How property settlement period blowouts impact agency cash flow

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If you are an agent, you will know that the current tight market conditions mean that settlement periods are set to explode, some even extending into next year.

The highly competitive market means that buyers usually need to act quickly to secure their dream home, but also need time to get financing or even sell their own property first.

Therefore, buyers and sellers are looking for longer payment terms.

This leaves you in a difficult position when it comes to your commissions and cash flow.

Market forces behind the trend

With the number of real estate transactions drastically reduced throughout 2021, we have seen real estate prices soar.

The growth and results of suppliers taking advantage of the current conditions have been nothing short of astounding.

According to the recent CoreLogic study housing market report, the national number of live registrations is down 23.2% compared to the same period last year.

In Victoria alone, sales volumes fell 31.1% and 42.9% in NSW.

However, house prices rose 20.3% nationwide over the same period.

This is the highest 12-month appreciation since June 1989!

The result of reduced volumes has had a ripple effect for sellers and buyers, resulting in extended settlement periods.

In a recent Elite Agent article, Ray White chief economist Nerida Conisbee suggests that it’s not just the tight market, but the fact that sellers, who have capitalized on their sale, are not feeling not have to rush the purchase.

Nerida also refers to the tightening of loan criteria which likely lengthened the funding approval process.

Stifling cash flow for agencies

So what does this mean for agencies that rely on ongoing real estate transactions to maintain healthy cash flow?

Under normal market conditions, a typical quotation period to trade is generally 45 days, plus an average settlement period of approximately 42 days.

This means that agents, on average, receive their commission payment in around 90 days.

However, with these extended settlement periods, it could mean waiting 120-150 days for an agency to receive their earned commission rights.

While the value of the commission may be slightly higher at this time due to inflated prices, lack of stock and payment delays can result in lower overall revenue and longer waits.

All of this creates a risky position in which to find yourself.

Pressure on cash flow increases

Everyone has done well to overcome COVID lockdowns once again in 2021, and we are all excited to be back to normal after two difficult years.

However, the lasting effects of these trade restrictions will be felt for many months to come.

Who knows what 2022 conditions have in store for us as an industry.

Adding extended timeframes to already scarce property settlement periods means constant spending is draining cash accounts, limiting agency marketing, business growth, and even putting pressure on overall operating costs.

However, there are ways to take some of the pressure off.

Forward-thinking agencies are looking for smarter ways

By simply supporting it or waiting for it, you can put the brakes on your agency.

Is this a risk you’re willing to take? If not, there is a better way to regain control, despite the settlement date blowouts – and that is the commission flow.

Commission Flow allows you to claim your commission rights now, rather than waiting.

It exists to give you the freedom of cash flow, allowing agents and agencies to get through these tough times on your terms.

The commission flow is real estate financing for agents by agents.

If you or your business wants a better way to deal with overdue payments, contact us today.

Our commission feed offer is specially designed to give you access to unconditional funds before they’re normally available, so you can claim your commission faster.

With a best price guaranteed and access to funds in as little as 4 hours, we may have the solution you are looking for.

For more information visit commissionflow.com.au


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