Real estate math
Pearson VUE area VIII has 7 math questions and PSI gives calculations 7%; Florida embeds math in several areas and the Texas handbook states its conventions. Most candidates lose points here on setup, not arithmetic, so every drill answer shows the steps.
80 questions in 2 hours 30 minutes, 56 to pass. 7 of the 80 questions come from real estate math, and every answer is explained.
Or try the free real estate math drillThe seller prepaid a one-year hazard insurance policy for $1,440 covering January 1 through December 31. The buyer takes over the policy at a closing on August 20. Prorate using a 360-day year with 30-day months; the buyer owns the day of closing. What credit does the seller receive?
What to know about real estate math
- Area: an acre is 43,560 square feet and a mile is 5,280 feet. Rectangle area is length × width; a triangle is half the base × height. Convert to acres by dividing square feet by 43,560. Price per square foot = price ÷ area.
- Commission: sale price × rate = total commission, then apply the splits in order (listing and selling side, then broker and agent). A rate found from a commission is commission ÷ price.
- Loans: LTV = loan ÷ value; down payment = price − loan. Monthly interest = balance × annual rate ÷ 12; the principal paid in a month is the payment minus that interest. One discount point costs 1% of the loan amount. Annual interest = principal × rate.
- Income property: NOI = effective gross income − operating expenses (debt service and depreciation are not operating expenses). Value = NOI ÷ cap rate; cap rate = NOI ÷ price; NOI = value × rate. GRM = price ÷ monthly rent; price = GRM × rent.
- Prorations: compute the daily rate from the yearly (360- or 365-day) or monthly amount stated in the question, count the days of the seller’s or buyer’s period including or excluding the closing day as the question states, and debit the party who owes it while crediting the other. Taxes paid in arrears are a seller debit and buyer credit; prepaid items are a seller credit.
- Property tax: assessed value × tax rate. A mill is one-tenth of a cent ($0.001), so 25 mills = $25 per $1,000 of assessed value = 2.5%. Rates may also be stated per $100 of assessed value.
- Transfer tax: consideration × the stated rate per $500 or $100, rounding up fractional units when the question says so. Seller net = price − commission − loan payoff − closing costs; to find the price that nets a target, divide the required net plus costs by (1 − commission rate).
- Percent change: (new − old) ÷ old. Appreciation compounds year by year; straight-line depreciation for appraisal divides cost by economic life. Always re-read what the question asks for (monthly vs annual, buyer vs seller, before vs after a split).
Pearson VUE outline area VIII: 7 of the 80 scored national questions in our mock come from this topic. The notes state principles that hold in every state; state-specific rules are in the California, Texas and Florida guides.
Drill real estate math, then sit the full exam
80 questions in 2 hours 30 minutes, 56 to pass. 7 of the 80 questions come from real estate math, and every answer is explained.
Or try the free real estate math drillCommon questions
How do you prorate property taxes at closing?
Find the daily tax (annual tax ÷ 360 or 365 as the question states), count the days of the year the seller owned the property (through or up to the closing day as stated) and multiply. Because taxes are usually paid in arrears, the seller is debited that amount and the buyer credited.
How do you calculate a monthly mortgage interest payment?
Multiply the outstanding balance by the annual interest rate and divide by 12. On a $240,000 balance at 6%, the first month’s interest is $240,000 × 0.06 ÷ 12 = $1,200. The rest of the payment reduces principal.
80 questions in 2 hours 30 minutes, 56 to pass. 7 of the 80 questions come from real estate math, and every answer is explained.
Or try the free real estate math drillMore real estate exam topics
- Property ownership and estates · 9 of 80
- Legal descriptions and land use controls · 6 of 80
- Valuation and appraisal · 11 of 80
- Contracts · 9 of 80
- Agency · 7 of 80
- Practice of real estate and fair housing · 10 of 80
- Property disclosures and environmental issues · 9 of 80
- Financing and settlement · 7 of 80
- Transfer of title · 5 of 80
Free real estate math drill · National mock exam · California exam · Texas exam · Florida exam
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