Common Real Estate Math Problems
As a real estate agent, you’ll face a number of different math problems on a daily basis. From calculating cost per square foot to helping buyers understand their closing statements, determining commission spits to working out mortgage insurance, the math involved in a real estate transaction is no laughing matter. You’ll be dealing with numbers more often than you may think.
But, don’t bust out your old calculus books just yet. Real estate math problems don’t have to be complicated. You’ll get more comfortable with real estate math problems as your experience grows.
Whether you’re in need of real estate exam prep or are new to the profession and need a little refresher, we’ve put together a few of the most common math problems you might run into. This is certainly not an exhaustive list … but it will get you started.
Cost per acre for contract negotiation:
Question: An estate is selling 5.6 acres at $18,250 per acre. How much is the selling price?
Answer: To determine the full sales price, take the total number of acres and multiply it by the price per acre. For example: $18,250 x 5.6 = $102,200
Total commission being paid:
Question: If a property sold for $350,000, what total commission would the seller pay at 6%?
Answer: A 6% commission split can be calculated by taking the sales price and multiplying it by the commission rate in decimal form. For example: $350,000 x .06 = $21,000
Amount of closing costs being provided by the seller:
Question: During contract negotiations, the seller agrees to pay 3% of the purchase price towards the buyer’s closing costs. Based on a sales price of $157,000, how much would the seller have to pay?
Answer: The seller’s contributions towards closing costs can be calculated by taking the sales price and multiplying it by the percentage in decimal form. For example: $157,000 x 0.03 = $4,710
Think those were pretty simple? Now, here’s a fun one.
Calculating how much the seller needs to bring to closing:
Your seller just lost his job and is unable to stay in his home. He makes the decision to sell his home to move to a smaller house and contacts you to list the property. Within a few days, you have a fully signed contract and are moving into the closing.
The contract states that the purchase price of the property is $215,000. The seller agrees to pay a 5.5% commission and $1,500 towards closing costs for the buyer. The seller’s payoff amount is $201,500. He will receive a credit at closing for taxes at $543 and a credit for HOA dues at $250.
Question: Based on the information above, would the seller be required to bring money to closing?
Answer: No. And here’s why:
(Subtract) Commission: $215,000 x 0.055 = $11,825
(Subtract) Seller paid closing costs = $1,500
(Subtract) Seller’s payoff = $201,500
(Add) Credit for Taxes = $543
(Add) Credit for HOA dues = $250
Total = $215,000 – $11,825 – $1,500 – $201,500 + $543 + $250 = $968 that the seller would receive back at closing.
Ready to put your real estate math problem game in check?
Today, we have calculators on our cell phones for easy access. Calculators are handy, but if you don’t know what numbers or figures to put in, you can run into issues. Don’t let this happen to you. Take a few minutes to brush up on your math skills before your next closing and impress your clients with your vast knowledge of real estate and math.
If you’re new to just starting your real estate career and want to brush up on your real estate math problems prior to your real estate exam, License Exam Tutor’s real estate exam prep programs will give you access to over 100 real estate math questions for you to practice.