Real Estate Math — Commission Calculations
Commission math appears heavily on the license exam. Master these formulas.
Commission formula:
Commission = Sale Price × Commission Rate
Example: $350,000 × 6% = $21,000
Commission split:
$21,000 total ÷ 2 = $10,500 each (listing brokerage and buyer's brokerage)
Agent gets 70% split: $10,500 × 70% = $7,350
Finding sale price from commission:
Commission Amount ÷ Commission Rate = Sale Price
Example: $15,000 commission at 5% = $15,000 ÷ 0.05 = $300,000
Net listing calculation:
Seller wants net $280,000. Broker charges 6%. What must property sell for?
$280,000 ÷ (1 - 0.06) = $280,000 ÷ 0.94 = $297,872
Prorations at closing: Expenses are divided between buyer and seller based on date of closing.
Annual amount ÷ 365 × days = daily rate × days remaining/elapsed
Reference:
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