What Is A Commission Advance, Exactly?

I know, I know. The name is pretty self-explanatory. You get your commission before you would otherwise get your commission. Nothing tricky about that at all. This is just a simple agent commission financing tool. But how does it work? Why is this a mutually beneficial transaction? What are the risks, costs, and issues associated with receiving (and providing) a commission advance? Read on for answers to all of these questions, and more!

As an overview, here are some main takeaways:

• Up to 75% of your commission can be funded

• There are no credit checks

• There is no out of pocket charge or deposit

The first step in the process is, unsurprisingly, getting a property under contract. If you’ve already done that, you’re ahead of the game. Congrats! Once you’ve done this, you’ll fill out a quick application to cover the basics. This should take you no more than 30 seconds to do. If you’d like to speed up the application process, you can pre-upload required documents, such as the purchase agreement, the MLS listing, etc to submit along with your contact info.

From there, both your transactional history as an agent or broker and the specifics of the transaction on which you are requesting a commission advance will be reviewed. Once accepted and approved by your broker (or by you, if you are your own broker), this entire advance amount is funded within 24 hours. Simple as that. No lengthy employment history to summarize, no credit checks, and no massive stack of loan documents to sign.

When escrow closes, the advance is paid back (plus the advance fee) through the closing, so you don’t ever need to come out of pocket. If your escrow falls through, you can simply switch your advance to another escrow for a minimal fee (no hefty penalties or immediate payback requirements).

There are a number of reasons why this would be beneficial to real estate agents. With recent regulatory reform impacting and delaying transactions due to TRID disclosures, a commission advance can help agents stay on budget with marketing, prospecting and the administrative expenses of running a business. Commission advances can also be used to solicit additional business in the geographic proximity of the existing escrow to brand the agent as a top producer in the area.

Is this strategy unconventional? Sure. Do you really need the money? Probably not. But everyone could use some extra money at some point, and it is nice to know that commission advances are available when needed.

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