Chapter 10: Real Estate Mathematics

Question 1

A sum due a real estate broker for services in that capacity.

Answer 1

Commission

Question 2

Equal to one percent of a loan amount. For example, 1 point on a $100,000 is equal to $1,000.

Answer 2

Point

Question 3

1. Calculating Commissions
2. Calculating Interest
3. Appreciation
4. Depreciation
5. Points

Answer 3

When are percentages used?

Question 4

1. Amount of commission earned
2. Commission rate
3. Final sales price

FORMULA:
Commission Earned =
Final Sales Price x Commission Rate

Answer 4

Calculating Commissions

Question 5

1. Principle Balance
2. Annual Interest Rate
3. Amount Owed

FORMULA:
Annual Interest Rate =
Amount Owed / Principle Balance

Answer 5

Calculating Interest Rates

Question 6

1. Property Value
2. Annual Appreciation

SOLUTION:
Property Value (Yr.3) =
Property Value x % increase each year

FORMULA:
FV = PV x (1+a)^n
*FV - Future Value
PV - Percent Value
a - appreciation rate
n - number of years

Answer 6

Calculating Appreciation

Question 7

1. Property Value
2. Annual Depreciation Rate

SOLUTION:
Property Value (Yr.3) =
Property Value x % decrease each year

FORMULA:
FV = PV x (1-d)^n
*FV - Future Value
PV - Present Value
d - depreciation rate
n - number of years

Answer 7

Calculating Depreciation

Question 8

A measure of land equaling 43,560 square feet.

Answer 8

Acre

Question 9

Equal to 10,000 square meters

& 2.47 acres

Answer 9

Hectare

Question 10

Equal to 640 acres.

Answer 10

Square Mile

Question 13

Length x Width

Answer 13

Area of a Rectangle

Question 14

Side x Side
Or
1 Side Squared

Answer 14

Area of a Square

Question 15

Base x Height / 2

Answer 15

Area of a Triangle

Question 16

1. House Area
2. Sales Price
3. Price/sq ft

FORMULA:
Price/sq ft =
Sales Price / House Area

Answer 16

Calculating the Price Per Sq Ft

Question 17

1. Break shape down into squares, rectangles, and triangles.
2. Calculate the areas of each shape.
3. Add together the areas of each shape.

Answer 17

How to Calculate the Area of Irregular Lots

Question 18

Total income from property before any expenses are deducted.

Answer 18

Gross Income

Question 19

The result of subtracting expenses from income.

Answer 19

Net Income

Question 20

A bank will only lend money up to a certain % of the purchase price or Appraised Value, whichever is LESS.

Answer 20

Calculating a Loan-to-Value Ratio

Question 21

A sum of money lent or invested on which interest is paid.

Answer 21

Principal

Question 22

A fee paid by the borrower of a loan as a form of compensation for the use of money.

Answer 22

Interest

Question 23

The tax levy divided by the total taxable assessed value of a taxing jurisdiction, usually expressed in dollars per thousand, dollars per hundred, or mills.

Answer 23

Real Property Tax Rate

Question 24

1. Real Property Transfer Taxes
   - Real property transfer tax is typically expressed in $/1000.

FORMULA:
Transfer Tax Amount =
Rate x Property Sakes Price
*Rate = $/1000

2. Mortgage, Recording Taxes =
   Tax Rate x Mortgage Amount
   *Additional rules may apply based on the city where the tax is recorded.

Mortgage Recording Tax Rate:
$2.05 / $100 of loan amount

3. Real Property Taxes
   Annual Taxes = Assessed Value x Tax Rate

Answer 24

Tax Rates to Know of:

Question 25

Refers to the length of a parcel facing a street.

Answer 25

Front Foot