A property is listed for $475,000. Under a buyer broker agreement, the buyer offers to compensate their licensee 3% of the sales price. The licensee and their brokerage split commissions 50/50. An offer for $470,000 is agreed upon. How much will the buyer pay in commission to the brokerage?

Rationale

The buyer will pay $14,100 in commission to the brokerage.

The commission is calculated based on the agreed-upon sales price of $470,000, with the buyer broker receiving 3% of that amount. After determining the commission, it is then split between the licensee and their brokerage.

A ($14,250) YOUR ANSWER

This amount represents a 3% commission calculated from the initial listing price of $475,000 rather than the final agreed-upon price of $470,000. As commissions are based on the actual sale price, using the listing price leads to an incorrect calculation.

B ($14,100) CORRECT

Calculating the commission at 3% of the sales price of $470,000 gives a total of $14,100. This is computed as follows: $470,000 * 0.03 = $14,100. After the commission is calculated, the licensee and brokerage would split this amount, but the question specifically asks for the total commission payable by the buyer to the brokerage.

C ($7,125) YOUR ANSWER

This figure incorrectly represents half of the total commission. The total commission from the buyer's perspective would be $14,100, and thus half of that amount is not the correct answer to the total commission paid by the buyer to the brokerage.

D ($7,050) YOUR ANSWER

This amount also mistakenly reflects a portion of the total commission rather than the full amount. It does not accurately represent either the total commission based on the sale price or the split between the licensee and the brokerage.

Conclusion

The correct calculation for the buyer's commission payment is based on the final agreed-upon sales price of $470,000. By applying the 3% commission rate, the buyer pays $14,100 to the brokerage. Understanding how commissions are structured and calculated is crucial in real estate transactions, as it directly affects the financial obligations of the parties involved.

A property is listed for $475,000. Under a buyer broker agreement, the buyer offers to compensate their licensee 3% of the sales price. The licensee and their brokerage split commissions 50/50. An offer for $470,000 is agreed upon. How much will the buyer pay in commission to the brokerage?

The buyer will pay $14,100 in commission to the brokerage.

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