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.

To calculate the commission, first determine 3% of the agreed sales price of $470,000, which equals $14,100. This total is paid by the buyer as commission under the buyer broker agreement.

A (14,250) YOUR ANSWER

This amount represents 3% of the original listed price of $475,000, not the agreed-upon sales price of $470,000. The commission calculation must be based on the price at which the property is actually sold, which in this case is lower.

B (14,100) CORRECT

This is the correct calculation, as it represents 3% of the agreed sales price of $470,000. The calculation is done as follows: $470,000 x 0.03 = $14,100, which is the amount the buyer will pay in commission to the brokerage.

C (7,125) YOUR ANSWER

This figure does not accurately reflect the commission amount based on the agreed sales price. It seems to imply a misunderstanding of the commission structure or could result from an incorrect calculation, possibly reflecting a split commission rather than the total due from the buyer.

D (7,050) YOUR ANSWER

This amount is also incorrect, as it does not represent the total commission based on the sale price. It could be mistakenly derived from an incorrect percentage calculation or misinterpretation of how the commission is split between the buyer's broker and the brokerage.

Conclusion

In this scenario, the buyer is responsible for paying $14,100 in commission, calculated as 3% of the final sale price of $470,000. Understanding how to apply the commission percentage to the agreed-upon price, rather than the listing price, is crucial for determining the correct amount due, ensuring clarity in real estate transactions.

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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