The 7 Myths of Commission Advances

By
Services for Real Estate Pros with eCommission

Being in the business of commission advances we're often met with a lot of confusion among real estate professionals. What are they? Who gets them and why? What’s the catch, if any, involved? 

This lack of familiarity has at times lead some agents to make assumptions that simply are not borne out by the facts. We call these assumptions ‘myths,’ not because the concerns are without merit. Just that the explanations provided by some have been so far off the mark that we wonder how they arrived at those conclusions.

So what better way to explain what commission advances really are, not to mention how they regularly help tens of thousands of real estate agents across the U.S., then by talking about these ‘myths’? In other words, if we explain each of the myths, then you can see the truth much more clearly for what it is.

So here are what we at eCommission fondly call the 7 myths of commission advances:

 

Myth 1…Successful agents don’t advance their commissions.

Truth: Many of eCommission's most loyal customers are considered top producers in their marekts. On average, eCommission customers have been selling real estate for nine years, they complete 16+ home sales per year, earn over $100k in Gross Commission Income (GCI), and typically have one or more salaried employees. They use eCommission three times per year. 

 

Myth 2…Getting a commission advance is a poor financial decision.

Truth: Whether you own a restaurant, a clothing store or a landscaping company, all businesses experience cash flow ups and downs. Traditional businesses access lines of credit to ensure their cash flow remains steady throughout the year. The difference for real estate agents is that banks hesitate to extend working capital to them due to the uncertainty of their income. eCommission fills this void. Customers use our service to bridge the gaps between closings, invest for future growth and keep enough cash on hand for ongoing operations. Even Barbara Corcoran, celebrity real estate mogul and star of Shark Tank, agrees that agents need access to advances occasionally to help them through the real estate ‘cash-flow roller coaster.’ Barbara knows these agents are making proactive financial decisions, not poor ones!

 

Myth 3… If I take a commission advance, everyone will know.

Truth: Over the years, eCommission has perfected the process of advancing commissions quickly and confidentially. Our entire process is completed online. While we do require your broker to approve your request before funding, your application is verified without your clients ever knowing. Your privacy is our utmost concern.

 

Myth 4…If a sale falls through, it’s the end of the world!

 Truth: eCommission has advanced over a billion dollars in commission so we've leared a few things about sales falling through. It's a fact that 90% of the advances we make close and replay as scheduled. Just 10% fall through. And if that happens, we owrk with you to replace the advance using a future earned commission. There are no out of pocket fees associated with receiving an advance, even if the transaction cancels. You're only charged additional fees for the increase in time the advance is outstanding, all repaid through future commissions. 

 

Myth 5…Getting an advance from the agent’s broker is better.

Truth: Some brokers do offer commission advances in-house to their agents but one should carefully consider the potential repercussions before going down this path. What's the true cost of the advance? Is there a contract? What happens if the sale falls through? What if you decide to switch companies? In general, agents don't like the idea of owing their broker money and to be fair, brokers don't enjoy agents owing them money either! The solution is a trusted, 3rd party resource like eCommission that takes on the administrative aspects of providing the service securely, professionally and confidentially.

 

Myth 6...Commission advances hurt my credit score.

Truth: Never. Since a commission advance is not a loan, it does not involve your personal credit. eCommission does not use credit checks, nor do we report to credit bureaus. If anything, ensuring you have timely access to working capital to pay your expenses should ultimately improve your credit score, not hurt it!

 

Myth 7...Commission advances are expensive.

 Truth: There are of course fees involved in taking a commission advance. The cost will vary based on the size of th advance and length of time until your sale closes. For example, a new customer can expect to pay 9.5% of the amount they wish to advance if the sale is closing within 40 days. Longer closings (up to 120 days) will cost more. While you may initially think the service is expensive, consider the alternatives. eCommission customers can go online and have $15,000 wired to their bank account in under an hour. A bank cannot do this. It's also important to remember that alternatives to a commission advance, like taking a cash advance off a credit card, rarely offer limits large enough to benefit most agents. Plus, credit cards can involve hidden fees and repayment interest that's more expensive in the long run (see this post for more on hidden credit card fees).

 

Final thought: a commission advance is not the optimal solution every time an agent runs short on cash. It should never be used continuously or as a crutch. It is, however, a great option for when agents need funds to meet an important expense that could otherwise prevent them from growing their business. There's an old saying, "It takes money to make money," and as self-employed business owners, agents can relate to this better than most.

 

Are you new to eCommission, or do you have any questions about commission advances we can answer? If so, please let us know by reaching out to us at 1-877-882-4368 or you can visit the How it Works page on our website. 

Comments (26)

Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Good article Sean. I have used your service multiple times over the years including just recently. I'm an independent broker with only one agent. There are times when pulling a commission adavance allows me to meet my marketing obligations. Very good service if used wisely.

Mar 09, 2017 02:52 AM
Sean Whaling
eCommission - Austin, TX
Founder, CEO

Thank you, Bryant. I appreciate the feedback.

Mar 09, 2017 07:24 AM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

I honestly don't know  of  anyone  who has used this service in my marketplace ?

Mar 22, 2017 05:40 AM
Margaret Goss
Baird & Warner Real Estate - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

I don't think I would hesitate to use your service if I needed to.  Commission sales - no matter how hard we try - can be a roller coaster.  Sometimes help is needed if  you're at the bottom of a ride.

Mar 22, 2017 07:15 AM
Sean Whaling

I couldn't agree with you more, Margaret. Especially when in a month or so you can be back at the top of the ride. The issue is one of timing, not productivity. I appreciate your comment.

Mar 22, 2017 07:23 AM
Alan May
Jameson Sotheby's International Realty - Evanston, IL
A moving experience!

While I can see a commission advance if you get into a cash-flow bind, I can't imagine any reason why I would be willing to give away 9.5% of my commission in order to get that check 40 days early.

Mar 22, 2017 07:19 AM
Sean Whaling
eCommission - Austin, TX
Founder, CEO

Totally understand, Alan. The service may not be for everyone, especially if you have other convenient, less expensive options for managing cash flow. Thank you for commenting!

Mar 22, 2017 07:25 AM
John Marshall - FORE!
LoKation Real Estate - Cherry Hills Village, CO
Specializing in Golf Course Properties

Thank you for explaining how the service works, I have seen this over the years and understand it much more clearly now. Although I do not plan to ever have need the service I certainly appreciate the entrepreneurial aspect and never ceased to be amazed at the different ways to make money.

Mar 22, 2017 09:05 AM
Alan May

I don't think anyone every plans on needing this type of service.  But I can see that some might have a need.

Mar 22, 2017 01:09 PM
Sybil Campbell
Fernandina Beach, FL
Referral Agent Amelia Island Florida

Hi Sean Whaling, Thanks for the information, I'm sure lots of agents need an advance on their commission from time to time.

Mar 22, 2017 09:53 AM
Sean Whaling
eCommission - Austin, TX
Founder, CEO

Thanks for commenting Sybil!

Mar 22, 2017 10:24 AM
Mick Michaud
Distinctly Texas Lifestyle Properties, LLC Office:682/498-3107 - Granbury, TX
Your Texas Lifestyle is Here!

There are times when this could be a real boon to a RE practice.  Not as a habit.  Understanding the full costs for all contingencies is critical to making a sound decision.

Mar 22, 2017 02:07 PM
James (Jim) Lawson, DBA
DomainRealty.com LLC - Bonita Springs, FL
Broker Associate, RSPS, BPOR, HI & PE

Obviously there's a market for this service Sean. However, I think a wiser approach is to stash as much money away as possible during the salad days and self-finance when sales dwindle. Better yet, sufficient regular outside income puts the agent in a position to avoid borrowing no matter the market conditions.

Mar 22, 2017 04:08 PM
Dorte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Sean,

Sounds like a good service, but I hope, I will never need you.

Mar 22, 2017 07:08 PM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

A most interesting post.... I had no idea how popular commission advances are.

Mar 22, 2017 09:00 PM
Debra Leisek
Bay Realty,Inc Homer Alaska - Homer, AK

I just heard of someone up here using a service like this... we thought they must be desperate...  actually I still do think that... but I digress... if Bryant Tutas has used this service and has good things to say it must be of value.  I am just too stuck in my ways and never count on anything till the deal records.

Mar 23, 2017 12:36 AM
John Wiley
Fort Myers, FL
Lee County, FL, ECO Broker, GRI, SRES,GREEN,PSA

Years ago I was a Loan Broker. One of my services was Factoring. Many businesses struggle with cash flow because of cash receivables. It can even cause them to go out of business. So we purchased the receivables and the business had the cash to move on. 

It is not always about a business being poorly managed but about the time delay. So I understand that your services could make a difference in an agents business.

Thanks for the explanation

Mar 23, 2017 02:35 AM
DAWN PARKYN
Florida Luxury Realty Inc - Hudson, FL
Helping Buyers and Sellers since 1994

This is a great post....I have always shied away from this for a couple of the "Myths" mentioned....but I can see now that I may give this a try, if the need arises!  Thanks for the clarification.

Mar 23, 2017 06:18 AM
John Dotson
Preferred Properties of Highlands, Inc. - Highlands, NC - Highlands, NC
The experience to get you to the other side!

Glad to have a bit of insight on the process.  Real estate can be a rough ride and I could - possibly - maybe - see how this would help some folks make it from one high point to another.

Certainly good info.

Mar 23, 2017 08:33 AM
Dana Basiliere
Rossi & Riina Real Estate - Williston, VT
Making deals "Happen"

I have never been in a position where I needed one and would be loathe to pay that much interest. I guess if it was an emergency I can see someone doing it but not for me. Too much like a payday loan. 

Mar 23, 2017 11:04 AM
Sean Whaling
eCommission - Austin, TX
Founder, CEO

Dana thanks for commenting. I think there is an important point of distinction here… a payday loan exists for a salaried employee experiencing financial challenges between paychecks. A commission advance is for business owners managing cash flow.  In real estate as you know, many agents earn thousands in commissions one month, and nothing the next. I feel the solution to this problem is very different than what you described, but I respect and appreciate your point of view!

Mar 23, 2017 11:35 AM
Travis "the SOLD man" Parker; Broker/Owner
Travis Realty - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

Good info. Will check out your website. Just starting back up after family illness and roller-coaster ride now is ruff. Thanks!!

Mar 23, 2017 02:40 PM