A property sold for $450,000. The commission rate was 6%. If the listing broker received 60% of the total commission, how much did the listing broker receive?
Audio Lesson
Duration: 3:03
Question & Answer
Review the question and all answer choices
$13,500
Option A ($13,500) is incorrect because it represents 3% of the sale price ($450,000 × 3%), which would be the case if the listing broker received half of a 6% commission, not 60%.
$16,200
$27,000
Option C ($27,000) is incorrect because it represents the total commission amount (6% of $450,000), not the listing broker's share of 60%.
$10,800
Option D ($10,800) is incorrect because it represents 60% of half the total commission, or 3% of the sale price, which would be the case if the commission was split 50/50 between brokers.
Why is this correct?
Option B ($16,200) is correct because it accurately calculates the listing broker's share. First, the total commission is $27,000 ($450,000 × 6%), and then the listing broker receives 60% of that amount ($27,000 × 60% = $16,200). This follows the standard two-step calculation process for commission splits.
Deep Analysis
AI-powered in-depth explanation of this concept
Commission calculations are fundamental to real estate practice as they directly impact agent earnings and broker business operations. This question tests your ability to calculate total commission and then determine a broker's share. The process involves two percentage calculations: first determining the total commission (6% of $450,000), then calculating the listing broker's portion (60% of that commission). This type of question is challenging because it requires multiple steps and precise percentage calculations. In practice, brokers and agents must regularly perform these calculations to determine their earnings and business expenses. Understanding commission splits is crucial for business planning, as it affects both individual agent compensation and broker revenue. This question connects to broader real estate knowledge by illustrating how commission structures work in transaction processing, which is central to how real estate professionals earn income.
Knowledge Background
Essential context and foundational knowledge
Commission calculations are a cornerstone of real estate economics. Most real estate transactions involve a commission paid by the seller to their broker, which is then split according to agreements between brokers and agents. In California, commission rates are negotiable and not set by law, though they must be clearly outlined in the listing agreement. The commission split between listing and selling brokers is typically negotiated before the property is listed. Understanding these calculations is essential for agents to know their potential earnings and for brokers to manage their business finances.
Think of commission as a pizza: First, you cut the pizza into commission slices (6% of the sale price), then you share those slices according to agreement (60% to listing broker, 40% to selling broker).
Visualize the pizza being cut twice - first into commission portions, then into broker shares - to remember the two-step calculation process.
For commission questions, always calculate the total commission first, then apply any splits. Multiply the sale price by the commission rate, then multiply that result by the broker's percentage share.
Real World Application
How this concept applies in actual real estate practice
Sarah, a new agent in Los Angeles, just helped her clients sell their condo for $450,000. Her broker explained that the total commission is 6%, with 60% going to the listing broker and 40% to the selling broker. Sarah needs to calculate her earnings, which will be a percentage of the selling broker's share. Understanding these calculations helps Sarah know her potential commission before closing and allows her to advise her clients about how commissions work in the transaction.
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