Real Estate Math Formulas: Calculating Commission

The math portion of your real estate licensing exam may ask you to calculate commission for a sale.  Typically, an agent’s commission is calculated as a portion of the sales price of the property.  There is no standard percentage and it can be negotiated.  In many parts of the US, both the seller and buyer agent’s commission is paid by the seller.

Real Estate Math Formulas: Calculating Commission

In order to calculate commission, you first need to know what percentages are in the listing agreement and then multiple this percentage by the sales price of the property.

Real Estate Math Practice Problem: Calculating Commission for a $250,000 Property

The real estate math licensing exam may have the following problem:

Example. Joe hires Agent Sally to sell his house.  He agrees to pay 6% in total commission to be equally split between the Agent Sally and the buyer’s agent.  If Joe’s house sells for $250,000, how much commission does Agent Sally make?

Solution. To solve this problem, we first calculate the total commission.

Total Commission is $250,000 x 0.06 = $15,000

We know this commission is equally split between Agent Sally and the buyer agent, so

$15,000 / 2 = $7,500

Agent Sally will make $7,500 for selling Joe’s home.

Alternative Solution: Because the commission is split equally, you know that Agent Sally will make 6%/2 = 3% of the commission.  Therefore, $250,000 x 0.03 = $7,500.

BONUS: Real Life Real Estate

In real life, you may be asked to negotiate your commission.  In these instances it is important to be able to quickly calculate your commission so you know how much money you’ll be making.  Always have a minimum number in your mind that you know you cannot go below, which takes into account the value of your time and expenses incurred for listing a property.

We are seeing more and more large companies offer steep discounts to sell homes or to do them for a flat fee.  You must be ready to explain your value and why you are a better agent than your competitors!

Need more real estate math practice?

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