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Few mathematical formulas that every real estate agent should know
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Measurement Math:
Area: Width x Depth Depth: Area / Width Width: Area / Depth Area of a Triangle: (Base x Height) / 2 Area of a Trapezoid: (Top L + Bottom L /2) x H
1 Acre = 43.560 SF 1 Section = 640 Acres ¼ Section = 160 Acres 1 Township = 36 Sections Volume: Length x Width x Depth Converting SF to Square Yards: Divide SF by 9
Calculating Size of a Parcel:
EXAMPLE: How many acres are there in the S ½ of the SE ¼ of the SW ¼ of section 24, township 32 north, range 18 east?
STEPS:
Area of a Trapezoid: Formula: ([Top Length + Bottom Length] / 2) x Height = Area Steps:
Converting SF to Acres:
Total Square Footage / 43,560 = Number of Acres
The “T” Method
Part (small # or part) ÷ Don’t Forget! TGIF: Top Goes In First! Whole (BIG #) X Rate %
Commissions and Seller’s Net Profit
Total Commission Paid to Broker from Seller
Total Commission Contract Price or Sales Price Listing Commission Rate %
Contract Price (Sales Price) X Listing Commission Rate % = Total Commission Paid Total Commission / Contract Price (Sales Price) = Listing Commission Rate % Total Commission / Listing Commission Rate % = Contract Price (Sales Price)
Salesperson’s Share of Commission
Salesperson’s Commission Brokerage’s Share of Commission Salesperson’s Split %
Brokerage’s Share of Commission X Salesperson’s Split % = Salesperson’s Commission Salesperson’s Commission / Brokerage’s Share of Commission = Salesperson’s Split % Salesperson’s Commission / Salesperson’s Split % = Brokerage’s Share of Commission
Seller’s Net Profit
Seller’s Net (^) *Seller’s Net % is 100% minus the Listing Commission % the seller has agreed to pay the listing brokerage. It is the percentage of the sale that the seller keeps as profit.
Sales Price or Minimum Listing Price
Seller’s Net % (100% - Com %)*
Sales Price (or Minimum Listing Price) x Seller’s Net % = Seller’s Net Seller’s Net / Listing % = Sales Price (or Minimum Listing Price) Seller’s Net / Sales Price (or Minimum Listing Price) = Seller’s Net %
Proration Guidelines:
PAID IN ADVANCE: Credit Seller, Debit Buyer
Calculate the cost for time AFTER the closing date; Usually applies to property insurance. PAID IN ARREARS: Debit Seller, Credit Buyer
Calculate the cost for time BEFORE the closing date; Usually concerns property tax payments. Who gets the DAY of CLOSING?
Paid in Advance: If seller gets the day of closing, do not include the day of closing in your count. If buyer gets the day of closing, include the day of closing in your count. Paid in Arrears: If seller gets the day of closing, include the day of closing in your count. If buyer gets the day of closing, do not include the day of closing in your count. CALENDAR YEAR vs BANKER YEAR
The question will state which type of year should be used to solve the problem. If the question doesn’t state which method to use, use the banker year method. A calendar year consists of 365 days with varying calendar days per month. A banker year consists of 360 days per year with 30 days per month.
Capital Gains Tax:
Original Investment Selling Price
Adjusted Sales Price
Capital Gains Tax Limits: Married Couples, filing jointly: $500,000 | Singles: $250,
Annual Property Taxes:
Step #1: Calculate Assessed Value
Market Value X Assessment Rate Assessed Value
Step #2: Convert Local Tax Rate to a decimal: For MILLS: Move decimal point 3 spaces to the left: 55 mills 0.055 local tax rate For $ per $100: Move decimal point 2 to the left: $5.50 0.055 local tax rate
Step #3: Calculate Annual Property Taxes
Assessed Value X Local Tax Rate Annual Property Taxes
Annual Property Taxes with Equalization Factor:
Step #1: Calculate Assessed Value
Market Value X Assessment Rate Assessed Value Step # 2 : Multiply Assessment Value
X Equalization Factor
Assessed Value with EQ Factor
Step # 3 : Convert Local Tax Rate to a decimal: For MILLS: Move decimal point 3 spaces to the left: 55 mills 0.055 local tax rate For $ per $100: Move decimal point 2 to the left: $5.50 0.055 local tax rate
Step # 4 : Calculate Annual Property Taxes
Assessed Value with EQ Factor X Local Tax Rate Annual Property Taxes
Calculations for Loans
Origination Fee
Origination Fee ÷
LOAN X Fee %
LOAN X Fee % = Origination Fee Origination Fee / LOAN = Fee % Origination Fee / Fee % = LOAN
Pre-Payment Penalty
Pre-payment Penalty ÷
Principal Balance X Penalty Fee %
Principal Balance X Penalty Fee % = Pre-payment Penalty Pre-payment Penalty / Principal Balance = Penalty Fee % Pre-payment Penalty / Penalty Fee % = Principal Balance
Loan-To-Value Ratio (LTV %)
Loan Amount ÷ *When given the appraised value and the contract price, use the LOWER of the two Appraised Value or in your calculations. Contract Price* X^ LTV %
Appraised Value or Contract Price* X LTV% = Loan Amount Loan Amount / Appraised Value or Contract Price = LTV% Loan Amount / LTV% = Appraised Value or Contract Price
Simple Annual Interest
Annual Interest in $ Loan Amount Interest Rate %
Loan Amount X Interest Rate % = Annual Interest in $ Annual Interest in $ / Loan Amount = Interest Rate % Annual Interest in $ / Interest Rate % = Loan Amount