How commission advances work for the commission economy
Of course, we all know the dynamics of commissions. While they may make for big paydays, their arrivals can often be unpredictable, even for the most productive and experienced agents. Delayed closings, derailed financing, appraisal problems, disparity in closing figures and any number of other issues can come between you and your commissions. Sometimes for weeks or months. It’s a persistent uncertainty that can lead to financial strain, higher credit utilization and higher borrowing costs as you seek to cover everything from the costs associated with running your business to your own mortgage payments.
That’s why more real estate brokers and agents are turning to commission advances to solve their cash flow problems. A commission advance enables brokers and agents to sell a portion of their pending future commission for a fee to receive immediate cash. Agents turn to commission factoring to solve a one-time cash flow squeeze or as an option to provide greater stability over the long term.
Advanced funds are usually sent to accounts within one or two business days of approval.
Unlike borrowing, a commission advance is not a loan. Typically the advance company will evaluate the merits of the advance application based on your track record and the specifics of the underlying sales contract.
But not all advances are created equal. Some companies charge additional fees for account set up, domestic wires, processing, document handling, and other charges. And a seemingly low fee can grow quickly if the advance agreement is structured so fees compound over time – a clear concern if you’re factoring against a closing that could be extended. Some advance companies may offer a brief grace period before charging additional fees.
Any fees should be automatically paid at final closing by the escrow or settlement company with no out-of-pocket costs to you unless the total, including any fees, are greater than your total net commission.
Most commission advance providers charge between 7% and 20% of the amount advanced, usually based on the estimated time until closing. Agents and brokers should be wary of companies quoting at the higher end of the range as, especially as at that point, there are more cost effective alternatives.
Advance your commission with Tongo
Tongo is not your standard commission advance. Tongo is fast, private and flexible. We work directly with agents, so brokers and escrow/title are never asked to sign off or even be involved. Once a deal is approved in Tongo, an advance limit is created which users can access either by pushing funds directly to their checking account or by using the Tongo debit card anywhere Visa is accepted. When the deal closes and the agent has received their commission they repay Tongo directly. Fees are as low as 3% for 30 days and there’s never any additional or hidden fees so you only pay fees on what you use. In the event a deal is delayed or falls through, repayment just rolls to the next commission. If you’re interested in working with Tongo, click here to get started. If you have questions feel free to reach out here.