There is little doubt that agents are having to learn new skills to survive the delays that are taking place in closings. Of course, short sales approval timelines have created an entirely new dynamic in the real estate market - placing any expected settlement date on these purchase and sale agreements can become an exercise in clairevoyance. But even the "typical" sale, with no contingencies, can become an exercise in patience. A recent article from msnbc.com on how difficult it is to qualify for mortgages illustrates that the tightening of credit hasn't simply reduced the number of buyers in the market but has lengthened the time it takes approved buyers to close. This is on top of the regulatory hurdles resulting from the HVCC and RESPA. Not only are the "good old days" of quick closings a thing of the past, it looks like we should expect most closings to take 45 - 75 days from now on.
Aside from the frustrations that closing delays cause for buyers and sellers, agents and brokers need to figure out how to keep their business momentum up while they manage through the delay. The delays often require attention from the agent to ensure that the paperwork is getting to the lender quickly, that the appraisal is getting done and to all parties, that the inspection (and any conditions from FHA or HUD) is being acted on. All of this at the same time other clients are looking at 50 homes to choose the right one or three new listings need to be marketed. It all strains the capacity of the average (or above average) agent.
And where is the agent supposed to get the cash flow to continue operating while they wait for these closings? The delays create a new business balancing act - how to keep paying the bills while waiting for the commission. With credit lines strained and household incomes down, agents need to look to all available sources for cash flow. Commission advances are a critical lifeline for experienced agents who understand the likelihood of their transactions closing and want to maintain their business investments. Commission advance companies purchase the commission receivable on pending transactions and then collect the commission when the transaction closes. When looking for a commission advance company, look for 3 things:
1) A company that is interested in you as a client, preferably one that is in your locale
2) A cost that is predictable, with terms that don't nickel and dime you to death
3) Flexibility - with closing delays inevitable, will your advance cost more if closing is delayed 15 - 30 days?
Closing delays may be changing traditional cash flow patterns for agents - but that doesn't mean that the cash outflow requirements have changed. It simply means that agents and brokers need to be more creative and flexible in managing their cash flow, leveraging every asset at their disposal - including their commission receivables.
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