A broker earns a total commission of $18,000 on a sale. If the commission rate was 6%, what was the sale price of the property?
Correct Answer
D) $300,000
Step 1: To find the sale price, divide the commission by the rate: $18,000 ÷ 0.06 = $300,000.
Why This Is the Correct Answer
Step 1: To find the sale price, divide the commission by the rate: $18,000 ÷ 0.06 = $300,000.
Why the Other Options Are Wrong
Option A: $1,080
This amount comes from multiplying the commission by the rate instead of dividing.
Option B: $3,000,000
This amount comes from dividing by 0.006 instead of 0.06.
Option C: $108,000
This amount comes from multiplying by 6 instead of dividing by 0.06.
Deep Analysis of This Real Estate Math Question
This reverse commission calculation demonstrates how to work backwards from known commission amounts to determine original sale prices. The principle relies on understanding that commission is a fixed percentage of sale price, so dividing the commission by the rate reveals the original transaction value.
Background Knowledge for Real Estate Math
Reverse commission calculations became important for audit purposes, tax reporting, and when reconstructing transaction details from incomplete records. This mathematical relationship helps verify transaction accuracy and is essential for brokers managing multiple agent commissions and splits.
Memory Technique
Think 'Commission ÷ Rate = Sale Price' or use the acronym CRS (Commission ÷ Rate = Sale). Visualize 'undoing' the original multiplication by using division to get back to the original sale price.
Exam Tip for Real Estate Math
When given a commission amount and rate with the question asking for sale price, always divide the commission by the decimal rate. Look out for trap answers that show multiplication results - these are typically incorrect for this type of reverse calculation.
Real World Application in Real Estate Math
A brokerage receives a $18,000 commission check and needs to verify it matches their 6% agreement on a $300,000 sale. By dividing $18,000 by 0.06, they confirm the sale price was indeed $300,000, ensuring accurate record-keeping and proper commission distribution to their agents.
Related Topics & Key Terms
Key Terms:
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