Fund Studies are unbiased and we are not competitors in property management or maintenance. For more information about Delta Appraisal and our easy to read, functional Reserve Fund Studies or to request a competitive quote, please contact us. Thank you for taking the time to read our newsletter. If you have a topic that you would like to see in a future newsletter, please let us know. We are always looking for new ideas and would be happy to give you credit for your topic. Please send your ideas to delta@telus.net.
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