Real Estate Math
This chapter reviews the calculations licensees perform, including commissions, area, proration, and simple financing math. A methodical approach and careful reading of each problem lead to correct answers.
Commission and Percentage Problems
Most commission problems use the formula: sale price multiplied by commission rate equals total commission. For example, a 6% commission on a $320,000 sale equals $19,200. If the commission is split between two brokerages, divide the total, and if the agent then splits with the broker, apply that percentage next. Converting a percentage to a decimal before multiplying reduces errors.
Area, Volume, and Down Payments
Area of a rectangle equals length times width, useful for lot size, square footage, and acreage, where one acre equals 43,560 square feet. Loan and down-payment problems rely on the price: a 20% down payment on $250,000 is $50,000, leaving a $200,000 loan. Always identify what the question asks for and which numbers represent the whole, the part, and the rate. Labeling your figures keeps the calculation organized.
Proration and Interest
Proration divides shared expenses such as taxes or interest between buyer and seller based on the portion of the period each owns the property. Simple interest equals principal multiplied by rate multiplied by time. To find a monthly interest amount, calculate annual interest and divide by twelve. Reading the problem for the exact time period and rounding only at the end helps ensure accuracy.