Real Estate Calculations
The handful of formulas that cover almost every math question on the exam — commission, LTV, proration, and cap rate.
Real estate math looks intimidating until you realize the exam recycles the same handful of formulas in different dollar amounts. Learn the formulas, not the specific numbers.
Commission
Splits come next: divide the total between listing side and buyer's side (often 50/50, but the exam will tell you if it isn't), then divide each side's cut between the broker and the agent.
Loan-to-value and down payment
LTV and down-payment percentage are complements of each other, not the same number — an 80% LTV loan has a 20% down payment, not an 80% one. The exam plants this mix-up constantly.
Area calculations — the two numbers you have to know cold
No formula sheet is provided for these conversions, so they have to be memorized outright:
These show up constantly in disguised form — a lot advertised in acres but priced per square foot, or a property line measured in feet that a question wants converted to acreage before you can calculate a price. Missing the conversion, not the arithmetic itself, is the usual point of failure.
Proration
Proration splits a recurring cost (property tax, HOA dues) between buyer and seller based on who owned the property on each day of the billing period.
The trickiest part is never the math — it's figuring out exactly which days belong to which party. Always check whether the closing day itself belongs to the buyer or the seller before you count, and always check which day-count basis the question specifies.
A proration question will always state whether to use a 360-day or 365-day year, and whether the day of closing belongs to the buyer or the seller. Neither is a fixed convention you can memorize once — the question sets the rule each time, and applying your own habitual assumption instead of the stated one is the single most common way to get an otherwise-correct calculation wrong.
Worked example: annual property taxes of $3,650, closing on day 100 of a 365-day year, with the seller responsible through the day before closing (day 99) and the buyer responsible from the closing day forward. Daily rate = $3,650 ÷ 365 = $10/day. Seller's share = $10 × 99 = $990. Buyer's share = $10 × 266 = $2,660. Together they still total the full $3,650 — a useful check on any proration answer.
Net to seller (working backward)
When a seller wants to know what price nets them a specific amount after commission, don't just add the commission rate back — divide:
Capitalization rate (income property)
On every formula here, the fastest way to avoid a wrong answer isn't memorizing more formulas — it's writing down which number the question actually gives you, and which one it's asking for, before you start calculating.
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