Real Estate Calculations
The exam includes math you must compute correctly. This topic covers the core formula behind most problems, plus commissions, area and volume, and financial and proration calculations.
The Basic Percentage Formula
Most real estate math is a version of Part = Total x Rate. To find the part, multiply; to find the total or the rate, divide. A useful memory tool is the T-bar: the part sits on top, with the total and rate on the bottom. Commission problems apply this directly: Commission = Sale Price x Rate. For a net-to-seller problem, remember that the commission is charged on the sale price, so Sale Price = Desired Net / (1 - commission rate); you cannot simply add the rate back to the net.
Area, Volume, and Land Measurement
Area of a rectangle = length x width; area of a triangle = 1/2 x base x height. Volume = length x width x height. Key conversions to memorize: 1 acre = 43,560 square feet; 1 mile = 5,280 feet; and there are 640 acres in a section (one square mile). Under the rectangular (government) survey system, land is described by townships, sections, and their subdivisions, so acreage often comes from multiplying fractional descriptions by 640.
Finance and Proration Calculations
Interest for a period = Principal x Annual Rate x Time; for simple monthly interest, divide the annual interest by 12. Loan-to-value ratio = Loan Amount / Value, and the down payment is the value minus the loan. Property tax is Assessed Value x Tax Rate. Prorations at closing divide shared costs (taxes, interest, rent) between buyer and seller based on the number of days each owns the property, with the exact split depending on who is charged for the day of closing.