Unit 6: Basic Real Estate Math

Question 1

Frontage

Answer 1

The part of the land that touches the roadway. Will come up with Special Assessment questions.

Question 2

How many acres in a section?

Answer 2

640

Question 3

How do you convert acres to sqft

Answer 3

multiply # of acres by 43560

Question 4

How do you figure out how many acres you have?

Answer 4

Divide sq footage by 43560

Question 5

Formula for figuring out acres in a section

Answer 5

Divide 640 by the bottom number of each fraction in order as they give them to you.
ex: 640 /4 /2 /4

Question 6

Documentary Stamp Tax

Answer 6

Deed, Note, Intangible

Question 7

Deed Stamp

Answer 7

1. Seller only
2. Take selling price and divide by 100, round to nearest whole number to find # of stamps.
3. Multiply that number by .7

Question 8

Documentary Stamp on Note

Answer 8

1. Buyer only
2. For new and assumed mortgages
3. Take mortgate amount, divide by 100 for # of stamps.
4. Multiply number of stamps x .35

Question 9

Intangible Tax

Answer 9

1. Only for NEW notes, not assumed
2. Take amount of new mortgage and multiply by .002.
   For BUYER only

Question 10

Prorating

Answer 10

Certain costs, such as utilities and taxes, are prorated - divided b/t buyer and seller based on days each owns the property.

• Actual # of days in month, and 365 calendar days are used to calculate
• Buyer or Seller own closing date, that means the closing date is added to their proration.
• Property Taxes are paid for the past YEAR
• Mortgage interest is paid for the last MONTH

Question 11

Property Tax and Mortgage Interest paid when?

Answer 11

Prop tax - For last YEAR
Mort insurance - For last MONTH
Seller is debited, and Buyer Credited that money.
The seller pays the buyer for the days the seller was in the house.

Question 12

How to prorate Property Tax and Mortgage Interest

Answer 12

Take taxes and divide by 365 to find the “per-day” cost.
Multiply Per-Day Cost to the number of days the seller was in the house. That is how much the seller will be debited and the buyer credited.

MORTGAGES - do the same, but for only the MONTH of closing.
You might need to find the interest amount first, so mulitiply the loan amount by the interest rate, then take the number you get, divide it by 365, and multiply that number by the days in the MONTH the seller owns the property.

Question 13

Rent Proraton

Answer 13

1. Who owns day of closing? If buyer, tack that onto the number of days buyer owns house for that month.
2. Take total rent for month and divide by # of days in month, for per-day
   Multiply per-day times the number of days that the BUYER OWNS of the month.
3. Debit the seller and credit the buyer that amount.

Question 14

Basics of Area and Setbacks

Answer 14

Area - LxW
If you have a setback, subtract that and do LxW to find buildable area.
The 640/2/4/4/4 may come up in this part as well

Question 15

If you see AND in a problem,

Answer 15

that means do one side of and and then do the other side of and, and then add them.

Question 16

Special Assessments and Frontage

Answer 16

Frontage - running feet abutting the road.
With a special assessment, you pay when you benefit.
1. Take feet of frontage and multiply times cost per foot to find total cost of paving.
2. Multiply that amount by the percentage you would pay ex: $5000x .55 (55%) for total owner’s cost.
3. DIVIDE BY 2, because you only pay for YOUR SIDE OF THE STREET. They will not tell you this, it is assumed that you know.

Question 17

Commissions

Answer 17

A brokerage Fee, (sales commission) is always based on the SALE price (not listing price).
All money flows through the LISTING broker
Selling brokers, also called cooperating brokers, are paid a portion of the total brokerage fee.
Sales associates earn a portion of THEIR broker’s share of the commission. .

Question 18

Find the commissions

Answer 18

1. Total Commission percentage x selling price gets you the total commission.
2. Then multiply the broker’s percentage against the the total commission.
3. Then multiply the agent’s percentage against the brokers commission.

Question 19

NET LISTING

Answer 19

When a seller NEEDS to make a certain amount, and the Broker NEEDS to hit a certain commission percentge.

1. Take the amount the seller needs to make: 120,000
2. Subtract the broker’s percent from 100%
   100% - 5%=95%
3. Divide the amount the seller needs to make by the remaining commission percentage ex:
   120,000 divided by 95%
   That gives you the listing price.

Question 20

Calculating PERCENTAGE OF PROFIT

Answer 20

A buyer bought a property for 100k, and later sold it for 120k
120k-100k= 20k
Made / Paid
20k/100k
=20% percentage of profit

Question 21

When doing 2/3 and 1/3,

Answer 21

First calculate 2 divided by 3, then leave the number on the calculator, and mulitiply it by whatever comes next. Don’t try to round.

Question 22

Loan To Value Ratio Definition

Answer 22

Is the max percent of the sales price OR the appraised value, whichever is less, that the lender will lend in a particular case.

Question 23

Loan to Value

Answer 23

LTV,
If you see ‘to”, it means divide the first number by the second.
Loan divided by Value

Question 24

LtV = Value

Answer 24

Value is loan plus downpayment.

Question 25

IF a lenders LtV is 75%, what is the max mortgage amount on a sale of $92k?

Answer 25

Sales Price: 92K MULTIPLEID BY LtV Ratio: .75 | Max Loan Amount: %69,000

Question 26

LTV - calculating the loan

Answer 26

Do the LVT ratio times the Value.

Question 27

Straight Term Loan

Answer 27

360 DAY YEAR Loan in which the principal is paid back at the end of the term. The interest can be paid monthly, quarterly, yearly, at the end of the term.

Question 28

Straight Term Loan Math

Answer 28

Remember - 360 Day Calendar Principal x intereste rate to get annual interest Annual Interest divided by 360 days, to get daily intertest amount. Daily Interest amount x Number of days = total interest paid. Sometimes they want to know the whole amount paid, so add on the pricincipal.

Question 29

Straight term loan - you have the interest rate and the interest payments, we can figure out the loan

Answer 29

Annual Interest divided by interest rate = principal borrowed.

Question 30

Mortgage Qualifiying

Answer 30

2 separate processes: 1. Determining buyer's housing objectives 2. Determining their financial ablilities RULE OF THUMB - you should borrow no more than 2.5 times your annual income to buy real estate.

Question 31

Income Qualifying Factor

Answer 31

2.5 times your annual income

Question 32

Income Qualifying Math

Answer 32

What weekly salary would be required to qualify for a $104,000 loan? 1. Max Loan = 104,000 DIVIDED BY Qualifying Factor of 2.5 gives you annual income requiremet 2. Divide annual income by 52 weeks in a year 3. Gives you weekly income