Chapter 10 of 158% of exam
Real Estate Calculations
Licensees perform math for commissions, area, proration, and investment analysis. Accuracy is critical, especially at closing.
Commission and Area
Commission is a percentage of the sale price and may be combined with flat costs at closing. Area of a rectangular lot equals width times depth, and one acre equals 43,560 square feet. Careful arithmetic prevents settlement errors.
Proration and Investment
At closing, taxes and other prepaid or accrued items are prorated between buyer and seller by the closing date. Capitalization rate equals net operating income divided by value, and loan-to-value compares the loan to the price or value. These formulas support accurate analysis.