A property sells for $275,000 at a commission rate of 6.0%. What is the total commission?
Correct Answer
B) $16,500
Use the commission formula: $275,000 × 6.0% = $16,500. That is the total commission paid from the sale proceeds.
Why This Is the Correct Answer
Use the commission formula: $275,000 × 6.0% = $16,500. That is the total commission paid from the sale proceeds.
Why the Other Options Are Wrong
Option A: $8,250
This amount comes from using only half the commission rate or otherwise cutting the rate in half.
Option C: $165
This amount comes from moving the decimal twice and treating the percentage incorrectly.
Option D: $19,250
This amount comes from using the wrong commission rate.
Deep Analysis of This Real Estate Math Question
Basic commission calculations test the fundamental principle that real estate commissions are calculated as a percentage of the gross sale price. This straightforward multiplication forms the foundation for all other commission-related calculations and represents the total compensation paid to real estate professionals for facilitating the transaction.
Background Knowledge for Real Estate Math
Percentage-based commissions became standard in American real estate during the early 1900s as the industry professionalized. This system replaced flat fees and aligned agent compensation with property values, incentivizing agents to achieve higher sale prices while making services accessible across different price ranges.
Memory Technique
Remember 'Sale × Rate = Commission Fate.' For percentages, move the decimal two places left: 6% becomes 0.06. Think of commission as the 'fee for the key' - it's always a percentage of what the property sold for.
Exam Tip for Real Estate Math
Look for the key phrase 'total commission' in the question - this means you only multiply sale price by commission rate, nothing else. Be careful with decimal placement: 6% = 0.06, not 0.6. The answer should make sense as a reasonable percentage of the sale price.
Real World Application in Real Estate Math
A homeowner selling their $275,000 property agrees to a 6% commission with their listing agent. At closing, exactly $16,500 will be deducted from the sale proceeds and paid to the brokerage, which will then split this amount between the listing and selling agents according to their agreements.
Related Topics & Key Terms
Key Terms:
More Real Estate Math Questions
Find the annual GRM for a 4-unit building in Detroit Michigan with an asking price of $300,000 and gross annual rents of $25,000.
A property has annual property taxes of $3,600. The seller paid taxes through December 31, but the sale closes on October 1. How much does the seller owe the buyer as a proration?
The buyer gets a $280,000 mortgage in Florida. The intangible tax is:
A property sells for $350,000 in Florida. The documentary stamp tax on the deed is:
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?
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