When you start a new career, pay is an inescapable consideration even if you’re passionate about what you’re pursuing. You have to make a living, which means you have to make a certain amount of money.
One of the many advantages of getting a North Carolina real estate broker license is that there’s no income cap. How much you earn in a year largely comes down to the amount of work you put in and growing your network. But there are a few factors that affect how much money you’ll earn on a transaction.
The biggest factor for real estate brokers and agents is commission. North Carolina real estate brokers don’t have a set salary or hourly pay. They earn commission on the sale or lease of a property.
If all real estate professionals in North Carolina are brokers, does that mean the selling and buying “agents” keep all of the commission? And if that’s the case, is the overall commission paid by the seller less than in other states?
We’re helping all you future North Caroline real estate brokers make sense of how commission works in the state from how much commission comes out of the sale to additional considerations that may lower your take-home pay.
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This is the million dollar question for anyone who’s planning to work as an NC real estate broker. Or should we say, the 5.5% question. Because right now that’s the average total commission for homes in North Carolina that are listed by a full-service brokerage.
The latest research from organizations like ibuyer.com and Clever Real Estate put the average commission in North Carolina right in line with the current national average. In recent years as home prices soared, brokerages have reduced their fees bringing the average commission down half a percentage point. Even though commission has dropped from 6% the higher prices have balanced things out so that brokers are still taking home just as much money.
Of course, today there are a variety of discount brokers that offer to list homes for less than 5.5% commission. It’s possible for the total commission to be as low as 4%, but typically the buyer’s broker is still going to walk away with around 2.75% of the sale price.
One very important thing to keep in mind is that while 5.5% is the average, the commission is always negotiable. It’s not uncommon to see a listing agent accept anywhere from 4-6.15% commission. If the broker will also be helping the seller buy a home 4.5-5% commission is reasonable.
When a home is listed well above the average price listing brokers are often willing to accept a 5% commission. This is starting to become the norm around the country as home prices continue to rise. Online platforms like Redfin that offer a 1% listing fee are another factor that’s leading to more commission negotiations.
Something all brokers should consider is whether they are in a buyer’s market or seller’s market. In a seller’s market when inventory is low, brokers have steep competition for listings. In an effort to get a listing, the broker may be willing to offer a more competitive commission rate of 4.5-5%.
Just keep in mind that provisional brokers aren’t the ones that agree to the commission rate. Commission negotiations are handled by the broker-in-charge (BIC).
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A seller in North Carolina doesn’t have to pay the buying broker’s commission. It’s customary for them to do so, but it isn’t required in most circumstances. The only time there are stipulations regarding who pays commission is when a Veteran Administration (VA) loan is used to purchase a home. The VA doesn’t allow the buyer to pay commission, so in that instance, the seller is responsible for paying the buyer’s broker.
The listing commission isn’t just for the listing broker. The total commission is almost always split 50/50 between the listing broker and the buying broker. The exception to this rule is when the listing agent accepts less than the standard 5.5% commission. They may still give the buying agent 2.75%, or they may do an even split. In the latter case, the buyer’s agent would need to be willing to accept less commission than average. It can be a risky move since a lower commission rate may affect the number of buying brokers that show the property.
How much a North Carolina real estate broker makes also depends on the commission split with their brokerage. When a home sale closes and the commission funds are dispersed they don’t typically go directly to the provisional brokers who made the deal happen. Like other states that have a broker/agent system, in North Carolina, the commission is deposited with the BIC’s brokerage. The broker-in-charge then gives the provisional agent who closed the deal their cut.
A 50/50 split between the BIC and provisional broker is typical in North Carolina. That would mean the actual commission for the provisional broker is 1.375%.
However, the commission split between the BIC and provisional broker varies. It may not even be the same for different provisional brokers at the same brokerage. The level of experience a provisional broker has, the number of deals they do in a year and the size of their network can all play a role in the commission split with the BIC.
When you’re starting out you may be offered a 70/30 or 60/40 split and work your way to a 50/50 split with the broker-in-charge. You could also be offered a sliding scale commission split that gets more favorable the more you sell. But if you choose to go with a virtual brokerage that provides fewer resources you could start off keeping 80-90% of the commission that’s paid to the brokerage.
Ultimately, just as with a listing, the commission split with the BIC is negotiable. Before signing on with a North Carolina brokerage take the time to research competitive commission splits in your market. Then honestly assess what you bring to the table compared to other provisional brokers. The more value you bring the higher the commission split should be.
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