Real Estate Math

Real Estate Math: Finance, Settlement & Math ## Why This Matters on the Exam Real estate math accounts for approximately 10% of the national exam (~8–10 questions), and these questions reward candidates who know a small set of formulas cold. Master the core calculations below and you can reliably pick up nearly every math point on test day. --- ## The Foundation: Part / Rate / Whole Triangle Almost every real estate math problem is a variation of one relationship: `` PART ____________ RATE | WHOLE `` | You want… | Formula | |---|---| | Part (commission $, interest $, etc.) | Rate × Whole | | Rate (commission %, cap rate, etc.) | Part ÷ Whole | | Whole (sale price, property value, etc.) | Part ÷ Rate | Cover the unknown with your thumb — what's left is the operation. --- ## Core Formulas You Must Know ### 1. Commission Commission is simply the sale price multiplied by the commission rate. > Commission = Sale Price × Rate Worked Example: A home sells for $320,000. The listing agreement calls for a 6% total commission, split 50/50 between listing and selling brokerages. The listing agent then receives 60% of her brokerage's share. 1. Total commission: $320,000 × 0.06 = $19,200 2. Listing brokerage share: $19,200 × 0.50 = $9,600 3. Listing agent's cut: $9,600 × 0.60 = $5,760 Work from the top down, one split at a time. --- ### 2. Loan-to-Value (LTV) > LTV = Loan Amount ÷ Property Value Always use the lower of appraised value or purchase price as the denominator. Why it matters: If LTV > 80% on a conventional loan, **PMI (private mortgage…