Key Takeaways
- All compensation to brokers must be paid through their broker-in-charge, never directly to the broker
- Commission rates are negotiable and NOT set by law, NCREC, or any association
- Referral fees may only be paid to licensed brokers or as permitted by law
- Brokers must disclose any compensation received from parties other than their client
- Commission disputes between brokers do not delay closings
Commission and Compensation in North Carolina
Understanding compensation rules in North Carolina prevents license law violations and ensures proper payment.
Commission Basics
Negotiability
All real estate commissions are fully negotiable. There is no:
- Standard commission rate in NC
- Minimum or maximum commission
- Rate set by NCREC
- Rate set by any real estate association
Antitrust Warning: Discussing or agreeing on commission rates with competing brokers is illegal price-fixing.
When Commission is Earned
In North Carolina, a broker typically earns commission when:
- The broker procures a ready, willing, and able buyer
- On terms acceptable to the seller, OR
- Per the specific terms in the listing agreement
Payment of Compensation
Flow of Commission
All broker compensation must flow through proper channels:
| From | To | Permitted? |
|---|---|---|
| Client/Closing | Broker-in-Charge | Yes |
| BIC | Affiliated Broker | Yes |
| Client | Broker directly | NO |
| Cooperating Broker | Broker directly | NO |
Cardinal Rule
Brokers can ONLY receive compensation through their broker-in-charge (or their own company if they are the BIC).
A provisional broker or full broker working under a BIC cannot:
- Accept payment directly from a client
- Accept payment from another brokerage
- Receive commission from the closing attorney
- Be paid by any party other than their BIC
Commission Sharing and Referrals
Sharing with Cooperating Brokers
Brokers may share commissions with:
- Other NC licensed brokers
- Out-of-state brokers licensed in their state
- Other brokers within the same firm
Referral Fees
Permitted referrals:
- Broker to broker (licensed parties)
- For referring clients who complete transactions
- Must be disclosed to all parties
Prohibited referrals:
- Paying unlicensed persons for referrals
- Kickbacks to service providers
- Undisclosed compensation arrangements
Disclosure of Compensation
Brokers must disclose to their clients:
- Any compensation from the other party
- Any financial benefit from referrals
- Affiliated business arrangements
- Any conflict of interest
Commission Disputes
Between Brokers
When brokers dispute a commission:
- The dispute does NOT delay closing
- The transaction proceeds normally
- Brokers resolve the dispute separately
- May require mediation or litigation
Earnest Money Disputes
If buyer and seller dispute earnest money:
- BIC holds funds until resolution
- May file interpleader action with court
- Cannot disburse to either party without agreement
Compensation and Agency Relationship
Important Principle
| Myth | Reality |
|---|---|
| "Whoever pays me is my client" | FALSE |
| Agency is determined by written agreement | TRUE |
| Buyer's agent paid by seller is seller's agent | FALSE |
The source of compensation does NOT determine the agency relationship. A buyer's agent remains a buyer's agent even when paid from the seller's proceeds.
A North Carolina provisional broker may receive commission payment from:
Which statement about commission rates in North Carolina is TRUE?
When brokers from different firms dispute who earned a commission, what happens to the closing?