Chapter 15- Real Estate Math Flashcards
Area
A definite amount of space within a shape.
Commission
The dollar amount received by a real estate agent for completing the sale.
Most salespeople in real estate are paid on a commission basis.
Credit
Is something that is received.
A credit entry for a buyer is anything received or added to his or her account.
The deposit made on the property is a good example of something credited to the buyer.
A good example of a credit entry for the seller would be prepaid property taxes.
Cubic Area
The result of multiplying length times width times height
Debit
Something that is owed.
A debit entry for a buyer is anything charged against or subtracted from his or her account. The purchase price of the property is an example of something debited to the buyer.
A debit entry for a seller means the same thing. Unpaid property taxes are a good example.
Depreciation
A diminishing (loss) in the value of buildings and other improvements (for income taxes).
Loss of value in real property brought about by age, physical deterioration or functional/economic obsolescence.
All new depreciation schedules for normal income tax purposes involving real property must be straight-line.
Discount Points
Are charges made by a lender to increase the yield on a loan: one point equals 1% of the loan.
Discount point = 1% of loan amount
Interest
A fee paid for the use of other people’s money, stated in dollars and cents.
When one leases an apartment, he or she pays rent to the landlord for the use of the property.
Similarly, when one borrows money he or she pays ‘rent’ to the lender for the use of the money. ‘Rent’ = interest.
There is an extra variable that is a factor in all interest problems: TIME
Interest Rate
Is the percent of interest charged.
The purpose of principal and interest problems is to determine what we are paying (INTEREST) for the use of the amount borrowed (PRINCIPAL) and expressing that amount as a percentage (INTEREST RATE).
Irregular Lot
A parcel that does not consist of a single known shape.
Often the area of an irregular or circular parcel cannot be measured accurately without the help of a land measurement expert, such as a surveyor.
Many times, an irregular lot is simply made up of a series of rectangles and triangles, the combined measures of which make up the measure of the whole.
The area can be determined by breaking the lot up into the various rectangles and triangles which comprise it, and totaling their areas.
Principal (Amount Paid)
The amount borrowed in dollars.
Proration
The process of proportionately dividing (prorating) expenses or income to the precise date that escrow closes, or any other date previously agreed upon.
Its purpose is to apportion income and expense items correctly between the parties of a sale.
These are divided (or prorated) in proportion to the time that each owned or will own the property.
Buyer’s ownership starts on the day of closing.
In some areas, proprations are also known as adjustments or apportionments.
Rectangular Lot
A four-sided parcel whose opposite sides are equal in length and right angles are formed by the intersection of the sides.
The dimensions of a rectangle are equal on two sides.
Most lots encountered will be rectangular in shape.
Result (Amount Made)
Principal (paid) times rate (%) = Result
Straight-Line Depreciation
A method of computing depreciation on assets other than land for income tax purposes in which the difference between the original cost and salvage value is deducted in installments evenly over the life of the asset.
It is based upon the assumption that depreciation is dependent solely on the passage of time.
Depreciation is spread uniformly over the useful life of a property (building).
When doing depreciation problems, it is important to remember that land does NOT depreciate.
The IRS allows a minimum of 27.5 years straight-line depreciation on residential properties and 39 years on commercial properties.
