Real Estate Calculations
This topic reviews the math a licensee needs for commissions, proration, area, and financing problems on the exam.
Commission, Percentage, and Proration Math
Commission equals sale price times rate, then split among brokerages and agents. Proration divides prepaid or accrued costs such as taxes and rent between buyer and seller based on days of ownership. Percentage problems appear throughout, including profit and loss and equity calculations. Always convert percentages to decimals before multiplying.
Area, Value, and Loan Calculations
Rectangular area is length times width; an acre is 43,560 square feet, so dividing total square footage by that figure gives acreage. Value math includes capitalization (net operating income divided by cap rate) and gross rent multipliers. Loan math includes simple interest (principal times rate times time), discount points (one point equals one percent of the loan), and loan-to-value ratios.