Despite being a booming sector, real estate has its instabilities. The constant ebb and flow of sales across the year often make it tough for realtors to manage and estimate cash-flow when there is a slow period. That is where real estate commission advance helps to minimize the strain of end-to-end costs such as recompensing the employees, paying overhead fees and bills, and funding advertising initiatives for getting new clients on board.
What is a real estate commission advance?
It can be best defined as a financial service that enables brokers or real estate agents to sell a chunk of their remaining commission for a particular charge. In exchange, they can procure a part of their commission capital before closing. However, a commission is not a loan. No credit check is needed here.
What is the difference between a bank loan and commission advance?
A realtor commission advance is not a loan because there are zero upfront fees involved and it need not be repaid. You need to view this as a selling part of the commission. In return for a flat fee, realtors have the chance to access the attained commission before the settlement date. As opposed to a bank loan that accumulates both monthly and daily interest, commission advance companies usually buy out a part of the commission at a standard amount. During the closing time, the repayment takes place automatically.
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What happens if the sale falls through?
Amidst a bouquet of positives comes a critical aspect to ponder on. Real estate agents aiming for a commission advance often mull over the consequences that can occur if ever the sale falls through. According to every realtor commission express company, a commission advance needs to be managed with accountability, when other channels of repaying the advance appear risky.
You can do this by either paying in part or in full, by sending the advance commission company a contract, or by requesting coverage for a cancelled sale. When you decide to substitute a cancelled deal, the company will charge you a new amount depending on the initial advance charge.
Why do real estate agents opt for a commission advance?
In the recent times, many realtors have resorted to commission advance to give their business a competitive edge and operate seamlessly. Here are few reasons for it:
Practical and economical
Waiting for the commission is one of the most significant challenges of this business. Every transaction involves a considerable amount of resources that comprise of money and time that can get exhausted at any point in time. Even though realtors might have their pending commissions, there are times when it is tough for them to keep operating without any cash infusion. That is where commission advance walks in as a practical solution, without which realtors might witness extreme downtime that might cost them on potential business opportunities.
A favourable cash-flow
A commission advance leads to easy cash availability. That, in turn, results in better liquidity for the business, translating in growth and profits by catering to the overhead costs and daily functional expenses. Since the addition to capital results in favourable cash flow, marketing, and other associated promotional initiatives, the company gains a positive momentum that results in a better business flow.Furthermore, it also generates the required space to develop the business by outgrowing the influence of commission delays post the closing of a deal.
Freedom from all kinds of debts
Gaining access to the earnings before using your own capital or taking out a loan helps to avoid debt. Since the real estate business system has delay inbuilt in its cycle, the moment you opt for credit, it propels you to take a bit more and then be entirely burdened by it. On the other hand, when you say yes to an advance commission company, the charges for selling a commission at a reduced rate is lesser than the interest you need to pay on credit cards.
Every company and real estate agent should market themselves, their brand, services, properties, and critical traits if they want to stay visible and viable in the real estate industry. Competition has increased manifold which has called in for ongoing and strategic marketing initiatives to attain a competitive advantage. Marketing comes with its own expenses that at times real estate agents cannot afford while awaiting payment. That is where resorting to a commission advance is a smart call. Along with marketing, real estate agents can also focus on online promotion activities.
Simply put, real estate agents count on commission agents to transform their pending commissions into money. Closings do not always take place on time. There are market fluctuations and changes that cause indefinite delays. In addition to that, the functional expenses keep going on. Commission advance companies provide reliable services to real agents to help them perform well in their business.
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