Mortgage

Find out how commission advance provides liquidity to real estate brokers

No transaction in real estate can be complete without the assistance of real estate agents or brokers.  Although it might sound like an exaggeration, one has to admit that the ease with which people can buy or sell property today has become possible due to the role played by real estate brokers. From listing your property, marketing it to the public, making price negotiations and sharing the experience during negotiations, they would do everything necessary for speeding up the process and driving it towards a meaningful conclusion.  They follow the transaction closely, liaison the title work, and even deal with home inspectors to ensure that the deal goes through without any hiccups. The involvement of the brokers makes life easy for buyers and sellers, which is why their services are in so much demand today.

The commercial and legal processes involved in property transactions need skilled and experienced people who know the tricks of the trade and well conversant with the procedures. Brokers are not only mere marketers but also facilitators of the process of property transaction that they make smooth and safe for their clients.  They are excellent negotiators and deft in handling contracts that has intricate legal as well as commercial interfaces woven into it. Most importantly, real estate brokers can help you save money, but only some can do it and not all.

The pain area

What you pay to brokers is just a small fraction of the property value, but the service you get is worth much more. Despite so much of hard work, brokers have to wait long to receive commission payments as they get the money only when the property exchanges hands successfully.  Thus, earning from the commission is a time taking process for brokers and is the pain area of their business.  Institutional or traditional business funding is not available for real estate brokers due to the high-risk market they operate in, and they have to arrange for their funds to run the business. The credit lines of banks remain out of reach of brokers.  Against this backdrop, it becomes important that brokers can roll back their earning into the business quickly for providing the funds, but the delayed commission payment cycle often creates a bottleneck.

The solution

 How do real estate brokers manage to run the business is perhaps the question that must be going around in your minds. Since the usual methods of business financing are out of bounds for brokers, it does not mean that it is the end of the road. An alternative method of funding created exclusively for real estate brokers is now available in the form of realtor loans commissions. It is a special financial arrangement that allows brokers to have quick access to the commission instead of having to wait until the transaction completes. Since brokers do not have any control on time taken for completing deals, the arrangement provides a breather to them as they can access the money as soon as they sign the deal and use it for propping up their business.

Addressing the cause

The advance commission is a special financial package customized according to the needs of brokers. It is completely different from other methods of providing financial assistance to business because it is neither a credit line nor a loan. The only similarity that it has with loans and credit lines is that you have to pay back the money within a stipulated time. Otherwise, it is strictly an advance given against committed earning with the sole purpose of expediting payment.

To avail the facility, you need not engage in a lengthy procedure, as you would have done for receiving other kinds of financial assistance. Just by submitting the proof of the deal undertaken for buying or selling a property, you become entitled to receive a major part of the commission arising from the deal. By cutting off the delay in realizing the commission payment, the arrangement of commission advance eradicates the cause that weakens the financial standing of brokers.

It is not new

By comparing commission advance with other methods of financing, it might be something new, but it is only a modified application of another method of financing beyond loans.  The trading community uses the facility of bill discounting that has features similar to commission advance.  In bill discounting, the trader offers the invoice for sale to some financier who agrees to buy it for a discount and pays the trader a major part of the invoice value upfront by charging some fees that they deduct from the amount payable.

In commission advance, there is striking resemblance with bill discounting in the structure as well as the mode of payment with specific changes in documents as the document of sale replaces the sale invoice.