Washington Managing Broker Exam — All Questions

A seller wants to net $188,000 after paying a 6% commission and no other costs. What must the sale price be?

• a.$199,280
• b.$188,000
• c.$200,000✓
• d.$212,000

In a net-to-seller problem the commission is charged on the sale price, so you cannot simply add 6% to the net. Use Sale Price = Desired Net / (1 - commission rate) = $188,000 / (1 - 0.06) = $188,000 / 0.94 = $200,000. Check: 6% of $200,000 is $12,000, and $200,000 minus $12,000 equals the $188,000 net. Adding 6% to $188,000 (giving $199,280) is the classic wrong answer the exam includes as a trap.

A property sells for $250,000 with a 6% total commission, split equally between the listing and cooperating brokerages. If the listing agent's brokerage pays that agent 70% of its share, how much does the listing agent receive?

• a.$7,500
• b.$5,250✓
• c.$9,000
• d.$3,750

Work in steps. Total commission = 6% of $250,000 = $15,000. Split equally between the two brokerages gives each $7,500. The listing agent then receives 70% of the listing brokerage's $7,500 share = 0.70 x $7,500 = $5,250 (the brokerage keeps the remaining $2,250). The $7,500 answer forgets the agent's split, and $9,000 or $3,750 come from splitting the wrong figure. Brokers must know these layered commission splits because they set the office compensation plan.

An income property has a net operating income of $60,000 and sold for $750,000. What is the indicated capitalization rate?

• a.12.5%
• b.6%
• c.10%
• d.8%✓

The capitalization rate is found by rearranging Value = NOI / cap rate into cap rate = NOI / value = $60,000 / $750,000 = 0.08, or 8%. This is the same relationship used to value income property, just solved for the rate instead of the value. Any two of the three variables (NOI, value, cap rate) let you solve for the third. Brokers working with investors use this constantly to compare properties, since a higher cap rate signals a lower price relative to income.