National Real Estate Exam (PSI)ContractsMedium
A seller enters into a net listing agreement, telling the broker to sell the home and the seller will accept $180,000 net proceeds. The home sells for $198,000. What is the broker's commission, and what percentage of the sale price does it represent?
- A$18,000, which is 9.09% of the sale price
- B$20,000, which is 10.1% of the sale price
- C$18,000, which is 10% of the sale price
- D$198,000, which is 100% of the sale price
Show answer & explanationAnswer & explanation
Correct answer: A. $18,000, which is 9.09% of the sale price
In a net listing, the broker's commission is the amount above the seller's net figure: $198,000 − $180,000 = $18,000. To find the percentage of sale price: $18,000 ÷ $198,000 = 0.0909, or 9.09%.
Why the other options are wrong
- B. Both the commission amount and percentage are incorrect.
- C. The dollar amount is right but the percentage is miscalculated (10% would require $19,800).
- D. This would mean the seller received nothing, which contradicts the net listing terms.
Net Listing
A listing agreement where the broker's commission is whatever amount the property sells for above the seller's specified net price.
- Commission = Sale Price − Seller's Net Amount
- Considered risky and illegal or restricted in many states
- Broker has incentive to sell for as much as possible
- Percentage of sale price can vary each transaction
Memory trick: Net = 'Net proceeds first, broker keeps the rest'