Not all Commission Advance Companies are Alike

Not all Commission Advance Companies are Alike

There are two truths in the real estate business

1) There will always be buyers and sellers of homes

2) Real estate agents will always need cash flow to help their clients buy and sell homes

And thus, commission advances were invented – first by brokers who were trying to help out their agents through the ups and downs of the market and then by independent companies who formed to be a substitute or replacement for these awkward broker relationships. You probably see ads for these independent companies constantly – in your email, on Facebook, in your web searches. They have so many different names, all some variation on “commission” or “advance” that you have to wonder whether there is any difference at all between them. Well, most of them are the same but the exceptions make some exceptional.

Here’s what is true of all commission advance companies:

1) They are factors of receivables – this means that they are in the business of purchasing business receivables at a discount. And all active real estate agents have receivables at one time or another – once the agent gets mutual acceptance on a purchase and sale agreement , they have a commission receivable, due to be paid when the deal closes.

2) They all get a pledge from the agent to settle the receivable if the deal doesn’t close within a specified time period, either with cash or with another commission pledge.

3) They all will charge a fee based on how large the commission advance is and how long the escrow is expected to take.

This is where the similarities end. And these similarities don’t even get at the most important criteria in choosing a partner for commission advances.

Criteria for Choosing a Commission Advance Company

Are they convenient and local? Most commission advance companies serve every state from one location (often in Texas or Florida) out of a call center. Some even try to spoof their websites to make you think they are local (BlahBlahBlah Advance of Seattle) – but their toll free number goes to Texas or Florida. They don’t understand your real estate market, they don’t aim to build a relationship with you – they are simply interested in collecting when the receivable closes. You won’t be picking up a check from these folks or meeting them at your local realtor association meetings. Except for one.

Do they respect the challenges of meeting a closing date? Most commission advance companies offer some grace period beyond the expected settlement date, during which the cost of the advance doesn’t change. But, these grace periods can be as little as 5 days and usually extend to only 20 days. Except for one.

Is the cost of the commission advance easily understood? It is typical for advance companies to charge underwriting or application fees, on top of the discount fee. Then there is often a reserve retained by the company to pay for late fees or extension fees. Once the grace period is over, the reserve is reduced (or sometimes the reserve is reduced during the grace period!), increasing the actual cost of the commission advance. If you or your broker wants a check instead of a deposit into an account – another fee. Some will charge a fee to get the money to you (a “transfer fee”). The fees pile can pile up, making it more difficult to understand the real cost of the advance. Except for one company.

How quickly can I get my funds? With most companies operating out of a call center, the funding of your advance is almost always at least a day away. And with ACH transmissions (the most common approach used by these companies), the funds may not be available for 2 – 3 days. That is, except for one company.

That company is Commission Express of Western Washington. We are:

A) LOCAL – Located in Seattle, WA we serve brokers in Washington, where we are licensed to operate (unlike those out of state companies), pay taxes (unlike those out of state companies), comply with WA state laws (unlike those out of state companies), live and understand the local real estate market.

B) COSTS ARE LOW AND EASILY UNDERSTOOD – Commission Express charges a simple discount fee based on the size of the receivable and when the transaction will close. No underwriting fees. No transfer fees. No application fees. And your reserve is refunded in full if your receivable is redeemed by end of the grace period.

C) A GRACE PERIOD THAT RESPECTS YOUR BUSINESS – Commission Express has a grace period of 30 days after the expected settlement date. Is your lender requesting more documentation at the last minute? Is there a delay in getting a certificate of occupancy on new construction? Are the repairs agreed to after inspection still being completed? Then you’ll extend your contract 7, 15, even 25 days and not have to worry about paying more money for your commission advance.

D) YOU RECEIVE YOUR FUNDS PROMPTLY – Because we are local, you can pick your check up at our office. Or you can ask us to make a deposit into your bank account at a local branch – no charge. If you are concerned about your bank placing a hold on a deposit, we will wire transfer funds into your account (for a small reimbursement fee). Many of our clients receive their funds the same day as their application. No other commission advance company can make that happen.

A homebuyer wouldn’t choose a broker from out of town, without knowledge or respect for the local market and regulations. Why should you choose a business partner to support your cash flow needs who isn’t from your market? Do your own research but remember to call your local cash flow partner – Commission Express of Western Washington.