Real estate agents render valuable service to buyers and sellers in transacting properties with ease. Almost all property deals involve real estate agents either working for buyers and sellers. That the brokers have become indispensable for property transactions would become clear from the fact that 87% buyers sought their services and the number of sellers availing the services is even higher around 92%. It is the responsibility of the real estate broker to facilitate the smooth transaction by ensuring that the clients remain satisfied. Real estate brokers prefer to run their own business so that they earn the commission in full without parting it with anyone. However, the brokers face an uphill task in running the business because of financial constraints. The real estate industry is different from other industries due to its unpredictable nature that creates a lot of uncertainty about the brokers earning.
The market also is far from steady as most of the time there are significant fluctuations in demand and supply that never allow a comfortable life for brokers. Sometimes they experience good to demand that spurs sale while at other times the market slumps and the earning of brokers, which depends on commissions only, hit the ground. Due to the unexpected nature of the industry, the traditional business financing models are not applicable to them whereas brokers have to keep pumping money into the business by utilizing their resources. This puts a lot of strain on brokers because the commissions reach them after a considerable delay as it is payable only when the transaction completes.
The delayed cycle of commission payment
Whenever we talk about earning, we usually refer to cash earning because it is pointless to bank upon any earning, no matter how much assured it might be, if you have to wait for cash. This is particularly relevant for brokers who despite earning commission receive the cash after an interval of 60 to 90 days on an average. Sometimes it can take even longer. In the absence of any external financing assistance, brokers have to use their own money for running the business, and the delay in cashing out commission often hits them hard.
Brokers get the breathing time
To maintain a steady flow of cash by taking care of the delay in commission brokers can avail the option of selling the commission as soon as they sign a deal. Since the documents about the deal prove the commission is assured and it is only a matter of time before the cash comes in, brokers can approach advance commission companies to avail the facility of advance real estate commissions. In the process, the company agrees to pay brokers upfront at least 75% commission against the deal documents that the brokers have to pay back within a month. Brokers receive the balance amount on completion of the deal.
The service is available for a small fee, which is almost insignificant considering how much brokers benefit from the spot payment of commission. The quick availability of cash cuts down the payment cycle and gives brokers enough breathing time to organize their finance to ensure the smooth running of the business.
Reducing the personal risk of financing
As brokers know that they would not be able to receive loans and other financing facilities from the traditional financial sources, they usually use their financing resources. Using credit cards and seeking financial help from well-wishers like friends and relatives is normal for brokers to sustain their business. But this can turn risky due to the uncertainty of the real estate business as brokers might expose themselves to the dreaded debt cycles that can harm them. The arrangement of the advance commission is such that brokers enjoy their own money without having to borrow. Only when they strike a deal that they receive the money and arrangement helps to expedite their payment.
Cheaper than loans
Although brokers may face the inconvenience of not receiving traditional business funding, it is a blessing for them. The arrangement not only provides the money instantly but as it is not a loan that entails interest, the charges paid for the service are lower than what brokers would have to pay as interest for taking loans. Moreover, the assured commission gives brokers the confidence of paying back the money on time by engaging in aggressive business and striking more deals in between. The financial support helps the real estate broking business to gain momentum that earlier used to limp for want of funds.
Being able to sustain the business with own money gives a lot of pride and confidence to brokers who stay motivated to take aggressive steps to maintain a steady pipeline of deals. The steady flow of deals together with the advance commission would wipe out the time gap in earning commissions that plague the real estate broking business.