Real Estate Calculations
Licensees must handle basic math for commissions, proration, area, and financing. This topic reviews the common calculation types tested on the exam.
Commissions, Proration, and Percentages
Commission equals sale price multiplied by the commission rate; splits divide that amount between brokerages and then between broker and salesperson. Proration allocates prepaid or accrued items such as property taxes and rent between buyer and seller at closing based on the number of days each owns the property. Percentage problems also appear in interest, profit and loss, and loan-to-value calculations.
Area, Value, and Loan Math
Area is length times width for rectangles; acreage uses 43,560 square feet per acre. Value problems apply capitalization (net operating income divided by cap rate) and gross rent multipliers. Loan math includes computing simple interest (principal times rate times time), monthly payments from tables, points (one point equals one percent of the loan), and loan-to-value ratios.