Who Is a Commission Advance For?
A commission advance is a service that allows a salesperson who works on commission to sell a portion of their pending sale in exchange for a fee. Commission advances are a popular financial solution for real estate agents who need quick access to cash and have a pending sale.
How does a real estate commission advance work?
A real estate commission advance works by following seven simple steps. Similar to a loan application (though a commission advance is not a loan), a request for a commission advance starts with signing up and submitting an application. The application includes the agent’s contact information, along with the details of the deal. Next, the agent’s broker must sign off on the advance since the broker is the one entitled to the commission first. Once the agent, their broker and the advance company agree to the terms of the advance, the money is sent to the agent. At closing, the broker repays the advance company directly (including any applicable fees).
How can you use a commission advance?
You can use a commission advance however you want. Some agents will leverage a commission advance to grow their business by investing in marketing to get more listings. Other agents might use a commission advance to cover personal expenses. One benefit of a commission advance is that you can use it how and when you need it, just like any other income you earn.
When and why might you need a commission advance?
As a real estate, you’re used to working on commission, not salary. Though the potential upside of working on commission far exceeds a salaried income, it also comes with a lack of predictability and stability. So, while you might have a great month with three, four or more closings, it’s also possible to go several months without any income.
Unfortunately, your income can grind to a halt, but your expenses won’t. If and when your commission dries up temporarily, a commission advance can help support your immediate cash flow needs. Say you want to continue investing in paid leads but don’t have the cash to pay this month’s invoice. Instead of losing those leads, you can take a commission advance on your pending deal to continue building your pipeline. Maybe you want to attend a conference or take an educational course. There are countless ways agents can utilize the funds from a commission advance — how you choose to spend it is up to you.
Conclusion
A commission advance is a useful financial product for any real estate agent. The traditional banking system isn’t designed for those working on commission, which is where a real estate commission advance can come into play. Unlike a loan or other traditional banking solutions, a commission advance doesn’t negatively impact your credit. A commission advance is also a faster solution than a traditional loan, and in many cases, you can receive the funds in under 24 hours. Since real estate agents almost always work on commission, cash flow problems are common. When the need arises, a commission advance is a quick and easy way to bridge the gap and help agents cover their personal or business expenses.