You will hear a lot of things about commission advances, and that makes it extremely difficult, to tell the truth apart from baseless fears. Even many real estate professionals are still confused about how companies can “lend” them the money without doing a thorough credit check or asking for collateral. Many people are simply confused because these advances look like loans but don’t behave like loans. They don’t have interests and the realtors don’t pay them back in cash over a period!
This has brought us to debunk the four most common myths people tend to believe about advance cash commissions –
If the sale fails, the company will ruin the business!
That is the farthest from truth anyone can get. If the sale falls through, a good realtor will seize the next opportunity to close a sale, and the company will get its payment. For skipping the penalties of commission advance real estate agents can always extend their payment periods by paying a pittance. There are no unpleasant surprises that crop up upon failed sales and companies state their policies very clearly.
Getting a commission advance is worse than getting an advance from the broker
Brokers can offer commission advances to their in-house agents. That might not be all bad. However, you have to consider the pros and cons of this as well. What will happen if you fail to close the upcoming sale? What will happen if you switch companies after a couple of weeks? Will there be a contract? Will you have to pay interest? A broker-agent relationship needs to be trusted. Is it a great idea to ask for commission advance from your broker? Often a commission advance company offers the same advance cash at far lesser risks.
It hurts credit score
That is simply IMPOSSIBLE! Neither does a company ever check the credit score of a real estate agent nor does it ever ask for collateral. If an agent’s sale falls through, the agent can pay the advance amount in cash, apply for extension or simple replace on sale with another. In none of these cases, credit score finds a place. The company will usually run a background check to look for pending liens and to see if you are true to the word when it comes to making payments.
Commission advances are public knowledge
Commission advance companies make it their highest priority to keep the identities of their clients secret. There are famous realtors and reputed real estate companies, who have taken multiple advance cash commissions over the last couple of years from different companies. These companies rely on online processing, and the application process is discrete. None of the clients of the realtors ever get a whiff of the process.
It is true that a commission advance should not be your first idea if you ever run out of cash. This should be an emergency solution for an emergency situation. You should not become compulsively reliant on cash advances to run your business.