If you’re an agent, you’ll know that the current tight market conditions have meant settlement periods are expected to blow out, with some even extending far into next year.
The highly competitive market means buyers typically need to act fast to secure their dream home but also need time to secure finance or even sell their own property first.
Therefore, longer settlement periods are being sought by both buyers and sellers.
This leaves you in a difficult position when it comes to your commission and cash flow.
The market forces behind the trend
With the number of property transactions being heavily reduced throughout 2021, we have seen property prices soar.
Growth and results for vendors capitalising on current conditions have been nothing short of astounding.
According to CoreLogic’s recent housing market report, the national number of live listings is down 23.2 per cent on the same period last year.
In Victoria alone, sales volumes have dropped by 31.1 per cent and an even larger 42.9 per cent in NSW.
However, housing prices have surged, up 20.3 per cent nationally over the same period.
This is the highest 12-month appreciation since June 1989.
The result of reduced volumes has had a flow-on effect for sellers and buyers, resulting in extended settlement periods.
Ray White Chief Economist, Nerida Conisbee, suggests it’s not just the tight market but the fact that sellers, who have capitalised on their sale, don’t feel pressured to rush the purchase.
Ms Conisbee also references the tightening lending criteria that has likely lengthened the finance approval process.
Strangling cash flow for agencies
So, what does this mean for agencies that rely on ongoing real estate transactions to maintain a healthy cash flow?
In normal market conditions, a typical listing through to exchange period is usually 45 days, plus an average settlement period of around 42 days.
This means agents, on average, receive their commission payment at around 90 days.
However, with these extended settlement periods, this could mean waiting 120 to 150 days before an agency receives its earned commission entitlements.
While commission value may be slightly larger right now due to inflated prices, the lack of stock and settlement delays can result in less income overall and longer waits.
All of this creates a risky position to find yourself in.
The cash flow pressure is rising
Everyone has done well to weather the COVID-19 lockdowns again in 2021, and we are all excited to get back to normal again after a tough two years.
However, the lasting effects of these trading restrictions will be felt for many months to come.
Who knows what 2022 conditions have in store for us, as an industry.
Adding extended timelines to already infrequent property settlement periods means the constant outgoings are running cash flow accounts dry, limiting agency marketing, business growth and even putting pressure on general operational running costs.
However, there are ways to alleviate some of the pressure.
Forward-thinking agencies are looking for smarter ways
By just putting up with it or waiting it out, you can be holding your agency back.
Is this a risk you’re willing to take? If not, then there’s a better way that puts you back in control, despite settlement date blowouts – and that’s Commission Flow.
Commission Flow allows you to claim your commission entitlements now, rather than wait.
It exists to give you cash flow freedom, empowering agents and agencies alike to navigate these difficult times on your terms.
Commission flow is real estate finance for agents by agents
If you or your business want a better way to manage settlement date blowouts, speak to us today.
Our Commission Flow offering is designed specifically to allow you to access unconditional funds before they are ordinarily available, so you can claim your commission faster.
With a best price guarantee and access to funds in as little as four hours, we may have the solution you are looking for.
For more information, visit commissionflow.com.au
