The secret to running a successful business lies in channeling the funds appropriately. The same holds true for the real estate industry. Similar to other sectors, a real estate business takes time, effort and considerable funds. However, realtors have to wait a long time to receive their commission, and it can cause cash flow disruptions. In such a scenario, brokers or realtors need financial assistance to work out their business plans.
It is tough for real estate agents to foresee their earnings beforehand! Factors such as interpersonal abilities, negotiation skills, sales, local market conditions and work ethic also play a critical role. Hence, to be able to set up a real estate business that caters to a realtor’s individual expectations is subject to consistent effort and time. A real estate commission advance helps to boost the cash-flow management. It further ensures that realtors have the required working capital to support their business plans and make necessary investments.
Funding your realty business
Reality experts and economists estimate that realtors usually spend about $500 to $1,500 at the start-up expenses. This amount is not inclusive of the money that goes into earning the credentials required for starting a real estate business. Few of the costs comprise of the following:
- Marketing materials
- Office rental charges
- Ongoing education
- Website management
- Listing costs
Few other aspects that need mention here are transportation expenses, technology costs (software and hardware) and many other allied costs of business development.
Managing cash is a challenge for realtors. Most banks today have rigid underwriting needs for loans. It compels many companies to generate funds by transferring their receivables to cash via factoring. The factoring companies usually offer working capital to several industries. This financing helps organizations to streamline their cash-flow. In the case of realtors, they need to convert all their future realty commission into cash through a realtor commission advance.
The way a commission advance works
Many companies offer cash advance for real estate agents. Realtors and brokers can receive the financial assistance by applying for the same. They can submit their application by email, fax or mail. The company usually provides the necessary guidelines along with a document list that applicants need to submit. Here are some interesting details about this process:
- The application and approval process does not require any credit check
- The amount is paid during the time of closing
- The process does not need any upfront charge or fees
Once you submit your application, the commission advance company will review and verify the document. Post application sanction, realtors might get the money on the same day. Usually, the fund is received within 48 hours.
Why realtors go for commission advance
There are some significant benefits of obtaining commission advance. Realtors can get the money as soon as they sign a deal. They can use it to finance their advertising and marketing initiatives or other business processes. Furthermore, with this fund, realtors can:
- Invest and expand the business even before the sale closes
- Make all their payments on time
- Project their income with greater certainty
- Reduce the business debts
Addressing short-term funding choice
Commission advance can be an excellent solution for short-term funding. Other alternative tools such as loans or credit card advance tend to be time-consuming and costly. The best commission advance companies provide the financial aid at a low service cost within a day.
Realtor commission advance cost
Commission advance providers get a discount fee as service charges. It is based on the state laws of your region. For instance, if you are in Colorado, you can expect the fee to be between 5% to 14%. The same gets charged on the realtor’s commission. Usually, realtors get 60 to 120 days to cater to the re-buying obligations. Furthermore, the advance received by the realtor includes their share of realtor commission amount minus a reserve/holdback and discount fee. It is interesting to note that the holdback is equal to the receivable percentage. Realtors get the holdback when they pay off the commission.
What happens when the realtor settlement gets paid off or does not close within the repurchasing time? Such instances cost realtors an extra charge. Real estate agents have the scope to substitute the receivable amount with any other transaction. Real estate brokers and agents are required to maintain a positive cash-flow to function seamlessly. Converting the illiquid receivables into a valuable real estate commission advance is an apt way to grow and enhance the business.
The real estate industry holds promise for lucrative deals. Since competition is acute, it is essential for real estate agents to maintain a smooth business flow. They also need to be ready for new business deals. That is where a real estate commission advance can help in making strategic business decisions for growth and everyday operation.