Commission Express Offers Low-Cost B2B Franchise Opportunity

Nation’s Only Franchised Commission Advance Company Solves Cash Flow Problems for Real Estate Professionals

Real estate transactions can be fraught with issues that hold up settlements and sales commissions for agents and brokers. Delays in earned but unsettled commissions can put a serious crimp in cash flow for real estate professionals. Market fluctuations can also prolong the periods between closings, while expenses remain ongoing. 

Situations like these prompted a pair of experienced real estate brokers in the Washington, D.C., area to work on a reliable solution to cash flow issues. Their idea was to purchase accounts receivable from earned but unsettled sales commissions at a discount. They honed the protocols, computer database, forms and reports necessary for this factoring system, and founded Commission Express, the first commission advance company of its kind, in 1992. The service was so popular that they began franchising in 1996.

Today, Commission Express remains the only franchised real estate commission advance company in the U.S., and has 38 franchise locations across the country. As a business-to-business or B2B franchise opportunity, founded by and for real estate professionals, Commission Express’ mission is to empower agents and brokers by providing fast, reliable access to the income they’ve already earned, says Commission Express co-founder John Stedman, who serves as president and CEO. “We’ve been in business for over 30 years and have a solid track record, having advanced more than $1 billion to real estate professionals since 1992,” he says.

How Commission Express Works

The Commission Express franchise model is based on a specialized form of invoice factoring (the sale of receivable income to a third party) for real estate professionals. Agents and brokers apply for advances by providing their fully ratified sales contracts with projected closing dates in 90 days or less, says Rachel Feghali, Commission Express national manager. Clients’ fees are based on the size of the commission advance and the number of days until the projected closing, she says.

Upon approval of the client’s application, Commission Express pays an advance of about 80% of the total or portion of the commission being purchased, and holds back the remainder, Feghali says. The client assigns the commission to Commission Express, which gets paid when the transaction settles. If the settlement occurs as scheduled, the funds that have been held back – minus the Commission Express fee – are returned to the client. If the settlement is delayed beyond 30 days, the client incurs additional fees and interest, which are paid from the funds that have been held back.

“One thing that sets our company apart is that we have a 30-day grace period. If something happens and the settlement is delayed for whatever reason, the client doesn’t have to worry about incurring additional fees during that 30-day grace period,” she says.

Market Potential and Demand

The residential real estate market size in the U.S. is enormous, with an average of more than 5 million new and existing home sales per year over the past decade, and a total annual dollar volume of transactions averaging about $1.5 trillion, according to the Federal Reserve. Real estate commissions and related closing costs average about $170 billion annually, which is 0.6% of U.S. gross domestic product, the Fed reports.

Although fluctuations in the real estate market are common, demand by real estate professionals for reliable cash flow remains constant, Stedman says. In a hot market, brokers and agents must spend more on lead generation and marketing to compete for buyers and win listings. Housing inventory might be lower, contributing to longer periods between sales and commission payments. When the market slows down, houses take longer to sell, and agents must spend more to attract buyers from a smaller pool and showcase slow-moving properties. Closings and commission payments are less frequent, but expenses remain constant.

Advantages for Commission Express Franchisees

• No real estate experience necessary. While real estate knowledge is beneficial, it’s not required. “Our franchise owners are people who have had enough life experience to have good judgement and the capital to do business. Generally speaking, we’ve had everybody from Harvard MBAs to people who hadn’t graduated from high school, and they’ve all been successful,” Stedman says.
• Comprehensive training and ongoing support. Franchise training may be virtual or in person at Commission Express headquarters in Virginia, and one-on-one support is ongoing for as long as needed, Feghali says. “We go over our underwriting process start to finish. I will personally do the first handful of transactions with a new franchisee to make sure they know what to look for, and we basically hold their hand per se until they’re ready to take it over on their own. We’re definitely as hands-on as they need us to be,” she says. The corporate team also shares a marketing plan with new franchisees, and focuses heavily on support during their first three months in operation and continuously as needed thereafter, she says, adding that franchise owners also are encouraged to attend real estate trade shows.
• Fast, low-cost startup. Franchise owners need only a computer and internet connection to work from their homes. If they’re eager to start, they can be in business in as little as 14 days (with a month being more typical) from the time they express interest, review the franchise disclosure document (FDD) and go through training, Feghali says.
  Some new franchisees purchase their first commissions while still in training, Stedman says. “We have real-time data here at the national franchise, so if a deal comes in from North Carolina, and we’re here training the new North Carolina franchise owner, we just bring that deal right over. Rachel underwrites with the new franchise owner and away we go,” he says.
• Quick returns on investment. Franchise owners need a minimum of $150,000 in liquid capital to run their businesses, “but our deals turn over so fast that it will take six or eight months to a year to use up that $150,000,” Stedman says.
• Built-in client base. “We’ve been in business so long that it would be hard to find a market where we don’t already have some customers,” he says. “So, when we sell a market, we give the franchise owner all the data on every customer that we’ve ever done business with in that market.”
• Repeat business. As a B2B franchise opportunity, Commission Express cultivates longstanding relationships with clients. Commission Express’ business is composed of 80% repeat customers who use the commission advance company an average of four to six times a year, Feghali says.
  “Once you have 50 clients in your database, you will do a deal every business day. That’s the tipping point for us because of the four to six times a year that they use us and the business resulting from their referrals to others,” Stedman says.
• Steady business regardless of market conditions. When the market is hot, agents and brokers have to spend more to compete with other real estate professionals for buyers and listings, while reduced housing inventory may slow the frequency of sales. When the market slows down, real estate professionals spend more to entice buyers from a smaller pool and showcase slow-moving properties. Expenses remain constant, and so does demand for steady cash flow.
• White-collar, high-value business. Franchise owners keep regular business hours. “When banks are closed, we’re closed,” Stedman says. Franchisees don’t have staffing headaches because they don’t require employees. In this B2B franchise opportunity, owners work with licensed real estate professionals earning an average $125,000 a year or more, and the average commission purchased by Commission Express is right at $8,000, Stedman says.
• Long-standing niche business. With its specialized service and expertise demonstrated over more than 30 years in a highly specific market, the commission advance company has attained significant customer loyalty, as evidenced by its repeat business.

To learn more about franchising opportunities, visit Commission Express.