Commission Advances

Sealing that big real estate transaction after weeks or months of working on it can bring on an exhilarating sense of accomplishment. However, all of that excitement often fades away when you realize that the terms of your agreement leave you waiting another few weeks or months for your commission on the sale to arrive. You probably didn’t count on the inconsistent cash flow and not having any control over your paydays. 

Through the seasonal ebbs and flows, whether it’s a seller’s market, or a buyer’s market that fact never changes. You’re still stuck waiting for months on end to get paid. Covering your expenses while you wait on commissions owed to you can be difficult, so consider taking out a simple advance. Commission advances allow you to access the money you worked so hard to earn immediately rather than waiting for a cheque or bank transfer that is tied up in formalities.

What Is A Real Estate Commission Advance?

With commission advances, you can get your money right away instead of having to wait until the sale closes. Commission advance companies purchase your commission so that you can get your money now when you need it. Then, when your deal closes, you simply repay the loan. The ability to have your money in your hands when you need it the most gives you some financial freedom and the ability to get ahead.

How Do Commission Advances Work?

While all commission advance companies have their own application process, typically you can expect the following step to occur.

  1. Make sure your deal is completed and all the documents have been signed
  2. Find a real estate commission advance company to work with
  3. Submit an application, you typically need to provide…
    1. Personal information
    2. Government-issued photo ID
    3. Information about where the money will be deposited (i.e. void cheque, etc.)
    4. Trade record sheet for the sale
  4. The commission advance company purchases your future commission
  5. Then deposit the agreed amount (typically a certain percentage of your commission)
  6. Once you receive your commission in a few weeks or months you pay them back plus the fees you agreed to

Check out what is a merchant cash advance.

Requirements For Commission Advances

There are a few requirements for these kinds of opportunities. Lenders can’t hand out money just on the promise of a deal, so you will need to meet these rules before applying:

  • A completed sales agreement that is firm and advancing to closing
  • A set closing date
  • Immediate notification of any changes to the sale, its terms, or the date for closing
  • Proof of conditions being waived for the sale
  • Proof of your commission amount and the agreement for its payment so the lender can take over the transaction when it occurs

Check out these other ways to make money in real estate.

Benefits Of Taking Out A Real Estate Commission Advance

Keeping a real estate business running smoothly requires a steady flow of cash. Long closing periods make it tricky to space out payments. Commission advances allow you to benefit from:

  • Quick payment when you need it
  • Low fees and rates due to the fixed nature of the future payment
  • Basic requirements are easy to meet, unlike with other types of business loans
  • Few limits on the amount of payment, making it easier to cash in on large commissions
  • Coverage for a wide range of sales and deals, including new construction, condos, and other properties

If you are trying to decide on a lending solution for your real estate business, setting up an account for commission advances could help even out your cash flow over the months. This makes it easier to stay up to date on tax payments and marketing efforts. Multiple requests can be processed at once by most lenders.

Looking for alternative business funding options? Check out this article

Commission Advances Can Help You Market Your Business

Let’s face it, selling real estate is hard work. It takes a great deal of time and effort to market and sell a house. Business cards, signs, websites, seminars, newspaper advertisements, and open house flyers are expensive, and then you have showings and open houses too. If it’s been months since you’ve received a commission check, your budget might not allow for these marketing strategies.

With commission advances, you can spend less time worrying about where you’re going to come up with the money to pay for everything, and more time focusing on your marketing techniques and doing what you do best, selling houses. Every real estate agent knows that every penny put into marketing has the potential to generate more leads and sales.

When you’re waiting around for your commission, your business can become stagnant. Instead, taking out a commission advance gives you an opportunity to grow your business and soar to new heights.

Thinking of getting a business line of credit to manage your cash flow? Learn how to get a business line of credit

Commission Advances Can Help You Regulate Your Personal Finances

Just because you don’t have a regular paycheck doesn’t mean your bills can wait for your next commission check to come in. Falling behind on your bills and payments could lead to debt issues and even credit issues.

A commission advance can help you better control your cash flow and plan more accurately so that you can stay on top of your finances and manage your money confidently. They allow you to pay your bills when they are due, and not when your deal closes and your commission check finally comes in.

Real Estate Commission Advance FAQs

What is a real estate commission advance?

A real estate commission advance is a financial service that allows real estate agents to access their commission almost immediately, rather than waiting till closing. Depending on the service provider, real estate agents can get up to 95% of their commissions without having to wait till closing. 

How much can you get through a real estate commission advance?

The amount you can get in advance depends on the company. While some companies may offer advances up to $20,000, others may have no caps on the commission advance amounts.  

How much does it cost to get a real estate commission advance?

The cost depends on the company you’re asking for a commission advance from. Fees can range between 5% up to 25% or more. 

Are there any disadvantages to a commission advance? 

The main disadvantage to commission advances is the fees you incur. Cost can easily range between 5% to 25% of the amount you’re advancing.  Another major disadvantage of commission advances is that you have to repay the amount even if the home transaction doesn’t close or falls through. 

Bottom Line

If you’re having trouble making ends meet while waiting for your commission cheque, a real estate commission advance could be the solution you’ve been looking for. With it, you can get the money you need now to not only pay for home expenses but to promote your real estate business. 

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