Real estate agents and brokers make their living off commissions from properties sold. However, once a sale has been negotiated between a buyer and seller, delays prevent such real estate professionals from receiving commissions right away. There is usually a wait until closing can happen, and that closing date can sometimes be pushed back further due to scheduling conflicts and other factors. Sometimes, that wait can extend for weeks.
Real estate agents and brokers can often be stuck with cash flow issues while they wait for such pending commissions. In the past, their only recourse was to wait for the transaction to be complete. However, real estate advance companies can give a portion of the agent’s or broker’s expected fee from pending real estate transactions, so they aren’t subject to the delay.
For real estate agents and brokers who aren’t familiar with real estate commission advances, the process works like this:
- Agent applies to funding company
- Once the application is received, the underwriting process begins
- Submittal of relevant paperwork is then verified
- Funding is released to the real estate agent
Every property has a unique story on how it was sold. Outside factors (like interest rates, property taxes and housing inventory) can contribute to how sellable a property is. Realtors must deal with this, plus any issues that a particular property or client can bring (new vs. old property, personal tastes of prospective buyers, location, and so on). They alone carry the financial cost of listing and showing the property. Then, they must spend their time whittling down prospective buyers to serious ones, then getting a firm offer and finally getting property sold. The whole process can take months and that is all before they receive payment.
Timing is everything and to be successful in real estate – it takes dedication, speed, and flexibility. An infusion of capital at the right time can make a huge difference, which is why commission advances make sense. They are a quick and timely option for agents to access funding denied to them by traditional lenders who won’t loan against such commissions.
Real estate agents and brokers live very busy lives. They are intensely focused on selling their inventory and acquiring listings for future properties. Commission advances help make short-term and long-term goals attainable, like increasing their marketing budget for current listings, staging properties to acquiring office space, or adding more agents to their firm.
The real estate commission finance industry has grown over the last decade. Besides commission advance companies that fund directly to the real estate professional, there are third-party brokers who act as intermediaries between the real estate agent interested in a commission advance and the actual funding company. Any real estate agent and broker considering using commission advances as a financing option should be aware of the huge third-party broker presence, as they charge fees above what a direct lender will.
According to most organizations and news reports on the housing market and other economic indicators important to real estate agents, the economy is stronger than ever. The Real Deal, a New York City based real estate publication, published an article about the real estate commission advance industry in 2009. The San Diego Tribune also covered the trend in an article published in 2011. It’s evident that over the years, more real estate agents and brokers use commission advances as a viable option to assist them. Most agents may know a little about real estate commission funding, but it’s important to fill in the blanks for those who want more detail about it. You never know when you could use it!
Joseph Genovesi is the President of Commission Express- Mainline, a subsidiary of Balanced Bridge Funding. Commission Express-Mainline is a real estate commission funding company that provides advances to real estate agents and brokers based on their expected commissions in parts of Pennsylvania and the entire state of Delaware. Commission Express-Mainline released their publication titled The Essential Guide to Real Estate Commission Advances. Real Estate brokers and agents in Pennsylvania and Delaware interested in getting an advance on their fees can email [email protected] or call 267-769-0747.