There is a lot of confusion surrounding commission advances 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 markets. 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.
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 commissions so we’ve learned a few things about sales falling through. It’s a fact that 90% of the advances we make close and repay as scheduled. Just 10% fall through. And if it happens, we work 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 are only charged additional fees for the increase in time the advance is outstanding, all repaid through future commissions. For more detail on this topic, read our ‘What Happens If My Sale Falls Through‘ blog post.
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 the advance and length of time until your sale closes. While you may initially think the service is expensive, consider the alternatives. Most eCommission customers can go online and have $15,000 wired to their bank account in under an hour (you can sign up here to find out how much you qualify for). 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 is more expensive in the long run (see this post for more on hidden credit cards fees).
Final thought: a commission advance is not the optimal solution every time an agent runs short of 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 visit the How it Works page on our website.