Posted by admin on August 21, 2010 under Real Estate License Basics | 
One very important part of your real estate training is the math associated with real estate transactions. There are many formulas you should get to know before you will be able to earn your real estate license. In this three part installment of Real Estate Basics we will review the real estate math that you will need to understand in order to pass your real estate license exam. In part one of this installment we will cover the how to calculate commissions and loan interest.
Calculating commissions
Calculating commissions involves the purchase price of the property and the commission rate on the contract to determine the amount of commission to be paid. For the purposes of our example, we will use a purchase price of $150,000.00 and a commission rate of 5%. Use the T to help with your calculations.
_____________COMMISSION____________
Sales price | Commission rate
A commission rate is generally a percentage of the purchase price of a property. If you have the purchase price and the commission rate, simply multiply the commission rate by the purchase price to find the commission.
$150,000.00 X .05 = $7500.00 commission on the sale
If you have been given a commission amount and the purchase price you need to divide the amount of commission paid by the purchase price to determine the commission rate.
$7500 / 150,000 = .05 or 5% commission
If you are only given the commission rate and the commission amount, divide the amount of commission by the commission rate to determine the purchase price.
$7500 / .05 = $150,000.00
Financing
Math for financing is a little bit different. The calculations are usually to determine interest rates and the principle and interest paid on a mortgage payment. It is important to remember that when you are dealing with interest rates they are expressed in annual rates. Our T for these calculations looks like this:
_________________INTEREST_________________
LOAN AMOUNT | INTEREST RATE
To determine the interest amount, simply multiply the loan amount by the interest rate. Assuming the interest rate for a $150,000.00 loan is 6% you can calculate the interest.
$150,000 X .06 = $9000.00 in interest
If you have only the rate and the interest amount, divide the interest by the interest rate to determine the purchase price.
$9000 / .06 = $150,000.00
If you have only the loan amount and the interest amount, divide the interest amount by the loan amount for the interest rate.
$9000 / 150,000 = .06 or 6% interest
In the next part of Real Estate License Math we will the calculations used on a settlement sheet for things like interest and taxes as well as when and who to debit and credit at closing.
Posted by admin on August 22, 2010 under Real Estate License Basics |
In part one of the Real Estate Basics – Real Estate Math installment we reviewed how to calculate loan interest and commissions for the purposes of taking the real estate license exam. In part two we will take a look at the calculations behind the figures on the settlement sheet.
Calculating interest due at closing
Much of the math on your real estate license exam will have to do with calculating interest due from the buyer and seller at closing. If the seller has an existing loan on the property it will need to be paid off at closing. The seller is responsible for their loan amount and the interest back to the first of the month. On closing paperwork this is a DEBIT to the seller only. The buyer must secure a new loan and pay the interest up to the end of the month, including the interest for the day of closing.
Let’s say that the seller owes $100,000.00 on their loan on September 1. Since mortgage payments are paid in arrears, that payoff amount remains the same through September 30. If the interest rate on that loan in 6%, and the closing is on the 30th the equation for the interest due is
$100,000 X .06 = $6000.00 /12 months = $500.00 due from the seller for the month of September.
For a mid month closing, the monthly interest rate translates into a daily rate when divided by 30. So to change our closing to September 15th, then the buyer owes interest from the day of closing on, 16 days.
$500.00 / 30 = $16.67 per day X 16 days = $266.72 due from buyer at closing.
Calculating taxes
The first step when you are calculating taxes on a settlement sheet is to figure out if the taxes have been paid or not. Next is to determine whether the seller owes a credit or is due a credit and to break the taxes down to a daily number. For the purposes of real estate license math, a month has 30 days and a year is 360 days. In order to calculate the total tax per day, the annual tax amount is divided by 360 days. If the taxes for a property are $2500.00 annually, the equation for the daily tax is
$2500.00 / 360 = $6.95 per day
If the taxes have not been paid in full for the year and the closing happens on September 15 the seller owes tax for 8 months and 15 days, or 255 days, which equals $1772.25. The way that is calculated is
8 months X 30 days = 240 + 15 days = 255 days
255 days X 6.95 per day
This will show on the settlement sheet as a $1772.25 debit to the seller and a $1772.25 credit to the buyer.
In the event that the taxes for the year have been paid in full by the seller then the settlement sheet would show a credit to the seller for $1772.25 and a debit to the buyer in the same amount.
Posted by admin on August 21, 2010 under Real Estate License Basics |
For this installment of the Real Estate Basics series we will review real estate brokerage and the basics of what you need to know to get your real estate license.
The real estate brokerage business is the facilitation, listing, marketing and managing of information for the procurement of buyers, sellers, tenants or leased property for clients. This is accomplished with the help of other brokers and the use of a network of broker shared listing known as the Multiple Listing Service.
Real estate can be brokered legally by sole proprietors, joint ventures, limited partnerships, general partnerships, or for profit corporations. Not for profit corporations, cooperative associations and business trusts are not permitted to broker real estate. There are many types of brokerage organizations. There are limited and full service agencies, independents and franchises as well as brokerage agencies by client type, property type, or transaction type.
The relationship between brokers and salespersons is important to understand and will be covered in your real estate courses. The real estate broker’s role is to negotiate an agreement for the sale, purchase, rent, lease, or otherwise exchange interest in real property for a fee or a commission. Real estate brokers are also responsible for supervising all their salespersons activities as well as accepting and keeping all of the funds being held for the transaction in an escrow account. Salespersons must be affiliated with a licensed real estate broker, either as an employee or as an independent contractor. The real estate salesperson role is much the same as the broker’s role except that they cannot negotiate the final terms of an agreement and they are not permitted to hold or accept escrow funds.
The salesperson and the broker have certain obligations to each other. The salesperson must obtain and sell listings for the real estate broker, abide by all regulations and policies as per their employment agreement, and always promote ethics and protect the broker’s reputation. The broker’s responsibility to the salesperson is to provide the policies and an employment agreement to the salesperson. They must also provide salespersons necessary information, office support, training and compensation while upholding ethical standards.
Operating a real estate brokerage requires more than obtaining and marketing property listings and managing information about the market, clients, and properties; real estate brokerages must follow all advertising regulations and Anti-Trust Laws. Real estate brokers are responsible for the content of all advertising material. Every advertisement must contain the broker’s identification information. Blind ads and misleading ads are prohibited. Antitrust Laws like the Sherman Act and the Clayton Act are in place to protect against unfair business practices, monopolies, and trade restraints.
Real estate brokerage is a large subject and you will need to understand it to pass the real estate license exam. In this installment of Real Estate Basics we have only summarized the general parameters of real estate brokerage in the hopes of making the information easier to understand. Your real estate courses will cover the subject more in depth for you.
Posted by admin on August 29, 2010 under Real Estate Careers |
For many people that want to take advantage of the affordability in the housing market, closing costs can be substantial. One of the largest costs you will have to pay is the commission to the real estate licensees that helped you through the process. Sitting at the closing table you will watch each of the selling and listing brokers and agents collect their sizable commission checks. There is a way for one of those checks to be yours at the closing table. Earning your real estate license is a great way to not only to educate yourself on the huge purchase you are considering, but to get a nice check along with the keys to your new home at the closing.
One hard lesson that homeowners learned during the housing crash in 2008 was that they need to be better educated in real estate before they make a purchase. Taking the word of paid professionals who may or may not have your best interest at heart is enough to keep many people from coming anywhere near the real estate market. What you may be surprised to learn is how easy it is to earn your own real estate license. Even if the only sale you ever close is your home, you will more than likely recoup the cost of your real estate training and licensing with a significant amount of cash to spare.
With an investment of just under two hundred dollars and a few weeks of training you could earn a real estate license and get thousands back at the closing of your new home. When the time comes to pay all of the listing and selling brokers and agents, one of them could be you. You will have all of the information on the real estate world that the professionals you are working with do. You can complete your transaction with the confidence that you know what you are doing.
Would you work extra hours for a few weeks if it meant a payoff of thousands of dollars? Would you pay $200.00 to get thousands of dollars back at the closing table? Even if the purchase of your own home it the only real estate transaction you are ever involved in, it is worth the investment, especially when you consider the bonus of having a real estate license that you could use to start a whole new career if you choose to.
The smart buyers are the ones who are making the best deals in today’s housing market. The smartest buyers have found the opportunity to not only make the best deal on their purchase, but to earn a commission on it as well. Getting the real estate training that you need is easy. Online real estate schools offer the real estate courses you need from any computer with an internet connection. Recently introduced is the availability of the course work from any mobile device with an internet browser. You can literally complete the courses anywhere and at any time.
Most buyers are going to use the internet to research the real estate market before they buy, why not do your research at a qualified online real estate school and earn your own real estate license? Get the peace of mind that comes from understanding the real estate process and a piece of the commissions as well.
