A property was listed for $110,000. It sold for $106,000. A 6.5% fee was split equally between the listing and selling real estate firms. The listing…

The commission is always calculated based on the final sale price, not the listing price. The total commission is first calculated, then split between the firms, and finally, the individual licensee's share is determined from their firm's portion.

1. Total Commission: $106,000 (Sale Price) × 6.5% (0.065) = $6,890

2. Listing Firm's Share: $6,890 ÷ 2 (equal split) = $3,445

3. Listing Licensee's Share: $3,445 × 55% (0.55) = $1,894.75

B. $1,966.25: This amount results from incorrectly using the listing price ($110,000) instead of the sale price as the basis for the commission calculation.

C. $3,575.00: This figure represents the listing firm's entire share of the commission if the calculation were incorrectly based on the listing price ($110,000 0.065 / 2).

D. $3,789.50: This is the result of incorrectly applying the licensee's 55% split to the total commission ($6,890), rather than to the listing firm's share.

1. Galaty, F. W., Allaway, W. J., & Kyle, R. C. (2022). Modern Real Estate Practice (21st ed.). In the chapter on "Real Estate Brokerage," the text outlines that brokerage commissions are negotiable fees, typically calculated as a percentage of the final sales price. The process of co-brokerage and commission splits between firms and their affiliated licensees is detailed as a standard industry practice. (Specific calculation examples are found in Chapter 10, "Real Estate Brokerage").

2. New Jersey Real Estate Commission. (2023). New Jersey Real Estate License Law and Rules (N.J.A.C. 11:5). Section 11:5-7.1, "Broker's commission," establishes that the terms of compensation must be agreed upon between the principal and the broker. This legal framework underpins the contractual basis for the commission calculations demonstrated in the question, which are based on the executed contract of sale.

3. Baruch College, Zicklin School of Business. Course: RES 3200 - Real Estate Principles. Course materials for fundamental real estate principles universally cover commission calculations. They emphasize that the commission is earned upon finding a "ready, willing, and able buyer" and is calculated on the property's actual selling price as stipulated in the brokerage agreement. (See syllabus and lecture notes on Brokerage and Agency).