The price increased by 25%. A percentage increase compares the change with the starting value, not the ending value. Both divisions in the question are mathematically valid, but they answer different questions.

Use this original example in three steps:

1. Find the increase: $300,000 minus $240,000 equals $60,000.
2. Divide by the original price: $60,000 divided by $240,000 equals 0.25.
3. Convert the decimal to a percentage: 0.25 multiplied by 100 equals 25%.

A quick check is to multiply $240,000 by 1.25. The result is $300,000, so the answer returns to the stated ending price.

Where does 20% come from? Dividing $60,000 by $300,000 tells you that the difference represents 20% of the ending price. It also explains the reverse calculation: a 20% reduction from $300,000 returns to $240,000. A 25% rise and a 20% fall can cancel each other because they use different starting amounts.

Before reaching for a calculator, finish this sentence: "The change is being measured against ___." That makes the denominator easier to choose. For percentage appreciation, use the original value. If a problem specifically asks for profit as a percentage of sale proceeds, that is a different comparison.

This example measures price movement only. It is not net profit, taxable capital gain, return on invested cash, or an annualized investment return. Those calculations need additional facts, such as costs, financing, and time.

Real estate investment is covered in the FREC sales associate course syllabus. Continue with our worked real estate math examples to practice choosing the correct base.