A property sells for $460,000 with a 6% commission split equally between the listing broker and the selling broker. The listing agent receives 65% of the listing broker's share. How much does the listing agent earn?
Correct Answer
A) $8,970
Step 1: total commission = $460,000 × 6% = $27,600. Step 2: listing broker's half = $27,600 × 50% = $13,800. Step 3: listing agent's share = $13,800 × 65% = $8,970.
Why This Is the Correct Answer
Step 1: total commission = $460,000 × 6% = $27,600. Step 2: listing broker's half = $27,600 × 50% = $13,800. Step 3: listing agent's share = $13,800 × 65% = $8,970.
Why the Other Options Are Wrong
Option B: $149,500
This amount comes from forgetting to apply the commission rate and using the sale price as the base.
Option C: $17,940
This amount comes from forgetting to split the total commission between the two brokers.
Option D: $13,800
This amount comes from forgetting to apply the agent's internal split after calculating the broker's side.
Deep Analysis of This Real Estate Math Question
This multi-step commission calculation demonstrates the layered compensation structure in real estate transactions. The calculation requires understanding both horizontal splitting (between cooperating brokerages) and vertical splitting (between broker and agent within the same firm), reflecting the complex business relationships that enable modern real estate transactions through cooperative marketing and shared commission pools.
Background Knowledge for Real Estate Math
The cooperative commission system was formalized through MLS organizations in the mid-20th century to encourage property sharing between brokerages. Individual agent commission splits evolved from independent contractor relationships, where agents receive negotiated percentages of their broker's commission share based on experience, production levels, and brokerage agreements.
Memory Technique
Use 'TBSA': Total commission, Broker split, Single broker's share, Agent's portion. Visualize a dollar bill being torn in half (broker split), then one half being divided again (agent's share). The agent gets a piece of a piece, never the whole amount.
Exam Tip for Real Estate Math
For multi-step commission problems, write out each calculation step clearly and verify that your final answer represents 1-3% of the original sale price for individual agents. Look for answer choices that are exactly half of other options, as this often indicates the broker split was missed.
Real World Application in Real Estate Math
In a typical transaction, when a RE/MAX agent lists a $460,000 property and a Coldwell Banker agent brings the buyer, each brokerage receives $13,800 of the total $27,600 commission. The RE/MAX listing agent, having negotiated a 65% split with their broker, receives $8,970 while the broker retains $4,830 to cover office expenses and franchise fees.
Related Topics & Key Terms
Key Terms:
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