A broker earns 5% commission on a $600,000 sale. If the listing broker gets 60%, how much do they receive?
Audio Lesson
Duration: 3:06
Question & Answer
Review the question and all answer choices
$12,000
Option A ($12,000) would represent 40% of the $30,000 total commission — which is actually the selling/buyer's broker's share, not the listing broker's share — making it a classic answer trap that tests whether candidates confuse the two sides of the split.
$18,000
$30,000
Option C ($30,000) is the total commission earned before any split occurs; selecting this answer reflects a failure to apply the 60% listing broker split, which is the critical second step of the problem.
$15,000
Option D ($15,000) would represent a 50/50 split of the $30,000 total commission, which is a common default assumption but is factually incorrect given the 60/40 split explicitly stated in the question.
Why is this correct?
The correct calculation proceeds in two steps: first, $600,000 multiplied by 5% yields a total commission of $30,000; second, the listing broker's 60% share of $30,000 equals $18,000. This two-step sequential calculation is the standard method for all commission-split problems on real estate licensing exams, and $18,000 is the precise result.
Deep Analysis
AI-powered in-depth explanation of this concept
Commission splitting between listing and selling brokers is a foundational concept in real estate brokerage economics, reflecting the cooperative nature of the MLS-based marketplace. When a property is listed, the listing broker typically offers a portion of the total commission to a cooperating buyer's broker through the MLS, creating an incentive for all brokers to show and sell the property. The percentage split is not regulated by law — it is a private contractual agreement between brokers — but understanding how to calculate each party's share is essential for both exam success and real-world brokerage operations. This math tests whether candidates understand that the total commission is calculated first, then divided according to the agreed split.
Knowledge Background
Essential context and foundational knowledge
Commission splitting became standardized in the United States with the rise of Multiple Listing Services in the mid-20th century, as local broker associations needed a systematic way to incentivize cooperation between competing firms. Historically, commissions were paid entirely to the listing broker, who would then negotiate a referral or split with any cooperating broker. The modern MLS system formalized this into an upfront offer of compensation, making the split transparent and enforceable. Following the 2024 NAR settlement, the mechanics of how buyer-broker compensation is offered and disclosed are evolving, but the mathematical principles of calculating splits remain unchanged.
Podcast Transcript
Full conversation between instructor and student
Instructor
Hey there, welcome back to our real estate license exam prep podcast. Today, we're diving into a question that covers a fundamental concept in real estate math. Are you ready to tackle it?
Student
Absolutely, I'm here to learn. What's the question?
Instructor
Great! The question is about a broker's commission on a $600,000 sale. The broker earns a 5% commission, and the listing broker gets 60% of that. How much does the listing broker receive?
Student
Okay, I see. So, I need to calculate the total commission first, then find out 60% of that amount?
Instructor
Exactly! That's the core concept here. You're right to start with the total commission, which is 5% of $600,000. Can you calculate that for us?
Student
Sure, 5% of $600,000 is $30,000. So the total commission is $30,000.
Instructor
Perfect! Now, let's move on to the second part. You mentioned the listing broker gets 60% of the total commission. How much is that?
Student
If the total commission is $30,000 and the listing broker gets 60%, then it would be $30,000 times 0.60...
Instructor
Yes, and that's exactly what we're looking for. Let's do the math together. $30,000 times 0.60 equals $18,000.
Student
Oh, I see! So the listing broker receives $18,000. That's the correct answer, right?
Instructor
Absolutely, option B is correct. It's crucial to understand that the question requires two steps: calculating the total commission and then applying the split percentage. Now, let's talk about why the other options are wrong.
Student
Sure, I'm curious to know that.
Instructor
Option A, $12,000, is incorrect because it's based on a 2% commission, not the 5% as stated in the question. Multiplying the percentages together before applying them to the sale price is a common mistake.
Student
I see, so the percentages need to be applied sequentially.
Instructor
Exactly. Option C, $30,000, is incorrect because it only represents the total commission, not the listing broker's share. And option D, $15,000, is wrong because it's not a percentage of the sale price or the total commission.
Student
Those are some common pitfalls. I'll keep those in mind.
Instructor
Absolutely. Now, let's try a memory technique. Think of the commission like a pizza. The total commission is the whole pizza, and the listing broker gets 60% of it, which is three slices out of five.
Student
That's a great way to visualize it! It makes it easier to remember.
Instructor
Exactly, and for exam tips, always remember to calculate the total commission first, then apply the split percentages. Look for keywords that indicate a two-step process.
Student
Thanks for the tips and the explanation. I feel more confident now.
Instructor
You're welcome! Remember, practice makes perfect. Keep working on your math skills, and you'll ace the exam. We'll see you in the next episode!
Use the two-step ladder: Step 1 — climb to the 'total commission floor' (sale price × rate); Step 2 — take your 'cut of the floor' (total × your percentage). Never skip a step or you'll fall. Remember: 'Total First, Then Split' — TF-TS — like a tennis score, always count the full game before awarding the set.
When faced with commission questions, visualize the total commission as a whole pizza, then mentally divide it according to the split percentages to ensure you calculate each party's share correctly.
Always write out both steps explicitly when solving commission-split problems: (1) Sale Price × Commission Rate = Total Commission, then (2) Total Commission × Broker's Percentage = Broker's Share. Exam writers deliberately include the total commission ($30,000) as a distractor answer to catch students who stop after step one, so always complete both calculations before selecting your answer.
Real World Application
How this concept applies in actual real estate practice
A seller lists her Brooklyn brownstone for $600,000 with Broker A, agreeing to a 5% total commission. Broker A enters the listing on the MLS and offers 40% of the commission to any cooperating buyer's broker. Broker B, representing the buyer, brings an accepted offer at full price. At closing, the title company disburses $30,000 in total commission: $18,000 goes to Broker A (the listing broker, receiving 60%), and $12,000 goes to Broker B (the buyer's broker, receiving 40%). Each broker then pays their respective salesperson a portion of their received share according to their internal compensation agreements.
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