Real Estate License Test Formulas

tax rate (Sec. 18)

(budget - nonproperty revenue) ÷ (assessed value - exemptions) = tax rate

accrued depreciation using effective age and total economic life (Sec. 15)

(effective age ÷ total economic life) x reproduction cost new = accrued depreciation

sale price given the amount the seller wants to net and the mortgage amount (Sec. 20)

(sellers net + mortgage amount) ÷ (100% - commission rate) = sale price

estimated property value using the gross rent multiplier (GRM) (Sec. 15)

sale price ÷ monthly rent = GRM GRM x monthly rent = property value

rent owed for a percentage (overage) lease (Sec. 4)

gross sales - sales threshold = gross sales subject to rent gross sales subject to rent x percentage charge in lease =additional rent base rent + additional rent = total rent

tax savings realized from allowable exemptions (Sec. 18)

homestead exemptions x millage rate = property taxes due 1. multiply base exemption + blind exemption by total mills 2. multiply the additional $25,000 exemption by city and county mills 3. add values from steps 1 and 2 to find total tax savings

loan-to-value (LTV) ratio (Sec. 13)

loan amount ÷ price = LTV ratio

housing expense ratio (HER) and the total obligations ratio (TOR) (Sec. 13)

monthly housing expense (PITI) ÷ monthly gross income = HER monthly total obligations ÷ monthly gross income = TOR

acres in a government survey legal description (Sec. 12)

multiply the denominators of each fraction together and then divide 640 by the result OR working backward or forward, divide 640 by the denominator of each fraction

# of potential lots in a subdivision (Sec. 10)

1. calculate # of square feet available for development 2. determine the potential # of lots per acre 3. potential # of lots x # of acres = total # of lots in subdivision

cost of a special assessment (Sec. 18)

1. calculate cost of total paving 2. calculate cost of homeowner's share 3. divide cost by 2 (assume cost is split with owner across the street)

annual depreciation allowance on residential rental property (Sec. 18)

1. calculate the value of the building without the land 2. building ÷ 27.5 years = annual depreciation

annual depreciation allowance on nonresidential income property (Sec. 18)

1. calculate the value of the building without the land 2. building ÷ 39 years = annual depreciation

property taxes due (Sec. 18)

1. calculate total city, county, and school mills 2. $25,000 base exemption + $500 blind exemption (if applicable) applies to the assessed value up to $50,000 3. an additional $25,000 exemption applies to the assessed value greater than $50,000 on city and county taxes 4. assessed value - applicable exemptions = taxable value 5. taxable value x tax rate = taxes due 6. additional $25,000 exemption x school board mills = additional taxes due 7. add values from steps 5 and 6 to find total property taxes due

# of acres in a parcel given the cost and price per square foot (Sec. 10)

1. calculate total square feet 2. total square feet ÷ 43,560 = # of acres in a parcel

mortgage interest proration on an assumed mortgage (Sec. 20)

1. mortgage payments are normally paid monthly 2. mortgage interest is usually paid in arrears 3. proration is based on monthly interest NOT monthly payment of principal and interest 4. calculate daily interest charge

acres in a government survey legal description with "and" in the description (Sec. 20)

1. multiply the denominators that immediately precede the "and" 2. multiply the denominators that follow the "and" 3. find the acreage of each 4. sum the two acreages

documentary tax on deeds (Sec. 20)

1. tax is paid on full purchase price 2. rate is $.70 per $100 increments ($.60 in Dade County) 3. if not an even $100 increment, round UP to next even $100 increment 4. typically seller pays the tax on the deed (entered as a debit to seller)

documentary tax on notes (Sec. 20)

1. tax is paid on note amount of new and assumed mortgage notes 2. rate is $.35 per $100 increments 3. typically buyer pays doc stamps on notes (entered as debit to buyer)

intangible tax on new debt (note) (Sec. 20)

1. tax on new debt ONLY 2. rate in 2 mills ($.002) per dollar of new debt 3. typically buyer pays intangible tax (entered as a debit to buyer

estimated market value of a subject property using the sales comparison approach (Sec. 15)

If the comparable property is inferior, add value (CIA) If the comparable property is better, subtract value (CBS)

taxable income for an investment property (Sec. 18)

NOI + reserve for replacements - mortgage interest - annual depreciation = taxable income

estimated property value using the income approach (Sec. 15)

NOI ÷ cap rate = value

capitalization rate using the income approach (Sec. 15)

NOI ÷ value = cap rate

total interest paid on a mortgage loan over an extended period of time (Sec. 20)

calculate # of payments paid to date calculate the total amount paid to date amount borrowed x % paid off = principal paid to date total paid to date - principal repaid = total interest paid to date

percentage of profit (Sec. 20)

calculate total cost calculate amount made on sale amount made on sale ÷ total cost = percentage of profit

investor's equity (Sec. 17)

current market value - mortgage debt = equity

average price per square foot and applying it to estimate land value (Sec. 15)

estimate the square footage of each comparable lot sale price ÷ total square feet = price per square foot average the price per square foot of the com parables subject property sq. ft. x average price per square foot = estimated value of subject lot

broker's share of commission (Sec. 20)

full commission x broker's split = commission due broker

rent owed for a variable (index) lease (Sec. 4)

new index - original index = difference in index difference in index ÷ original index = percent increase previous rent x percent increase = increase in rent amount previous rent + increase in rent = new rent

loan-to-value (LTV) ratio when given down payment (Sec. 13)

price - down payment = loan amount loan amount ÷ price = LTV ratio

mortgage amortization (Sec. 20)

principal balance x annual interest ÷ 12 = first month's interest monthly mortgage payment - first month's interest = principal payment beginning loan balance - principal paid = new principal balance

property tax proration (Sec. 20)

property taxes are paid in arrears; therefor the seller has usually not paid the property taxes at the time of closing calculate the # of days the seller owes for the calendar year

simple sales commission (Sec. 20)

purchase price x % of commission = total commission due

rent proration (Sec. 20)

rent is paid in advance (usually at the first of the month) therefore the unused portion of advance rent belongs to the buyer monthly rent ÷ days in month = rent per day rent per day x days owed buyer = amount of proration (credit buyer, debit seller)

estimated property value using the cost approach (Sec. 15)

reproduction cost of new building - accrued depreciation = building value building value + site value = depreciated value of the property

graduated commission (Sec. 20)

sale price portion x first rate = first commission due sale price portion x second rate = second commission due sum the 2 commissions

net to the seller (Sec. 20)

sale price x (100% - commission rate) = net to seller

GIM using the gross income multiplier (Sec. 15)

sale price ÷ annual income = GIM

percentage of profit given lot dimensions and cost per front foot (Sec. 20)

the first dimension is ALWAYS front feet front feet x cost per front foot = total cost

cost per front foot (Sec. 10)

total cost ÷ front feet = cost per front foot

NOI using the income approach (Sec. 15)

value x cap rate = NOI