Real Estate Calculations
Licensees must perform everyday math involving commissions, proration, area, and simple investment measures. This chapter reviews the common calculations tested on the exam and used in practice. Careful attention to what a problem asks and to units prevents costly errors.
Commissions and Percentages
Commission is usually a percentage of the sale price, and the total may be split between brokerages and then between broker and agent. To find a commission, multiply the sale price by the commission rate expressed as a decimal. For example, 6 percent of a $420,000 sale is $25,200, and an even split gives each side $12,600. Always confirm whether the question wants the total, one side, or an individual agent's share.
Proration, Area, and Investment Math
Proration divides shared expenses such as taxes or interest between buyer and seller based on the closing date. Area calculations use length times width for rectangles, and acreage uses 43,560 square feet per acre. Simple investment measures include gross rent multiplier and capitalization rate, where cap rate equals net operating income divided by value. Practicing these formulas builds speed and accuracy for the exam.
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