Real Estate Calculations and Practice
Commission and proceeds
Commission = sale price × rate. The listing broker receives the total, pays the cooperating broker per the offer of compensation, then pays the salesperson per the employment agreement. Seller net = price − loan payoff − commission − closing costs − prorated debits + prorated credits.
Prorations
Three decisions control every proration: (1) whose day is closing day, (2) whether the item is paid in arrears or in advance, (3) the proration base. Maryland practice commonly uses a 365-day year, but contracts sometimes specify 30-day months - read the contract. Taxes paid in arrears and rent paid in advance are the two standard items.
Trust accounting
Earnest money and collected rents are trust funds. Deposit promptly into the broker's escrow account, never commingle with operating funds, disburse only with authorization or court order, and keep records that reconcile. Conflicting demands on a deposit call for a written release or interpleader.
Area and loan math
Area = length × width; triangle = ½ base × height; 1 acre = 43,560 sq ft. LTV = loan ÷ value; down payment = price − loan; one point = 1% of the loan amount; monthly payment = P&I + taxes + insurance + PMI/MIP.
Worked example
Seller closes June 15; annual taxes of $3,650 are paid in arrears for the calendar year, and the buyer owns closing day. On a 365-day basis the daily rate is $3,650 ÷ 365 = $10. Seller owns January 1 through June 14 = 165 days → $1,650 charged to the seller and credited to the buyer.
Traps
Debiting and crediting the same party twice, using a 30-day month when the contract specifies a 365-day year, computing commission on the net instead of the gross price, and forgetting that the closing day itself must be assigned to buyer or seller exactly once.