hey guys today I want to talk to you about calculating Commission's how to come up with a total Commission amount how to learn how to do commission splits because remember you're likely going to have Commission's that are going to be split into multiple pieces most notably they're gonna be splitting into pieces one side for the listing firm and one side for the selling infirmed remember you've got to get that terminology nailed down listing is the seller side listing is the seller side selling is the buyer side the selling firm represents the buyer the listing firm represents the seller so it's gonna be a big terminology challenge to make sure you get it right you can't learn this math or you can't answer these math questions if you don't get that vocabulary right so maybe just go down the road every day for 10 minutes straight listing seller listing seller seller listing selling listing listing so two with you get to the point where you can't even say one of those words about saying the other and then the next day you practice selling them by selling buyer by selling buyer selling and again you've got to get those tied together they are two different sides of the transaction you start thinking about everything as being on one side or the other now this formula is the basic formula for calculating a commission so if you know the purchase price and you know the Commission rate that's being charged you would just simply multiply those two to get the total Commission that is your T bar formula of course if you know the Commission and you know the REA you could divide those two to get the purchase price if you know how many Commission is charged and you know the Commission rate Commission in dollars divided by the Commission rate equals the purchase price purchase price times the Commission rate equals a total Commission same way to read up t bar that we've used all the rest of the class and you know for a quick example here it says a home is sold for three hundred and twenty five thousand dollars with a 7% total Commission being charged what's the commission on the sale well the Commission is going to be equal to equal to the purchase price times the rate so $325,000 times seven percent gives us a total Commission of twenty two thousand seven hundred and fifty dollars that's a seven percent total Commission now that deals with total Commission and total Commission is pretty easy to deal with it does get more complex when we start to split Commission's remember that these Commission's are going to be split up in most cases the listing firm has agreed to compensate of pay or share with a cooperating firm we call that cooperating from the selling firm that's the firm brings the buyer to the transaction the listing firm brings the seller to the transaction the cooperating firm or the selling firm brings the buyer to the transaction and if we're charging like in that previous example of 7% Commission it's very likely that the listening firm is not keeping all of that 7% they're probably splitting it up they're probably giving some of that money over to a firm who's representing a buyer over to a selling firm and so splitting them into pieces is going to be much harder as far as the math goes now here's an example of splitting a commission it says a home is sold for $227,000 with a 6% total Commission being charged the listing firm is cooperating with firms produce a fire by offering them 2.5 percent of the sales price based on this information what's the listing side Commission on the sale so much sure there are a couple different ways to do this I'm going to show you a longer way I'm going to show you the shortcut method that I prefer but I want you to understand how it works so I'm going to switch over to a different spring we've got a two hundred and twenty seven thousand dollar sales price with a six percent total Commission and and so let's work with that first so when we took take a look at that we've got a two hundred and twenty seven thousand dollar sales price times a six percent total Commission if we do the math there that's a total Commission of thirteen thousand six hundred and twenty dollars on the transaction toad but if you look back over at the question on the slide and this is your slide pack from chapter 9 chapter 8 I'm sorry agency contracts it says the listing firm is cooperating with firms who produce a buyer by offering them 2.5 percent of the sales price so the listen firms not keeping that entire six percent they're giving away 2.5 percent of it so we can also calculate how much of that is being given away that's another number we could look yet we could say two hundred and twenty seven thousand dollars times two twenty-five percent and if we do that they're giving away five thousand six hundred and seventy five dollars of that total commission to the selling side that's the selling side so here's the way that you should think of every single transaction you have the listing side and you have the selling side well we know what the selling side Commission is artists work is terrible today we know the sowing side Commission is that five thousand six hundred and seventy five dollars here's what we also know we also know that the total Commission is right here at thirteen thousand six hundred and twenty dollars so when we put those two things together we can easily figure out how much the listing side Commission is because the listing side Commission is going to be this total Commission - the selling side Commission and so if we do that we take thirteen thousand six hundred twenty dollars and we subtract five thousand six hundred and seventy five dollars we get a total listing side Commission seven thousand nine hundred and forty five dollars so of that 13 thousand six hundred and twenty dollars the listing side so the firm representing the seller right here is gonna keep seven thousand nine hundred and forty-five dollars and the selling side the firm who's bringing them a buyer is gonna keep five thousand six hundred seventy-five dollars now I want to go back to the question for a second I want to show you there's a little bit easier way to do that if you don't want those a long way if you're comfortable with the long way and you want to calculate both both sides you want to see here's the listing side there's the selling side now which one are they asking me for because in this question they want to know what is the listing side of the Commission on the sale and of course we just figured that with seven thousand nine hundred and forty five dollars that was your listening side Commission but there's a little bit of a shortcut way and it's the one that's on your slide pack it says that you can take the total Commission a six percent and simply subtract out the two point five that you're giving away so six minus two point five leaves you with three point five that's how much the listing firm is keeping because they're giving away two point five and so that's gonna be simply the sales price times three point five percent which is the same seven thousand nine hundred and forty five dollars that you came up with doing it the other way it doesn't matter which way you go if you get confused with the shortcut then do it the long way the long way is not a very long way so just calculate the total Commission and then calculate how much they're giving away and whatever is left over is the listing style or if they said here's the total Commission and they said the listing side was keeping three point five percent you calculated that one first and then you could have gotten the selling side either way these two together have to total up to the total Commission being charged because they're simply sharing that Commission it's all about how the sharing takes place or the split whatever you want to call it so let's take a look man at your work sheet let's start to work through some of these on the worksheet and talk about how to answer them this thing what is the total sales commission listing firm discharging a 6% total Commission on sale of four hundred and twenty five thousand dollars well that would simply be four hundred and twenty five thousand dollars times six percent and is $25,500 $5500 number two says 123 Main Street is sold for three hundred eighteen thousand dollars what's the total Commission paid by the seller of 123 Main Street if they've executed an exclusive right to sell list the agreement to compensate the listing firm with five percent of the total sales price a lot more words but exactly the same question they want to know what is the total Commission right there what's the total Commission amount paid by the seller 123 Main Street well that's simply five percent of three hundred eighteen thousand dollars so three eighteen times five percent equals $15,500 forgive me for a second while I save a copy of this but save all my doodles on my original okay so number three a buyer's firm is being compensated with 2.5 percent of the total sales price on a property which they have under contract for two hundred and eighty five thousand dollars how much compensation should the selling firm expect to receive so remember with every transaction you've got the listing side and the selling inside with it you got the listing side you've got it selling side on every single transaction so in this one they told us that the selling side is being compensated with 2.5% I know it's the selling side because it says a buyer's from so that's gonna be two hundred and eighty five thousand dollars times two point five percent equals seven thousand one hundred and twenty five dollars there's your selling side Commission alright number 4 says the total Commission charge on the transaction is 7 percent of the sales price of this amount the listing from is offering cooperating firms representing the buyer or a selling firm remember from representing the buyers to selling for three percent of the sales price that they produce a buyer assuming the property sells for $350,000 what will the selling firm's compensation be so again think of the transaction with two sides the listing side the selling side okay here's what we know the total is 7% we know that both of these added together 7% we also know that the selling side is 3% so we can go ahead and do the math on that if we wanted to that's gonna be $350,000 times 3% that is $10,500 so the selling side Commission is this $10,500 they want to know the selling side Commission so that's what we've already calculated right there the selling side Commission $10,500 number five a listing form is charging a total commission of six percent on the sale and cooperating with outside firms representing the buying the transaction by offering 2.4 percent of the sales price as compensation for any firm that produces a buyer based on this information what percentage of the sales price will the listing firm retain as their commission on the transaction so we've got the listing side that the selling side and we know that they're charged in a 6 percent total and here's what we know they're compensating or cooperating outside firms representing the buyer so that's the selling side right with 2.4 percent of the sales price and we know that the listing side and the selling side have to add up to be or de turtle the 6 percent right here we know that's true so one thing I can simply do is say 6 minus 2 point for at least 3 point 6 percent over here on the listing side that's the split 3 point 6 percent goes the listing side 2.4 percent goes to the selling side and they want to know how much the listing firm that's paid so they wanna know this number right here so my man is gonna be to take the sales price which I couldn't even give you the question so we went one up we'll say four hundred and twenty five thousand dollars times three point six percent and I apologize for neglecting to give you that for twenty five times three point six percent equals fifteen thousand three hundred dollars that's the listing side Commission number six is very similar so as a seller asana listening women is read to pay a 7% total Commission on the sale if the listing from is paying cooperating selling from three percent of the total sales price how much can the listing firm expect to earn it the house sells for three hundred eighteen thousand five hundred dollars so again create your division start to think of it as two sides listing Sally we know the total Commission is 7% split between these two sides we know that the cooperating selling practices the listing from is paying a cooperating selling firm 3% of the total sales price so we know the 3% goes over here on the selling side because that's what they're being paid well again 7% minus 3% would give us 4% over here on the listing side and they want to know how much can the listing firm expect to earn so that's gonna be 318 500 times the listing firms Commission which is 4% 318 500 times 4% equals twelve thousand seven hundred forty dollars that's the listing farms commission when I transaction now before we go on to number seven I've got to go back over to the slides because we've got to talk about number seven if you look at number seven it says blue sky real estate is listening to property for sale using the exclusive right to sell listing agreement with a six percent total listing commission we can handle that and they've agreed to compensate cooperating selling firms with 40% of the total Commission now that's not a percentage of sales price that's different than anything we've seen so far we're not saying they're getting 2.5 percent of the sales price or 3 percent of the sales price we're saying they're getting 40% of the total Commission and so if you go back to your slides for the chapter I want to introduce you to something called the Commission tree the Commission tree is a way to do these types and only these types of Commission split questions where they give you that this firm is going to keep this percentage of the Commission and that this agent is going to keep this percentage of the Commission split with their firm because what really happens with commissions is they get split twice first they get split between the sides and you see that right here that's what we've already talked about this split that happens between the two sides that's the one in the middle here but then there's another split that happens down here at the bottom we're each side the listing side gets split again between the broker and their firm and the selling side gets split again between the broker and their firm so you've got two levels of splits going on there and we have to work through both of them here's the other thing to look at every time there's a split and those splits are right here here every time there's a split each side of that squid has to add up to be a hundred percent so when you split it between the listing side and the selling side at that first split level that first V you see and the listing side goes to the left and the selling side goes to the right so the sellers side of the transaction on the Left buyers side of the transaction on the right that first split has to add up to a hundred percent so for example if the listing side was getting sixty percent of the Commission and you would put forty percent on the selling side the goal here is to fill the chart out completely with all the information you have before you even attempt to do any math because the nice thing is once you get the chart filled out then you don't have to worry about the math the math will take care of itself so we're going to show you how to do this and we're going to work through it the other thing I'm going to plant to you and say to pay attention to is these arrows what these arrows mean is that if you're going from the top of the chart to the bottom of the chart you're going to multiply for your math step it's going to be multiplication all the way down and what I mean about that is I'm going step to the other side here what I mean by that is if you are given the sales price of the property and they want to know how much money the listing broker makes then you are coming from here down to here that's multiplication so it'd be sales price times total Commission times the listing side split times the listing broker squit you multiply all the way down perfect whereas if they gave you and they said Travis was the broker representing the buyer well the buyer side is this side the right side that's the selling side of the transaction so Travis would be here if he was a broker representing the buyer if this is the Travis had received a check for $5,000 and then they want to know how much the house sold for that's going to be working from the bottom of the chart up to the top and that's what you follow this area this Arab bottom the top is going to be division so that would be the selling brokers Commission divided by the selling brokers flip divided by the selling side split divided by the total Commission it's just going to be division and you follow it all the way back to the top so it's a matter of getting it filled in correctly if you get it filled in correctly the math will take care of itself so let's look at an example here it says Travis is less than 123 Main Street and it sells for $400,000 with a 6% listing Commission his firm you are in cooperation with firms representing the buyer bus put in total Commission equally with them try to get 75% of all these commissions what is Travis paid don't try to digest this all at one time filling in piece by piece one tiny little piece at a time so let's look at this we'll pull up a blank page here first thing I want to do this just draw my splits so I've got the top split and then I've got a split here and I split here now I'm gonna kind of put an imaginary line down the middle as well because remember this is the listing side and this is the sewing side we're splitting them up so let's start filling in information from that question here's the first thing it tells us travis is listing 123 Main Street so Travis is the listing broker so we go back to our chart before we go any further the listing broker goes all the way over here on the left-hand side that's gonna be tracks so we go back to our charm and fill that in and it settles for $400,000 well look we're the sales price goes it goes all the way at the very top of the chart so it sells for $400,000 go back to our chart and let's fill that information in for $100,000 so what else we've got with a 6% listing commission so we're charging a total total Commission rate of 6% that goes right there above your first split because that's the total permission that's gonna be split between the two sides of the transaction his firm you are a stop right there that's information we need to know because we don't know what they're gonna ask us for his phone Travis is from you Ari so if Travis is overhears the listing broker than you Ari must be the listing firm don't skip the information fill it in one tiny piece at a time so his farm you Ari remember that's the listing firm cooperates with firms representing the buyer by splitting the Commission equally with them so when we looked at this cooperation the cooperation happens run here in the move this is where they're cooperating with one another so you already splits their Commission holy between the lifting side and the selling side so what we're going to put there is we're going to try to get camps and do them as ourselves and equal squares is 50/50 and that's exactly what we're gonna fill in the listing side is getting a 50% flip the selling side is getting a 50% split easy enough so we go back to the question we've done everything up to this point it says Travis get 75% of all his Commission's so we go back over here Travis get 75% of all these commissions and if Travis get 75% this and this have to add up to be a hundred percent just like these two had to be a hundred percent so this is 75 and this must be 25% so we're going to fill that information in we are filled in every bit of information that we've gotten from that question now let's look at what they want to know what is Travis paid what is Travis paid so they want to know right down here at the bottom what is that number well look at what they gave us they did not give us Commission which would be at the bottom they didn't give us how much she's paid in fact that's what they're asking us for what they did give us the is a sales price up here at the top so we have to find a way to get from here to here and we're just going to take the most direct path we can find it's not we're just not going to go out of our way but we're going to go to most direct path that we can find and that's gonna be to go from $400,000 we have to go through we have to go through 6,000 first and then we have to go to 50% and then 75% I met 6% at the top so $400,000 for 6% through 50% through 75% that's the only way we can get to where we need to be to get Travis paid so our math and our calculator is gonna be exactly that here's exactly what we're gonna type into the calculator I'm gonna write it down it's gonna be $400,000 times because one top to bottom so it's multiplication 6% times 50% times 75% that's a nap and if we type that in I come up with $9,000 for the total Commission that Travis is owed on that transaction $9,000 take another look at a different example and this just shows where we pull in your slide back where the information came from that shows it filled in the same thing we just did on the other screen and chose the $9,000 now here's a little bit more complex one it says Karen of go Realty is working as a buyer's agent well before I get too deep into this I know I'm gonna need my splits so I'm gonna go ahead and do those and I know I've got my imaginary line down the middle I know this is the selling side over here on the right I know this is the listing side over here on the left so let's go and read it says Karen of go Realty is working as a buyer's agent stuff like they got two pieces of information that you need Karen of go Realty is working as a buyer's agent buyer side is the sellers side so over on the right hand side is where Karen and go are going to be so let's fill them in where they go Karen is you're selling broker and go is you're selling fun okay so Karen ago Realtors working as a buyer's agent representing Sally who's buying a home listed by Tom of hpw again we got information that we need to fill in tom is the listing broker and hpw is the listing firm right Tom and hpw it says Tom and hpw are charging a total commission of 5% so 5% total commission is going to go up here at the top of our Commission split trade go back to our information it says hpw compensates cooperating sell you farms by offering 45% of the total commission I can tell you if you miss these questions that's gonna be the sentence that throws you off it's gonna be this middle level where the listing side splits with the selling side we were the two sides of the transaction happened so go back it says hpw well we already established that hpw is on this side of the transaction on the listing side it says hpw compensates cooperating selling firms by offering 45% of Commission so hpw is compensating or paying out or sharing 45% so these people is not keeping 45% on their side they're giving it to the other side they're not keeping it over here they're giving it over there so the 45% goes right here to the selling side and if that's 45 then this must be 55% because they have to add up to be 100% all right the rest of the information go Realty keeps 40% of all Commission's earned by their brokers go keeps 40% of all commissioners that are earned by their brokers so when we look at that go keeps 40% which means their brokers must keep 60% because that has to add up to 100% as well go back to what other information we have caring is paid five thousand four hundred and fifty dollars for the transaction what was the home sold for so Karen was paid five thousand four hundred and fifty dollars fifty four with Karen and they want to know what was the home sold for so they want to know what's up here at the top the sales price our starting point is down here at the bottom and how are we gonna get there how are we gonna get there the path is to start at the number they gave us and we have to go up first number we come through sixty percent the next number would come to us forty five percent the next number is five and then we have our answer so if you go back and you look at the tree itself that giving us Commission which is at the bottom and they've asked us from a sales price which is at the top so bottom to top its division so our math is going to be I'll write it out again fifty four fifty divided by sixty percent we're working our way back up and the next one we come to is divided by forty five percent you just keep going don't hit the enter or equals on your calculator just keep typing fifty four fifty divided by sixty percent divided about forty five percent divided by five percent and if you do that it should come up with I've already got it on the other slide here once you get everything in place it should come up with a sales price of 403 703 and seventy cents it's a 450 divided by sixty percent divided by forty five percent divided by five percent equals 403 and change or three 703 in sites for your sales price and that's how you use the Commission trick now let's work some examples together without putting examples on your worksheet to work together it says the number seven so blue sky real estate is listing a property for sale using the exclusive right to sell list and Grandma my hair is drawn again remember we're dividing it listing side on the left selling Zion the right okay loose no real estate is listing a property for sale so they are the listing firm so we fill them and we've got blue sky over here be it's using the exclusive right to sell listing agreement with a six percent total listing commission so it's charging a six percent commission up here at the top before they split it and they've agreed to compensate cooperating selling funds with 40% of the total Commission so they blue sky blue sky real estate is listing a property for sale with a six percent total listing commission and they've agreed to compensate cooperating selling firms compensate the selling firm pay the selling firm forty percent so the forty percent goes to the right because that's the selling side so you've got 40 percent over on this side which means you must have sixty percent on this side based on this information how much is the total listing side Commission on the transaction at the home sells for $500,000 so the other piece of information they've given us here is $500,000 so now what do they ask us for first of all what did they give us the starting point that gave us $500,000 and what they asked us for was what is the total listing side Commission well the total listing side Commission is this number right here so our path to get there from 500 goes there 6% and then 60% that's how we get there so the math is going to be $500,000 times 6% times at 60% and that is a total of eighteen thousand dollars for the total listing side commission $18,000 alright number eight says Thomas was a provisional broker affiliated with eight homes of the triangle and has taken a new exclusive right to sell listing so let's start to divide it out here you know we've got our imaginary line down the middle because we've got the listing side and the selling side listing sides on the left right this thing selling sides on the right selling this Thomas is a provisional broker affiliated with ace homes of the triangle is taking a new exclusive right to sell listing so stop right there we know Thomas and we know ace are on the sellers side they're on the listing side on the left-hand side so Thomas listing broker ace listing firm the sellers agreed to pay a 5% total Commission we know that the total Commission goes up there if ace homes compensates firms representing the buyer with 55% of the total Commission so ace homes who's on this side of the line compensates firms are representing the buyer which is on that side of the line with 55% of the total Commission then that 55% goes on the right side is selling side the buyers side of the line which means it must be 45% back over on this side of the line how much is the selling side Commission on a three hundred and fifty thousand dollar purchase so the three hundred and fifty thousand dollars goes up there at the top that's our starting point always put the starting point there and then what are they asking us for they want to know the selling side Commission well here's the selling side Commission right here that's the whole selling side not how much the selling broker or selling from got the hummus was the whole selling side so their path to get theirs from three through five percent and then 55% so $350,000 times five percent times 55% and put you got man that gives us nine thousand six hundred and twenty five dollars nine thousand six hundred and twenty-five dollars is your total selling side Commission mmm-hmm number nine says zonas purchasing a property in raleigh as a first-time homebuyer she's hired century 21 triangle group you're representing the purchase and broker Stephen is working with her Stephen has been affiliated with century 21 triangle for four years and has an eighty percent commission split with his firm zeldor purchases appropriate so you know I'm doing it to myself well I could carry one reading all that stuff I see that I'm doing a Commission's but why don't I go ahead and draw my squids and that's what you're gonna have to do on the exam see what kind of math you're doing and go ahead and start working with it so let's start again so does purchasing a property in Raleigh is a first-time homebuyer I'll put my imaginary division lines here remember we got the listing side on the left and the selling side on the right okay all right so those first-time homebuyers she's hired century 21 triangle to group to represent her in the purchase so the buyer has hired century 21 I mean century 21 is the selling firm and broker Steven is working with her so Steven is the buyer's agent or selling agent Stevens Miller was in 321 trying over four years and has an eighty percent commission split with his firm so Steven has an 80 percent commission split which means his firm must be keeping 20% of those selling side commissions zone purchase of property listed by Danny of Keller Williams elite she's got any as the listing agent listing broker and Keller Williams as the listing firm it says kW discharging the seller a 5% total listing commission 5% Commission okay I saw on the cell and killer winds has agreed that they will confidence--a any cooperating firm who produces a buyer with 40% of the total Commission so somebody's going to get paid 40% for producing a by they're being compensated 40% for producing a bond so what is it sent to you the 40% should go on the seller side or the 40% should go on the buyers side sounds familiar you should go on the buyers side so that's gonna be over here on the right-hand side at 40% and if that's 40% then it must be 60% over here on the listing side based on the above information how much of a commission will Steven on on the transaction and again an aggressive to give a sales price so why don't we just try on this one $500,000 sorry about that so we got a $500,000 sales price and we want to know how much Stephen has been paid so our path to get there is down through 5% through 40% and through 80% so it's gonna be $500,000 times five percent it's out 40% times 80 there's no $500,000 times five percent times 40 percent times 80% he'll tell us how much Stephen is gonna get paid and that is $8,000 Stephen getting paid a grand in that transaction okay number ten Bobby Byers represented by Kim and the purchase of a home and clay so if we started to mount this thing out of course with better imaginary line down the middle here with the selling side on the right listing side on the left it says Bobby buyer is represented by him and the purchase of a home in clay so the buyer side is the right that means Kim is the buyer's agent or selling agent so she's on the right-hand side Kim as a provisional broker associate with Dewey Cheatham and Howe Realty so d CH Realty is Kim's firm facility front and she has a fifty five percent commission split with her firm so Kim has a fifty five percent split which means her firm must have a forty five percent split upon closing investment Bobby's new home Kim was paid a commission of four thousand five hundred fifty dollars so she got four thousand five hundred and fifty dollars when she closed assuming that the listing permanent transaction was charging a six percent listing commission so six percent commission up there at the top before we started to split it up and cooperating with selling brokerages by offering 45% of the total commission remember it's always the listing size who's offering or paying so the listing site is cooperating with the selling side by offering them forty five percent so the selling sides being offered the forty five percent so before T percent goes to the right that's the selling size which means the listing sides split must be 55% what was the purchase price of the home so you know our starting point Kevin's Commission and here's what they want to know the purchase price up here at the top our paths to get there it's going to be to work up from 45 53 to 55 percent through 45 percent and through six percent that's the path we have to follow to get back up to that purchase price so the math is going to be 45 50 divided by 6% and then / I'm sorry folks my brain is not working today typing it wrong worth 45 50 divided by 55 percent / 45 % & / 6 percent all the way back to the top work our way back out and if we type that into the calculator 4550 dollars divided by 55 percent divided by 45 percent divided by 6 percent we end up with a grand total for a sales price of three hundred and six thousand three hundred ninety seven dollars and about 37 if we're worried about the change 306 397 for your sales price you just following that chain whether you're working over down you're following it up number 10 ranae's a broker with sunrise realty who earns a commission check from her firm for a representation of sunny seller and the transaction okay well all we can do is start and map it out so we can make sense of it you know address this imaginary line down the middle ranae's a brook was sunrise Realty earns a commission check from her firm for a representation of sunny seller in the transaction so Renee the listing broker and sunrise is a listing firm says Renee executed a listing agreement with the seller and which the soul is to play sunrise Realty of five percent brokerage to the five percent commission goes up there at the top and when ad has a 40 percent rid of all Commission's on with her firm so Renee is that they 40% of her permissions which means sometimes keeping 60% of those commissions so some has Realty has a firm policy of paying and cooperating selling frames so remember whenever they're cooperating it's in that middle lobe right here so it says summarize Realty and their the listing firm has a firm policy of paying a selling from sixty percent so the selling firm is getting paid sixty percent which means the listing firm is keeping 40 percent and Sally purchased the homeless about sunrise Realty with the help of a by representative and when they ended up with a commission check for seven thousand eight hundred and fifty dollars so I'm gonna put the 7850 here with her nut what was the sales price for the home we ran into our starting point 7850 and they want to know sales price here's our path straight up so 7850 and because we're going from the bottom to top it's gonna be divided by 40% divided by 40% / Iverson and that will give you if we do the math sales price 980 one thousand two hundred and fifty dollars for a sales price 980 one thousand two hundred and fifty dollars sales price of that house the path erase that stuff alright number twelve requires us to go back to the drawing board because number twelve is asking us a little different question it's not asking us for Commission if you read the question it says Elmer wants to walk away from selling his house with net proceeds of 125,000 oh so he take one hundred and twenty five thousand miles away from that transaction so they're gonna afford it down to him in on his new home in Chapel Hill and then it gives us a bunch of expenses he's got to pay off a mortgage to pay off property taxes attorneys fees and it says he's agreed to compensate the firm listing his home with a turtle list and commission of six percent of the sales price and based on that information how much we need to sell his home for well this is not a commission split question this is what we call a seller net question so I'm going to go back over to our slide packet here we're gonna talk about seller net pricing these are pretty simple questions they do require you to draw a little pie chart for yourself now pie charts just a circle and a circle always represents a hundred percent of anything of any transaction and so the way we're going to solve these questions is to add the cash amounts together however much the seller needs to take away from the transaction their mortgage pay off their property tax bill their attorneys fees whatever cash amounts it gives you just add them together and then draw your self a little pie chart and take the Commission percentage out of that pie chart so if it's a five percent commission that leaves you with 95 percent left in the pot once you've done that I'm going to show you a very simple trick so here's an example it says Thomas is selling his home and needs to net forty five thousand dollars on the sale after all expenses are paid she's got to have forty five thousand dollars left over he must pay off his mortgage loan of one hundred and seventy two thousand dollars as well as twelve hundred dollars and other clothes he's agreed to compensate his listing firm with a 5% of the gross sales price for what price should thomas sell the property to meet his needs so the first thing we do is just added the cash together for $45,000 he needed the net plus one hundred and seventy two he needs to pay off his mortgage and $1,200 another closing cost if you had all this together you end up with two hundred eighteen thousand two hundred dollars here's the magic and you have to do it this way it will not work any other way it must be done this way once those numbers are added together you're gonna simply take that five percent slice that five percent commission out of your pie chart well if I think a five percent slice out at least 95 percent remaining and so that's the number I'm going to divide by it's always going to be division on the seller net question and so it's going to be two hundred eighteen thousand two hundred dollars divided by what's left after we take that slice out of the pie so divided by 95 percent and in order to accomplish his goals x we need to sell that price to sell at home for two hundred and twenty nine thousand six hundred eighty four dollars it's gonna be the immediate price so now let's go back over to your worksheet and look at a couple of these so Elmer Neace and waffle every was on his own with net proceeds of one hundred and twenty five thousand dollars that's the first amount of money we need to work with we need 125 grand at least so he's gotta for the down payment on his new home in Chapel Hill he's got the Alvin existing mortgage balance of 287 450 so plus 287 450 because we need enough money to pay off the mortgage says y'all also have 3800 and $50 and outstanding property taxes he's got to pay those and he's got also pay 400 Oz on attorneys fees so if we got all that together don't worry it's quite a bit of cash hundred twenty-five thousand plus two 287 or fifteen plus three thousand eight hundred and fifty plus four hundred dollars it's four hundred sixteen thousand seven hundred dollars total cash that Elmer Neath but that's not what he needs to sell the house forward and here's why if we think of that transaction as a pie chart a hundred percent there's a six percent slice coming out that commission of six percent of the sales price so there's that six percent slice taken out which leaves ninety four percent left over so our math to get our final answer here is going to be four sixteen seven hundred divided by 94% it's always gonna be divided by this number whatever is left over after you take the Commission out so for 16 seven hundred divided about 94% and we need to sell that house for four hundred forty three thousand two hundred ninety seven dollars and some change alright another one of those so Sandra saw her parents home in Mebane and wishes to net $50,000 so we know she needs to sell for at least 50,000 because she needs to walk away with that much as part of liquidating their estate she contracts with Mebane exclusive properties to list the home at a 5% Commission rate so if you want to go ahead and deal with that we know we're going to have our fight right here and we know that the slice that's coming out is 5% which leaves 95% left over her parents have an outstanding reverse mortgage balance of 118 627 so that's going to be paid off now it's pending property taxes of $2,300 that's got to be paid off and there are our tony speeds totaling $2,100 which must be paid and we total all that up we end up an incorrect number because anytime 173,000 $27 that we need in cash but that's not what we need to sell the property for to figure out what we need to sell the property for it's gonna be that number 173 owed 27 divided by 95% remember always divided by that remaining percentage and that tells us we need to sell that property for one hundred eighty two thousand one hundred thirty three dollars and sixty eight cents for a sales price immediate sales rights for that property and that's how you do a cellar net question and that takes us through the in-class part of the chapter eight math so you should be able now to finish up the rest of the worksheet on your own from homework I'll see you guys in class Thanks