The Essential Guide to Real Estate Commission Advances

Real estate agent showing home buyers their contract.

In an unpredictable business like real estate–where sales ebb and flow throughout the year–it can be difficult to predict and control cash flow during the slower periods. Applying for a real estate commission advance can help reduce the stress of ongoing expenses, such as paying bills and overhead fees, compensating your employees, and marketing and advertising your business to attract new clients.

While the industry has been around for the last several decades, REALTOR® commission advances are still a fairly new concept to many people. Here we explain what they are and how they could benefit you and your business.  

“In the real estate business there are peaks and troughs of cash flow. If you are in a trough, you may need to realize fees in advance of the closing.” –Patrick Conlin, COO, Accel Commission Advance

After you finish reading this guide, you’ll be able to answer the following questions:

  • What is a real estate commission advance?
  • How is a Realtor® commission advance different than a bank loan?
  • What other types of financial options exist for real estate professionals?
  • When should I take out an advance on a real estate commission?
  • How does the advance work?
  • What does the application look like?
  • What are some real-world examples of commission advances?

What is a real estate commission advance?

First, let’s start with a definition. A commission advance for Realtors® is a financial service that allows a real estate agent or broker to sell a portion of their pending commission for a fee. In exchange, they receive a portion of their commission funds before closing.

It is not a loan, and does not require a credit check. It’s simply access to earned commission prior to the settlement date. Whether you are a real estate agent or broker, commission advances allow you and your company to control the necessary cash flow to operate successfully.

What’s the difference between a Realtor® commission advance and a bank loan?

A real estate commission advance is not a loan, as it does not need to be repaid and there are no upfront fees. Think of it as selling a portion of your commission: In exchange for a flat fee (to be paid once your sale closes), you gain access to your already-earned commission prior to closing.

Unlike a bank loan which accrues daily and monthly interest, commission advance companies purchase a piece of your commission for a standardized, flat fee. When your sale closes, repayment of the advance happens automatically: there are no monthly payments or upfront fees.

Why not take out a bank loan?

Though bank loans and lines of credit (LOCs) are the more common (and less expensive) options for those struggling with cashflow, real estate agents and brokers may find that dealing with the bank is not the easiest or most practical solution.

Banks usually require loan and LOC applicants to present non-liquid assets, such as bonds, stocks, and real estate. These assets, used as collateral, guarantee that the applicant will have something of significant value with which to pay back the loan. While some agents and brokers may have no problem coming up with the necessary collateral to secure a loan, others may find this difficult.

Credit checks are not necessary for commission advances

Credit checks are another potential hurdle that real estate agents or brokers might face when applying for a bank loan or line of credit. Agents who recently started working at a different agency, declared bankruptcy within the past few years, or have a high credit utilization ratio may have unbalanced credit scores that would be unacceptable on a loan application.

Real estate commission advance companies generally don’t take credit score into account in their underwriting process. In lieu of a credit check, most commission advance firms conduct a background check which tells them if someone has outstanding liens or historical judgments. For obvious reasons, commission advance firms are not interested in doing business with someone who has a track record of not meeting obligations.

Whereas a bank loan can take seven days or longer to approve and disburse payment, the application process for a commission advance is quick and easy to submit online, and can be approved and even funded same-day. Within 24 hours, your application can be processed and funds deposited into your bank account.

When should I take out an advance on a real estate commission?

Agents or brokers can take out a commission advance anytime they need early access to funds for personal or business reasons.

Here’s a common real-world example: An agent who generally closes 12 transactions in a year, on average, hits a slow period where he hasn’t closed in two months and thus hasn’t earned commission during that time. He will still close 12 sales by the end of the year, but the timing is staggered so that there may be one or two months with limited cash flow. In this scenario, ongoing expenses and bills still need to be paid, and a commission advance could be a welcome solution.

Sometimes, an agent or broker may have an unexpected one-time expense that exceeds any savings they have (i.e., home or vehicle repair). In these situations, an advance on their commission could help them receive accelerated access to their funds.

Alternatively, a Realtor®, knowing that spring and summertime are their peak revenue earning seasons, may want to start ramping up their marketing and advertising efforts a few months in advance. Savvy real estate pros can utilize the services of a commission advance company to receive immediate payment on a commission prior to closing, which allows them to quickly launch a marketing campaign to help grow their business.

What does a Realtor® commission advance application look like?

The application takes about 10 minutes to complete and can be filled out online. It asks for the amount of advance you are looking for, information related to the property on which you are requesting an advance, and the approximate closing date. Information related to the lender and lending officer is also usually requested.

In the application, you will be asked to provide:

  • Proper identification, such as your driver’s license.
  • MLS listing of the property showing the status as “under contract”, “pending”, or “sold”.
  • Wire instructions (where to send your advance).
  • Closing date.
  • Whether you are representing the buyer or seller.
  • Evidence that contingencies have been satisfied.
  • Commission sharing agreement or documentation showing net fees owed to you.

Applying with Accel Commission Advance

Once Accel receives your application, their proprietary cloud-based processing system allows them to advance your commission quickly and efficiently, in as little as 24 hours.

What do the underwriters look for on an application?

To confirm that the agent or broker requesting the advance is actively representing buyers or sellers in real estate transactions, underwriters look at data related to the number of transactions that the agent or broker has completed in the last six months and how many active and pending listings they currently have.

Accel Commission Advance requires that an agent or broker has at least one other listing or active deal in the process of closing. The deal must also be scheduled to will close within 45 days. Credit score is not considered in their underwriting process.

How are the fees determined?

Fees are set based on numerous factors, and each case is assessed individually. Accel offers reduced fees as an agent or broker completes more advances with them and establishes a consistent track record. Accel offers competitive fees as low as 8 percent.

How does a commission advance work?

Advances will be delivered to your bank account via a wire transfer. Accel gets you paid fast. Overnight funding for Realtors® is possible, especially for agents and brokers that have already done business with Accel.

Repayment of the advance happens automatically when your sale closes. The settlement company will receive a commission disbursement authorization signed by your broker instructing them to send a portion of your commission directly to Accel on your closing date.

Every transaction is different, and the timing of each sales cycle can vary widely depending on how long it takes to get an inspection and lender in place, among many other factors. Accel Commission Advance provides flexible cash flow solutions to Realtors® to help them meet their financial needs.

The Accel Commission Advance Difference

Accel’s friendly staff guides each client from filling out the application all the way through funding the advance. If you think their real estate commission advance solution could be the right fit for you, please call one of their advance specialists at 267-534-7611. Or to apply online, simply click here to submit an application.