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Commission Advances becoming Increasingly Popular

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By Beth McGuire

RISMEDIA, June 18, 2008-With the real estate economy struggling for several months, many agents have turned to the services of commission advance companies to help ease the strain on their cash flow.

The common elements of commission advance companies are:

- Advances of up to 90% of an agent’s net earned commission
- Fees deducted as a percentage of the commission advance based on the number of days until the scheduled closing date
- If the closing date changes, additional amounts may be deducted from a reserve amount. If the date doesn’t change, agents receive a balance refund at closing.

Several companies who offer advance commissions and have different policies include: eCommission, Commission Express and Agent’s Advance.

There are many reasons why an agent would need to receive a commission advance. Stabilizing cash flow is the primary need, as agents often use their draws to pay for marketing materials, open houses, and other operating expenses for their business.

In speaking with brokers, the company most consistently sited as being trusted is eCommission based in Austin, TX. This sentiment stems from eCommission’s policy of requiring brokers to authorize 100% of all advance requests prior to funding and never advancing money directly to agents without the broker’s consent, a common practice at other advance companies. Most importantly, eCommission does not hold the broker responsible to repay advances if a sale falls through, but the broker is required to withhold future commissions earned by the agent if an advance is not repaid as originally agreed.

All advance companies require repayment through a third party, usually the title or escrow company closing the sale. But in certain states, that can also include the closing attorney or even the brokerage company itself.

By taking out a commission advance, agents receive the freedom of knowing when they will get paid from a real estate transaction instead of waiting for factors outside of their control (title companies, brokers, attorneys, banks etc.).

Fees can range from 8%-15% of the amount requested for advance. Some companies carry a minimum fee. Each individual needs to understand their own financial circumstances to decide if a commission advance is right for them. Taken responsibly, the service presents a viable option to the short term cash flow needs of agents.

For more information, visit http://www.ecommission.com/.

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