Real estate agents find it difficult to avail business loans. The volatile nature of the real estate industry and the uncertainty of income that real estate agents have to face are reasons why banks and other financial institutions are reluctant to offer any credit lines or loans to them. While this may seem to be a disadvantage for the agents, if you analyze the aspect closely, you would discover that it is a blessing in disguise.
Debts can become quite menacing for the business of real estate agents whose income is solely dependent on commissions from sale only. How then would real estate agents ensure a steady flow of cash that keeps the business going? With some financial companies have come forward with the offer for buying a commission from real estate agents at a discount, the liquidity of the business gets a boost.
What is selling of commission?
Instead of borrowing money to reinforce the business finances, real estate agents can use a smart way of rolling back their own money into a business with the help of commission advances. Since the commission is payable to agents only on deal closure, there is a considerable gap between the time of signing the sale contract and receiving the commission. Instead of waiting to earn the commission, agents can now approach the financial company to sell the pending commission that they would earn from a contract to the financial company for a discount. The sale can happen immediately upon signing the sale contract document, and the agent receives the commission immediately without having to wait for closing the deal.
How to pay back
Whether to sell the entire commission or a part only, is a decision that the real estate agent has to take. Since there is a capping to the amount of commission that the financial company is willing to pay in advance and business needs can vary, it is essentially a business call that real estate agents have to take. The standard norm for paying back the advance amount to the financial company is 30 days with a grace period of 15 days from the deal closure. In case the deal falls through, and the sale is canceled, the agent has to pay back the money from some other source or offer a replacement contract to replace the earlier one that had to be scrapped.
Taking multiple advances
As long as you have a valid sale contract from which you earn commission, you can offer multiple contracts to the financial company for availing the commissions in advance. However, the total amount of advance commission has to be within the maximum amount that the company has fixed for the advance limit. This can vary from one company to another as also the special discount offered to first-time customers.
The arrangement of the advance commission has brought a great reprieve for real estate agents who have found a sound method of financing to meet the cash flow challenges of business. They can now keep investing in a business with their own money.