With a home worth $240,000 and a mortgage balance of $199,000, if a 6% commission is charged, the commission as a percentage of the seller's equity is approximately what percent?

With a home worth $240,000 and a mortgage balance of $199,000, if a 6% commission is charged, the commission as a percentage of the seller's equity is approximately what percent?

• A. 20%
• B. 35%
• C. 6%
• D. 40%

Answer: (B)

This item tests expressing the broker’s commission as a percentage of the seller’s equity, not of the sale price. First find the numbers: the commission at 6% of the sale price is 0.06 × 240,000 = 14,400. The seller’s equity is the sale price minus the mortgage balance: 240,000 − 199,000 = 41,000. Now compare the commission to the equity: 14,400 ÷ 41,000 ≈ 0.351, which is about 35%. So the commission represents roughly 35% of the seller’s equity.

This item tests expressing the broker’s commission as a percentage of the seller’s equity, not of the sale price. First find the numbers: the commission at 6% of the sale price is 0.06 × 240,000 = 14,400. The seller’s equity is the sale price minus the mortgage balance: 240,000 − 199,000 = 41,000. Now compare the commission to the equity: 14,400 ÷ 41,000 ≈ 0.351, which is about 35%. So the commission represents roughly 35% of the seller’s equity.