Chapter 11 of 157% of exam
Real Estate Calculations
Licensees perform math to calculate commissions, area, proration, and investment returns. Accuracy in these calculations is essential at closing.
Commissions and Area
Commission is calculated as a percentage of the sale price and may be split between brokerages. Area conversions rely on the fact that one acre equals 43,560 square feet. Careful unit tracking prevents costly errors.
Proration and Investment Math
At closing, expenses like taxes and interest are prorated between buyer and seller based on the closing date. Investment measures include capitalization rate, which divides net operating income by value. Loan-to-value ratio compares the loan amount to the property's value or price.