How do you calculate the commission earned on a sale?

The commission earned on a sale is determined by multiplying the sale price by the commission rate. This calculation reflects the standard practice in real estate transactions, where a percentage of the sale price is designated as the commission.

For example, if a property sells for $300,000 and the agreed-upon commission rate is 5%, the commission can be calculated as follows: $300,000 (sale price) multiplied by 0.05 (commission rate) equals $15,000. This straightforward multiplication method directly correlates the total sales amount with the earnings for the agent, ensuring a clear understanding of the financial rewards related to the transaction. The approach is widely recognized within the industry, making it the standard calculation for determining commission.

Other methods listed do not adhere to standard real estate practices. Using a fixed fee does not take into account the sale price percentage, and dividing the commission rate by the sale price would not yield the correct commission amount. Adding the sale price to the commission rate also misaligns with traditional commission calculation methods.