What Is A Commission Advance?

What Is A Commission Advance?

A commission advance is a financial service whereby you sell a portion of a pending commission for a fee. In exchange, funds are advanced to you before closing. It’s not a loan. It’s simply access to the commission you’ve earned without the wait!

How does it work?

The first step in the process is getting a property under contract.  If you’ve already done that, you’re ahead of the game. Once you’ve done this, you’ll need to fill out our quick application so we know how to contact you.  This should take you no more than 30 seconds to do.  If you’d like to speed up the application process, you can pre-upload required documents, such as the purchase agreement or the MLS listing along with your contact info.  Fast agent financing is right around the corner!

From there, we use a risk-based pricing plan to review each commission advance request. Our pricing is more competitive because we evaluate all of the following and more:

  • Your production history
  • Details of the transaction
  • Expected closing date
  • Verification & review of all publicly available information

If approved by our company, we’ll present you with an offer of an advance on your commission.  Once accepted and approved by your broker (or by you, if you are your own broker), we are able to fund this entire advance amount within 4 hours.  It’s as simple as that.  No lengthy employment history to summarize, no credit checks, and no massive stack of loan documents to sign.  Funds sent to you right away.

When escrow closes, we will be paid back (plus our fee) through the closing, so you don’t ever need to pay us back out of your own pocket.  It is all taken care of for you!  We are able to provide you the liquidity you need so you can grow your real estate business and thrive.  Our fees are much more competitive than the industry standard, and what’s more, if your escrow falls through, you can simply switch your advance to another escrow for a minimal fee (no hefty penalties or immediate payback requirements).

As an overview of Commission Advance, here are some main takeaways:

  • We can fund up to 75% of your commission
  • There are no credit checks
  • There is no out of pocket charge or deposit to utilize our service

We know you don’t all need a commission advanced in California, but we could all use a little extra cash every now and then, and we hope you think of Express Cash Flow whenever the need arises.

taxaudit02

2019 IRS Audit Triggers for Real Estate Agents

IRS Audit Triggers for Real Estate Agents

While each new year is a good reason to look at finances, 2018 is an especially good year if your in the IRS Audit Trigger zone. While you may be celebrating, or hoping for better things to come the following year, your income (or profit) is almost always in an inverse relationship with your tax obligations. While it’s better to owe a lot in tax than owe none, you will want to make sure that you are “in the know” with regard to the new tax law. With that in mind, here are some audit triggers as well as some changes to the tax law to help get you off on the right track.

IRS and State Audit Triggers

1. Your numbers don’t match. Make sure your 1099’s and W-2’s match up to what’s being reported to the IRS. This is the fastest way to get a letter from the IRS because the matching is automated and is one of the first things they look at.

2. You made a lot of money this past year. This one is simple, and it is good. You want to make a lot of money. However, increasing your income also increases the amount of your income the IRS could stand to gain by auditing you, if they think you aren’t being honest with your deductions. If you are making a lot of money during the year, be very meticulous with your record keeping, and make sure you can prove everything that you are taking as a deduction.

3. You made a lot less money this past year. This is not as good. If you made a lot less money, you probably also have a lot less of it laying around to pay taxes with, so an audit could be extra devastating. If you are legitimately reporting all income, you shouldn’t have anything to worry about, but if there’s a chance you might not have reported everything (even by accident), this won’t look good in an audit. It is best to keep meticulous records of all income so that you can show the accurate income amount in case the IRS comes knocking.

4. You are self-employed. If you are in real estate, this likely applies to you. Even if you’ve set up your business as a corporation or an LLC and pay yourself that way, you will still fall into a higher risk category than someone earning a paycheck from a large company. There’s nothing you can do about this, but you can be extra cautious about the deductions you take, as well as ensuring you pay all of your tax liability in a timely manner, with quarterly payments made if possible.

5. You deduct your home office and/or vehicle. You should! But you have to do this one right. You should get clear with your CPA on exactly how much is allowable for home office and vehicle deductions, as going over these thresholds can be a red flag that results in an audit, regardless of how much income you make. Be very careful to follow these guidelines.

6. You have a lot of “meal/entertainment” deductions. Which for 2017 are allowable deductions but not for 2018. Are you deducting the entire amount when you should only be deducting the portion that was for the client(s)? Are you spending amounts that would be considered “excessive” or “lavish”? Are you spending amounts that are too large in proportion to your gross income? All of these things can be red flags that trigger an audit, and you will find yourself in a difficult situation trying to justify these expenses. Meals and entertainment costs are deductible up to 50 percent if they are ordinary and necessary to your business in 2017.

7. Are Commission Advances deductible? Generally the fee incurred would be deductible, but check with your CPA to confirm. A commission Advance is usually considered a business expense but improper documentation of this may lead to an unnecessary audit.

8. You were particularly generous this year! The IRS is always on the lookout for people who inflate their charitable donations and use a range based off a percent of income that is reasonable.

9. Big Deductions? Is one or two of your deductions exceptionally large and outside of the norm for your industry, income bracket or year over year trend.

10. Suspicious Round Numbers? Suspiciously round numbers on your returns will raise and auditor’s eyebrow.

11. Tax Credits? Claiming Tax Credits that aren’t yours.

Bottom line if you have questions about a deduction that you can ask your CPA, it is better to ask them instead of going through an audit after the fact.

About Us: Express Cash Flow provides commission advances for real estate agents and brokers. Check us out at www.ExpressCashFlow.com or call us at 844-818-2274.

Qualified Opportunity Zones Tax Savings

Qualified Opportunity Zones Tax Savings

Did you know that there is now a better method of deferring capital gains tax on appreciated assets than a 1031 exchange?   Even better than that, did you know that it is possible to sell massively appreciated real estate free of any capital gains tax whatsoever? Answer Qualified Opportunity Zones!

One of the lesser discussed and lesser known aspects of the Tax Cuts and Jobs Act of 2017 was the formation of Qualified Opportunity Zones (QOZ) and Qualified Opportunity Funds (QOF).  It’s on page 130, and doesn’t directly affect you unless you have large quantities of capital gains on which you’d rather not be taxed, so I’ll forgive you if you haven’t heard of it until now.

If that situation applies to you though, it is worth looking into.   But how do you know if the situation applies to you, what is a QOF and what is a QOZ?  Glad you asked- that’s what I’m here to answer.

There are two sides to this legislation that can benefit different folks in different ways.  Let’s first start with people who have recently sold an appreciated asset and are going to have a capital gain.  That might already be some of you, and that may be others of you in the future.

In the past, if you’ve sold this appreciated asset (let’s assume it is real estate), your only option to defer capital gains via a 1031 Exchange, in which you must relinquish your appreciated asset and purchase a replacement asset within both a finite period of time and a stringent set of guidelines.  The problem inherent in doing that, though, is that if you are picking a particularly good time to realize your gains (seller’s market!), guess what you’re going to need to do in order to defer your capital gains?  You guessed it, buy into that same market.

Now there are ways around this, you can sell in an “A” market and buy in a “C” market, or you can sell a particular type of property (residential) and buy a different type of property (Industrial?) via which you will be able to achieve a higher yield.  Or you could turn one multi-family property in CA into 85 single family rentals in Ohio, which I’ve helped facilitate and absolutely do not recommend for everyone.

But let’s say you don’t want to do any of that.  Let’s say you just want to not pay your capital gains tax at all.  Do these opportunity zones let you do that?

Well… kind of.

Here is exactly what the IRS has to say about Qualified Opportunity Zones:

Q. How do Qualified Opportunity Zones spur economic development?

A. Opportunity Zones are designed to spur economic development by providing tax benefits to investors. First, investors can defer tax on any prior gains until the earlier of the date on which an investment is sold or exchanged, or December 31, 2026, so long as the gain is reinvested in a Qualified Opportunity Fund. Second, if the investor holds the investment in the Opportunity Fund for at least ten years, the investor would be eligible for an increase in basis equal to the fair market value of the investment on the date that the investment is sold or exchanged.

Ok, so that’s a lot to unpack, and you can read more about what the IRS thinks are the important questions here, but essentially what the benefits actually are:

  • You can defer your gain until 12/31/2026
  • If you hold the reinvested funds via the QOF into QOZ assets for a minimum of 5 years, your basis in the original transaction increases by 10%, and if you hold for 7 years, you get an additional 5%, for a total of a 15% decrease in your initial liability (not bad!)
  • If you hold the investment for a minimum of 10 years, your basis upon sale is equal to your sales price.

I’ll go ahead and comment on those- 1 and 2 are cool if you’re talking about large dollars, but only really moves the needle if you are talking about very large numbers.  3 is a different story- 3 says that if you a buy a property through a QOF, don’t sell it for 10 years (or more), you pay no tax on the appreciation in that period.  This is an astounding bit of legislation, especially for those of us familiar with development and entitlements- things that generally take a while to accomplish, and see substantial amounts of profit (much of which is typically eaten up by capital gains tax).

If you’re like me, it might take a minute to fully appreciate the impact of that.  That means that if you buy a property in a QOZ via the captive capital gain in your QOF and hold it for 10 years, or more, your gain upon sale is entirely tax fee.  No two ways about it.  Just to make sure though- let’s walk through an example.

Let’s say that you sell your appreciated asset and that creates a capital gain of $2 Million.  You then invest that gain in a QOF, and that QOF buys property in a QOZ (also for $2 Million).

You then wait the requisite ten years (and remember, after year 8, the amount you are taxed on decreases to $1.7 M), and your property is now worth $5M.  The additional $3M gain is now not going to have any capital gains at all.  Zero.  $3M of tax-free gain… the holy grail of real estate investment (or any investment).

Ok, so these sound pretty cool?  Where are they?

Well, here.  And while the zones are certainly in places that you might expect them, they are also in a number of places you might not expect.  Huntington Beach?  Costa Mesa?  San Clemente?  These aren’t exactly areas that are screaming for outside capital to renovate a forgotten about and forlorn metropolis.  But, through the miracles of bipartisan legislation, they were included.

If you would like to know more about Qualified Opportunity Zones and how to best take advantage of this new and unique opportunity, feel free to reach out and we can connect on the topic.

Express Cash Flow – www.ExpressCashFlow.com

recruiting agents

Real Estate Agent Recruiting Tactics

We all know that agent recruiting is the life blood of any successful real estate office, and it should be the goal to recruit the most, best agents.  But how does a real estate brokerage actually go about doing this?  Here are some of the tactics used by the most successful recruiters from around the world.

  • Some of the best agent recruiting is done by your current agents! Ask your agents whom they’ve enjoyed working with on past transactions, and whom they look up to at other offices.  Then provide incentives (trips, meals, a boost in their split) for the agents that provide you with the best referrals.
  • Get involved with charities and your local community. Sometimes the best way to find good real estate talent is in the most unlikely of places, and being involved in communities outside of your industry will help you grow your network immensely.
  • Get involved in communities in your industry, too! Hold a new agent training for your local board, and make sure to follow up with any qualified candidates.  Have your agents support you in this endeavor, and encourage them to follow up as well.
  • Email all of your top recruiting targets with their end of year sales and what they could have made working for you- NOTE: make sure you are confident of their current splits and that this would compare favorably before sending.
  • Organize an outing or mixer for some of your top agents to mingle and socialize with your top recruits, so the recruits can get a feel for what will allow them to continue to grow and succeed.
  • Everyone wants to grow their network, make sure you not only connect with your potential recruits on social media, but ensure that you impact your relationship with them positively.

Once you’ve had a chance to implement all of these tips, recruiting will no longer be about hunting whatever agents you are able to convince they should switch to you, but rather farming your various networks for the most, best agents around.

Happy recruiting!

referral

Building The Best Referral Base

Referral Base Is Key

Much is made of how real estate agents are always doing business “by referral only” and mention that the best compliment you can give them is a referral of a family member, friend, or associate.  This is on business cards, email signatures, personalized notepads and perhaps even hanging on a sign in real estate offices.  But how do all these real estate agents go about building the referral base they seek?  We’d like to share with you some of their tricks of the trade.

  1. Always be involved in your community: This doesn’t just mean involvment in your community to secure buyers and listings, but also when it has NOTHING to do with real estate. Get to know the people living in your community.  Become an advocate for these issues and make yourself a local presence, for everything that isn’t about your own self-interest, and you will start to your referral base grow.
  2. Pick a Non-Profit You Are Passionate About, and Support It: This gives you an opportunity to do work that you care about.  It also helps build a network of like-minded people. What’s more, non-profits are generally led by successful people whom are more likely to transact in real estate, and eventually be a boost to your bottom line.  See?  It really is all for a good cause!
  3. Be A Resource for Others: One of the best ways for people to remember you as a savvy business person is to always have what they need, right then. This means knowing the right contractor, plumber, electrician, landscaper, photographer and hairdresser at a moment’s notice.  Being the resource people trust in the business community will help you build relationships.  In time, this will lead to reciprocity amongst your referral base.
  4. Pick A Strong Networking Group: Many industry veterans will tell you that belonging to a networking group is a must.  BNI, Toastmasters, Le Tip, ProVisors and other networking groups are all great options. These groups are crucial to building your networking skills and referral base.  However, it is crucial to pick the right group.  If the whole group is new to their business together, this will be a slower path towards growth.
  5. All The face time: In today’s world of modern day technology, we have more ways than ever to avoid actually sitting and talking with other people. We can email, text, call, Facebook Message, Tweet or Snapchat all of our contacts.  We’re to the point where getting face time is not the same thing as FaceTime.  We humans are social creatures, and the best way to stay top of mind is the old fashioned way.  This means being in the same place at the same time, and having meaningful conversations.  So schedule coffee, lunch, drinks, dinners, gym sessions or walks on the beach.  Spend time with people.  People who enrich you both personally and professionally, and whom have genuine interest in your business.  The ROI on this time spent with another real live human is the best way to grow your referral base.

About Us:

Express Cash Flow provides commission advances for real
estate agents and brokers.  Check us out at www.ExpressCashFlow.com or call us at 844-818-2274.

referral

Commission Advance Cost?

700x400_1 - Green Background

How much does a commission advance cost?

 

This is usually the first and most important question to real estate brokers and agents who inquire about commission advances. This is a very reasonable question, but not a simple one.

While other companies have flat fee or fixed pricing based on the amount requested for an advance, Express Cash Flow don’t operate that way. This is almost always to the benefit of the agent requesting the advance.  A one-size fits all approach doesn’t take into account the different variables of a real estate transaction.  It also doesn’t factor in experienced agents and inexperienced agents. If no two transactions and no two agents are exactly alike, then it makes sense that those transactions have different risks. If they have different risks, then it would only make sense that those different risks resulted in different pricing. So, what are the different risks, and how do they affect the commission advance cost?

Transaction Risk
No matter how solid a real estate deal seems, there is always the chance that it could fall apart. Sometimes a buyer is unable to qualify for financing, or has a cash emergency. While this is rare and unfortunate, it does happen. There are a number of hurdles to each transaction, and any of them can be its undoing. As such, an advance requested early in the lifespan of the transaction will always be more expensive.

Agent Risk
While there will always be risks associated with a transaction, we also measure your production history as a real estate agent or broker and the risk associated with a replacement transaction should your transaction fall apart. The more history of closed transactions you have, the lower our risk, and the lower your pricing will be.

Delay Risk
It is also entirely possible that there will be delays.  Because of this, we have to have protection from these delays since close of escrow date determines pricing. So, the only fees you will ever see besides our initial quoted fee is if your property does not close escrow on time. Note, however, that the close of escrow date we agree on does not have to be the same as the close of escrow date on the purchase agreement. In order to avoid these fees, you can project a close of escrow date after the scheduled close of escrow, which is a savvy, cost saving move.

Conclusion
There is only one right answer to our most frequent question “How much does a Commission Advance Cost?” That is, we don’t know yet, but would be happy to look at your scenario individually.  If you’re able to provide us all of the details, we should be able to give you a ballpark price.  The good news is, unlike some of our competitors, we give you the full amount you ask for and are paid back only at close of escrow, so our interests are aligned with yours throughout the transaction.

About Us:
Express Cash Flow provides commission advances for real estate agents and brokers. Check us out at www.ExpressCashFlow.com or call us at 844-818-2274.

Negotiation Image

Real Estate Negotiation

Much is often made of being the best salesperson, or persuading the other party in a negotiation to conform to your every desire. However, not all negotiations are a zero sum game, requiring one party to lose exactly as much as the other party wins. In real estate negotiation, this is in fact very rarely the case. It is very uncommon for a lopsided negotiation the result of one intelligent and informed party persuading another intelligent and informed party to do something against their will. Much more common is the scenario in which a solution is created to solve a problem, and both parties come out ahead. That’s what we’ll be focusing on here.

There are 3 basic principles to adhere to when entering a real estate negotiation:
1: Know the problem
2: Ensure the other party commits to a structure first
3: Keep the negotiation alive

Know the Problem

All transactions take place because two parties wanted to change their status quo. Unlike financial markets though, the motivations for real estate transactions are not always as transparent. Buying at the lowest point and selling at the highest are not always the primary concern for transaction participants, there may be other things in play, such as the desire to live in a specific neighborhood or style of home. On the other side, the desire to sell a home may be driven by needing to pay off other expenses, increasing motivation beyond the desire to achieve the highest price. If this is the case, the driving factor in the negotiation is not price at all; it is a bill that needs to be paid. Finding out exactly how much that bill is, in a nice way, can go a long way towards getting the best result on the buyer side (the lowest price). Conversely, there might be a tax issue caused that either requires the buyer to close very quickly or the seller to prefer to take a deferred payment (carry back), having this flexibility as a buyer will allow the lowest possible price.

First Mover Disadvantage

There are, unsurprisingly, many schools of thought on negotiation. While it is true that as a seller, you have a list price which theoretically anchors the real estate negotiation, it is also the case that both buyer and seller can force the other party to commit to a structure first, and that there is an advantage in doing so. As a seller, this is easy. Simply let the buyer make an offer, and if you are not comfortable with the structure, require (via a counter offer) that the buyer restructure their offer on more suitable terms. Notice, that while price is one of the issues to figure out in a negotiation, it certainly isn’t the only one. Many times too much of a focus on price will adversely affect other terms, such as who pays for services such as escrow, title, or repairs. As a buyer, it is trickier to make the seller commit first, but can be done. The approach that works best is to come up with an offer that is low enough that the seller must counter, but not so low that the seller is offended and ignores it completely. Striking this balance can be challenging, but the rewards make it very much worth trying for.

Negotiation Image

Keep the Real Esate Negotiation Going

This seems like a simple point, but it can often be difficult to remember during a contentious negotiation. No matter how badly you want something, and no matter how far apart you are from the other party, you are always closer to putting a deal together if talks remain open. It can be very tempting to respond with an emotional counter offer (taking only a nominal amount off the listing price, writing in all caps, etc), but anything that is done to antagonize the other party will usually come back in the form of a lost negotiation. So, whether you take the time to thoroughly respond to an offer you might think is frivolous, or call for clarification when there starts to be a disconnect as opposed to shutting of lines of communication, it can only help. This is one instance where a real estate negotiation is not a zero sum game, and everyone benefits if the negotiation continues.

About Us:

Express Cash Flow provides commission advances for real estate agents and brokers. Check us out at www.ExpressCashFlow.com or call us at 844-818-2274.

Property Value Image

Should You Get A Second Appraisal?

Another Appraisal?

It’s a nightmare scenario. After brokering an excellent deal and receiving an offer right at or slightly above purchase price, the home sellers, buyers, and agents are simply waiting for the final details to fall into place, when the unthinkable occurs: an appraisal below purchase price.

Nothing can kill a real estate deal faster than an appraisal falling short of the agreed-upon purchase price because buyers can’t get a loan for more than an appraisal says the house is worth. The National Association of Realtors reports that about 10 percent of canceled sale contracts are due to low appraisals.

So what’s a real estate agent to do when this situation occurs? First, these are times when commission advance can help agents maintain cash flow to their real estate businesses while sellers, buyers and agents attempt to salvage the deal.

What Now?

So, should you seek a second appraisal? Here are a few things to consider.

It’s important to remember that an appraisal is simply the opinion of one appraiser. This means two different appraisers can conclude two different values for the same home. As a real estate agent, you have certain tools at your disposal to determine whether an appraiser’s opinion is accurate.

Most lenders have a process for challenging an appraisal, so savvy agents often start by pulling comparable properties that have recently sold and making a case to the buyer’s potential mortgage lender. Appraisers typically pull comparable sales information from multiple listing services, so if sales occurred outside of the listing service, point those out. Also, check if the comparables used by the appraiser were short sales or foreclosures. Short sales and homes in foreclosure usually sell for less than homes sold by owners in good financial standing with their lenders.

Find out the lender’s appraisal challenge process. Appraisals cost the buyer or the lender, so be prepared to give specifics about what the appraiser missed in valuing the property. In addition to providing comparable property sales, be prepared to show improvements to the home that an appraiser may have overlooked. If the appraisal shows two bathrooms when there are actually three, ensure that the lender or appraiser on a second pass knows the correct number of bathrooms and bedrooms and the correct square footage of the home.

Many times, these contracts that fall apart due to low appraisals can be salvaged, but it takes research and effort to get the job done. An express commission advance can keep the bills paid until a delayed deal closes.