Commission advances: for better or worse?

by Olivia D'Orazio03 Dec 2014
Political satirist John Oliver recently did a bit on payday loan companies, and while he had a few choice words for those types of lenders, industry players seem to be more accepting of similar groups that target agents.
 
“There’s nothing wrong with them,” says veteran agent, Barry Lebow, adding he’s benefitted from a commission advance. “If you look carefully at their [lending] models, they’re not overly negative.”
 
While Lebow acknowledges the slippery slope these types of loans can set agents on, he also points to their outright benefits.
 
“It’s for circumstance, when you really need it,” he says. “If you have deals closing in June or July and you have to pay income tax in April – you’re paying income tax on the money, but you don’t have the money in your hand to pay it… but [commission advances] should not be a habit.”
 
Ryan Suchet, the president of Capital Growth, a company that caters to agents looking for commission advances, says companies like his are able to fill the inefficiencies of the real estate industry.
 
“Sometimes when agents close a deal, their job is done but they’re not getting paid until the closing date,” he tells REP. “They have other expenses – whether that’s to focus on the business or for life expenses. We’re a viable option for people looking for faster access to their cash.”
 
But that’s a viewpoint not many agents share. David Fleming says he could understand how an agent might need to take advantage of these types of services, but says it could be indicative of a bigger problem in an agent’s business.
 
“It reeks of people who are [working] month to month,” he says, adding that’s no way to build a sustainable career. “Barring a catastrophe, I think all agents should come into the business with a financial plan and if they have to go to an outside source to get that – at some point you have to get back on track.”
 

COMMENTS

  • by Ryan Suchet - Capital Growth 12/3/2014 10:56:19 AM

    In a perfect world, of course no one would need an advance. However that is not reality and some months will be better than others, so you need a small bridge to cover the leaner times. I also feel that simply waiting months for your commission is not the most efficient use of your capital.

  • by Menno van Driel - www.menno.ca 12/3/2014 4:55:08 PM

    But holy smokes look at their fees and rates; this service must only be for the outright desperate. Otherwise, you'd simply apply for a bank line of credit. If the bank says you don't qualify for that, then you CERTAINLY should not engage in high-cost borrowing.

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