Unit 1: Real Estate Math
A room measures 12 feet by 17 feet. At a cost of $55 per square yard, how much would it cost to install wall-to-wall carpeting? A) $1,472 B) $1,581 C) $1,668 D) $1,246
D) $1,246 The answer is $1,246. The area of the room (12 feet × 17 feet) is 204 square feet, which is divided by 9 (the number of square feet in a yard), totaling 22.66 square yards. 22.66 square yards times $55 per square yard is $1,246.
In 2016, taxes on Don Mark's home were paid in full and amounted to $1,468. He sold the home to Chuck Harris and closed the sale on August 29, 2017. What was the prorated tax amount, using a statutory year and prorating through the day of closing? A) $1,096.71 B) $982.56 C) $966.25 D) $974.40
D) $974.40 The answer is $974.40. Step 1: Calculate the charge per day: $1,468 taxes/year ÷ 360 days in a statutory year = $4.077 taxes/day. Step 2: Calculate the period: January + February + March + April + May + June + July = 7 months × 30 days in a statutory month = 210 days + 29 days in August = 239 days in the proration period. Step 3: Multiply the charge per day by the time period: $4.077/day × 239 days = $974.40 tax proration.
In 2016, taxes on Don Mark's home were paid in full and amounted to $1,468. He sold the home to Chuck Harris and closed the sale on August 29, 2017. What was the period for which the proration was calculated, using a statutory year and prorating through the day of closing? A) 241 days B) 237 days C) 269 days D) 239 days
D) 239 days The answer is 239 days. The seller owes the buyer for taxes from January 1 through August 29. Using a statutory year, each month has 30 days plus the actual number of days used in the month of closing: January + February + March + April + May + June + July = 7 months × 30 days = 210 days + 29 days in August = 239 days in the proration period.
The seller and the listing agent agree to put the home on the market for $275,000, and at the same time agree to a 5.25% commission. The buyer and the buyer agent negotiate the home price to $260,000. How much commission is paid? A) $13,650 B) $14,437 C) $13,000 D) $16,500
A) $13,650 The answer is $13,650. The commission is paid on the negotiated sales price, not the listing price.
If a lot was purchased for $20,000 and sold for $18,000, the percentage of loss is A) 10%. B) 11%. C) 1%. D) 90%.
A) 10%. The answer is 10%.Percentage of profit or loss is calculated by subtracting the previous value from the current value, then dividing the difference (profit or loss) by the previous (old) value: $18,000 - $20,000 = -$2,000 ÷ $20,000 (old value) = -0.10 = -10%.
How many square feet are in a right triangle property that is 600 feet at the base and 400 feet on the right side? A) 120,000 square feet B) 60,000 square feet C) 240,000 square feet D) 30,000 square feet
A) 120,000 square feet The answer is 120,000 square feet. If the property was a rectangle (600 × 400), it would be 240,000 square feet. Since this right triangle is half of that (240,000 divided by 2) the total area is 120,000 square feet.
Property owners on one street have petitioned the city to install paved alleys behind their homes. If Marcus has a rectangular lot that measures 90 feet by 140 feet, on what amount would he pay the special assessment? A) 90 feet B) 140 feet C) 280 feet D) 130 feet
A) 90 feet The answer is 90 feet. If two dimensions are given for a tract of land, the first dimension is the frontage if they are not labeled. The second dimension is the measurement for the depth of the lot: 140 feet. The special assessment would be based on the alley width, which would be the same as the street frontage since the lot is rectangular in shape.
An abbreviated formula for finding the commission amount is T × % = Pt. The Pt of this equation stands for which of the following? A) Part B) Rate C) Percentage D) Total
A) Part The answer is part. The income to the broker from the sale of a property is generally in the form of a commission. It is computed using the percentage formula: T (value of the property or total) × % (percent or rate) = Pt (income to the broker or part). T × % = Pt.
Current ad valorem property taxes owed by the seller that have NOT yet been billed at the time of closing are an example of A) accrued items. B) exempt items. C) nonrecoverable items. D) prepaid items.
A) accrued items. The answer is accrued items. Accrued items are owed by the seller but will eventually be paid by the buyer. The seller pays the buyer for these at the closing; the seller is "debited" and the buyer is "credited" for accrued items at the closing. Interest on an assumed loan is another accrued expense that requires prorating at closing. Prepaid items have been prepaid by the seller but not fully used up. The buyer owes the seller for these expenses.
What was the price per front foot for a 100-foot-by-125-foot lot that sold for $125,000? A) $556 B) $1,250 C) $10 D) $1,000
B) $1,250 The answer is $1,250. If two dimensions are given for a tract of land, the first dimension is the frontage if they are not labeled. The second dimension is the measurement for the depth of the lot. To find the sales price per front foot, divide the sales price by the front footage: $125,000 ÷ 100' = $1,250.
How much interest will the seller owe the buyer for a closing date of August 10 if the outstanding loan balance is $43,580? The interest rate on this assumable loan is 10.5% , and the last payment was paid on August 1. Prorations are to be done through the day of closing, using a statutory year. A) $254.22 B) $127.11 C) $508.43 D) $381.33
B) $127.11 The answer is $127.11. There are three steps in a proration problem: Step 1 is to calculate the daily rate: $43,580 (total) × 10.5% (rate) × 1/12 (time) = $381.325 month's interest $381.325 ÷ 30 days in a statutory month = $12.711 day's interest Step 2 is to calculate time: August 1 through August 10 equals 10 days. Step 3 is to multiply the daily amount by the number of days: $12.711 daily interest × 10 days = $127.11 interest proration
A home is listed at $525,000 but is only appraised at $490,000. How much are annual property taxes, based on $3.00 per $100 valuation? A) $3.00 for every $100 of the eventual sales price B) $14,700 (based on the appraised value of the property) C) $15,750 (based on the list price of the home), with any overage rebated once the sales price is final D) $15,750 (based on the list price of the home)
B) $14,700 (based on the appraised value of the property) The answer is $14,700 (based on the appraised value of the property). Taxes are based on the value placed on the property by an appraiser. Over time, the appraisal may move up or down depending on value.
The interest for 4 months on a $12,000 loan at an interest rate of 8% is A) $960. B) $320. C) $240. D) $640.
B) $320. The answer is $320. On loans for less than one full year, a monthly interest amount must be determined, then multiplied by the number of months: $12,000 × 0.08 = $960 in interest; $960 ÷ 12 months = $80 per month; $80 × 4 months = $320. Or use the formula principal (total) × rate × time (in months) = interest (part): $12,000 × 0.08 × 4/12 = $320.
The seller owes $2,400 in taxes for the current year. With a May 28 closing date and using a calendar year, the seller will be debited how much? (Assume it is NOT a leap year.) A) $966.53 B) $973.10 C) $992.83 D) $979.68
B) $973.10 The answer is $973.10. First, divide $2,400 by 365 to get the daily tax owed ($6.575). Then calculate the time to be debited from the seller (Jan. = 31 + Feb. = 28 + Mar. = 31 + Apr. = 30 + May = 28. Total = 148 days). Multiply the daily rate by the number of days: $6.575 × 148 = $973.10. The seller will be debited (charged) $973.10 and the buyer will be credited $973.10 at closing; that is, the buyer will "get the credit," or receive, the money on the closing statement.
A 100-acre farm is divided into lots for homes. The streets require one-eighth of the whole farm. If there are 140 lots, how many square feet are in each lot? A) 35,004 B) 27,225 C) 43,560 D) 14,000
B) 27,225 The answer is 27,225. First, calculate the part that is reserved for streets: ? = 0.125 for streets; 100 acres × 0.125 = 12.5 acres for streets. Then, determine the number of acres for lots: 100 total acres minus 12.5 acres for streets equals 87.5 acres for lots. The square footage of the acreage available for lots would be as follows: 87.5 acres for lots × 43,560 sq. ft. in an acre = 3,811,500 sq. ft. With 140 lots, the square feet per lot would be as follows: 3,811,500 sq. ft. ÷ 140 lots = 27,225 sq. ft. per lot.
Using the calendar-year method for calculating a closing-cost proration, February would have how many days if the year is not a leap year? A) 31 B) 28 C) 29 D) 30
B) 28 The answer is 28. Using the calendar-year method of proration, the prorated time period is calculated using the actual number of months or days in the period.
Quick percentages: 5% of $250,000 equals? A) $75,000 B) $50,000 C) $12,500 D) $25,000
C) $12,500 The answer is $12,500. The $250,000 equals the whole, or (100% of the amount). 5% (written as .05) × 250,000 = 12,500.
Eight years ago the homeowner purchased the property for $500,000. The market in that price range has basically been stagnant since then, and the owner now tells his sales agent (working on a 5.5% commission) he wants to sell the property and at least break even. How much should he list it for? A) $500,000 (commission cannot be counted as part of the transaction) B) Comfortably above $500,000 to allow for buyer negotiation C) $527,500, the original cost plus commission D) $500,000 (commission is a separate transaction that later can be a tax deduction)
C) $527,500, the original cost plus commission The answer is $527,500, the original cost plus commission. The seller is assuming a buyer would pay the asking price. A more accurate number would include the original down payment, interest paid on eight years of payments, factoring in the value of any improvements and subtracting the mortgage interest deduction. "Breaking even" may be more difficult than the seller realizes.
The area of what shape is calculated as "base times height divided by two"? A) Trapezoid B) Cube C) Triangle D) Rectangle
C) Triangle The answer is triangle. The formula for area of a triangle = (base × height) ÷ 2.
What are accrued expense and prepaid expense items? A) An accrued expense is the proration of the listing agent's commission over the time of the listings, and a prepaid expense is the amount paid by the seller up front for advertising. B) An accrued expense is funding of the lawn service paid by the seller until the buyer moves in, and a prepaid expense item might include unused portions of neighborhood seasons tickets to sports events. C) An accrued expense would be advertising placed by the sales agent but billed to the seller; and prepaid expense items would be the portion of the buyer agent commission paid in advance. D) An accrued expense is something owed by the seller that eventually will be paid by the buyer, such as interest on an assumed loan; and a prepaid expense is something paid in advance by the seller but not yet used up, such as prepaid insurance.
D) An accrued expense is something owed by the seller that eventually will be paid by the buyer, such as interest on an assumed loan; and a prepaid expense is something paid in advance by the seller but not yet used up, such as prepaid insurance. The answer is an accrued expense is something owed by the seller that eventually will be paid by the buyer, such as interest on an assumed loan; and a prepaid expense is something paid in advance by the seller but not yet used up, such as prepaid insurance. The calculation of accrued and prepaid expenses is an effort to keep the real estate transaction balanced, making sure those who benefit from a service pay only for the portion they use.
