Restaurants, gift stores, trucking companies and even builders can apply for a line of credit to keep their businesses running when receivables hit a dead zone.
Realtors? It turns out they can, too.
Once a home under contract passes inspection, the Realtor’s pending commission becomes an asset, Don Mullinax said.
His company, Commission Express, is able to lend against it.
“It gives Realtors an option, so they don’t have to park their business on the sidelines until another transaction comes along,” Mullinax said.
For sales closing within 30 days, Commission Express will advance up to 82 percent of the commission to the Realtor.
After closing, the Realtor pays the money back, plus a 9.7 percent fee on the amount borrowed.
It evens out the Realtor’s cash intake, so he or she can continue to market and pay other business expenses while waiting for the close.
Mullinax is conservative in the way he lends. He’s seen companies like his on the Internet that will advance money as soon as the Realtor has a listing.
“You kind of scratch your head. What happens if the property doesn’t sell?” he said.
Mullinax though, is comfortable with real estate finance and he has a knack for it.
Before opening his franchise in 2008, he’d already spent over 30 years in the banking industry making residential loans to homeowners and builders.
When Mullinax first opened the franchise, real estate was in a freefall. He saw there would be a value in advancing commissions to Realtors and that value would continue through the recovery.
During real estate’s “window of disadvantage,” people in the business relied on credit cards and maxed them out, Mullinax said.
“Even if people paid everything back, for them to go to standard sources for capital now, it’s an uphill battle,” he said.
One might expect Mullinax’s clients to all be novice Realtors, struggling to get a start. Not so.
New Realtors generally come with too much risk. His clients earn on average $85,000 per year.
One client is a real estate team that markets aggressively. There’s a lot of overhead that goes with the approach.
“We may work with them four or five times a year. For whatever reason, they hit a financing gap that they need to close,” Mullinax said.
He likes the business because it lets him build relationships with people and work with them over and over again. It’s what banking was like when he first got into the industry.
Strong ties to real estate industry
Mullinax graduated from the University of Memphis in 1969 with a degree in finance and a minor in real estate.
But his exposure to real estate began earlier, when he was in high school.
His father was building houses with a partner and Mullinax worked for them during summer breaks.
He started out with a shovel, digging field lines for septic tanks.
He moved up to working with the framers and brick layers and eventually, working with carpenters, “which was definitely better than digging field lines,” he said.
Mullinax’s first big job out of college was as a mortgage loan officer for Collateral Investment Company in Memphis. He worked there 13 years, eventually managing its branch operations.
A lot was happening in homebuilding. It was the 1970s and FHA was in the first years of its subsidized housing programs.
Mullinax would go on to work as a regional manager and a CEO in residential lending for two other banks and a financial services company focused on mobile homes.
His more than 30 years in banking gave him a front-row seat to major changes in mortgage lending.
Back in the business of building relationships
When the mortgage bankers first started doing conventional loans with Fannie Mae and Freddie Mac, lending standards were a lot tighter.
“If someone had one late payment in their credit history, they had to write a full explanation as to how in the world that possibly occurred,” Mullinax said.
He remembers when RESPA –– the Real Estate Settlement Procedures Act –– was first introduced.
“Everybody thought the sky was falling,” he said. “It was just like when they did TRID.”
Mullinax also lived through the 1990s era of bank mergers and consolidations.
Advances in technology and new software doubled the number of transactions banks could process.
There were no more books and ledgers. Employees in the formerly paper-driven industry were replaced by computers.
Mullinax saw his bank take over others, and twice, the bank he worked for was acquired by another.
The last time, his operation was shut down.
“I wound up deciding this was simply a crazy carousel,” he said.
As a manager, he’d see acquiring banks shut down centers, simply for increased profits.
It was contrary to what Mullinax enjoyed about his work.
“I was able to grow operations in Memphis because we had a lot of great people who cared and they were doing a great job,” he said.
In his current business, he gets to build relationships again.
“I try to be available to them as a resource,” Mullinax said. “I’ve had a title license. I’ve managed underwriting, closings and appraisals. So when they run into situations on a sale, I can offer suggestions to them.”
The better his clients are doing, the better his risk looks, too.
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