David Saks: Real Estate Practice : Lesson 851

David Saks - Real Estate Broker - The Real Estate Mart of Tennessee, Inc. - 4040 North Watkins-Suite #4 - Memphis, Tennessee 38127 - Phone (901) 357-4663

Real Estate Practice : Lesson 851

                                                   #851

Donna purchased a home seven years ago for $650,000.

She signed a listing agreement recently and offered the home for sale through the broker at an increase of 30% over what she originally paid for the home.

The house was getting any offers because of poor market conditions and Donna decided to reduce the price by 25%.

The property then sold with the reduced price.

Donna paid a 5% commssion to the brokerage that listed the home.

Did Donna gain or lose money in the sale ?

How much did she gain or lose ?

Take your time. The solution is posted below the wildlife photo.

wildlife

A. Donna lost money.

B. $47,937.50 lost on the sale.

Multiply $650,000 times .3 and we have $195,000 or 30% over the original price for a new listing price of $845,000.

Multiply .25, the 25% reduction, times the new listing price of $845,000, which equals $211,250, and subtract 211,250 from $845,000 and we now have a new selling price of $633,750.

The commission rate is 5% so multiply .05 times $633,750, the price the home sold for, and the commission due the broker is $31,687.50.

Add the commission of $31,687.50 and the 25% reduction off of the listing price of $211,250 and we have a total of $242,937.50.

Subtract the 30% increase over the original price, $195,000, from the combined commission payout to the brokerage of $31,687.50 and the price reduction of $211,250 (total $242,937.50) by subtracting $195,000 from $242,937.50 for a total loss of $47,937.50 in the sale.




David Saks



Time&Temp Memphis

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Comment balloon 0 commentsDavid Saks • October 11 2010 09:27AM

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