Real Estate Mathematics
Real estate math appears throughout the exam and in daily practice, from calculating commissions to prorating taxes at closing. This chapter reviews the core calculations you must master: commissions and splits, financing math, area and land measurements, prorations, and property taxes. Practice converting percentages to decimals and following each formula step by step.
Commissions and Splits
Commission is usually a percentage of the sale price and is often divided among brokerages and agents. To find a commission, convert the percentage to a decimal and multiply by the price. Splits are then applied in sequence: first find the total, then divide it among the parties. Careful order of operations avoids common errors.
Financing Math
Financing calculations include down payments, loan-to-value ratios, interest, and discount points. A down payment is a percentage of the price, and the loan is the remainder. LTV compares the loan to the property's value. Simple interest for a period equals principal times rate times time, and one discount point equals one percent of the loan.
Area and Land Measurement
Area problems are common for lots and buildings. The area of a rectangle equals length times width, giving square feet. One acre equals 43,560 square feet, a figure worth memorizing. Cost estimates often multiply the area by a cost per square foot. These calculations support both valuation and construction estimates.
Prorations at Closing
Prorations divide ongoing expenses such as property taxes fairly between buyer and seller at closing. Many closings use a 360-day banker's year to simplify daily calculations. Taxes paid in arrears mean the seller owes for the time already owned. Find the daily rate, then multiply by the number of days each party is responsible.
Property Taxes and Percentages
Property taxes are often expressed in mills, where one mill equals one dollar per thousand dollars of assessed value. To find the tax, divide the assessed value by 1,000 and multiply by the millage rate. Percentage-change problems divide the change by the original amount. Mastering these keeps tax and value calculations accurate.
Last updated: July 2026