Real Estate Calculations and Practical Applications
Commission math
Compute the gross commission from the sale price, split it between cooperating brokers, then apply the brokerage's internal split. Order matters: sale price × rate = total commission; total ÷ cooperating brokers; then the individual's share.
Worked example: $385,000 sale at 5.5% = $21,175 total. A 50/50 cooperating split gives each brokerage $10,587.50. If the listing salesperson has a 60% split, the salesperson receives 0.60 × $10,587.50 = $6,352.50.
Prorations
Use a 365-day year and count the days the seller actually owns the property. Annual taxes ÷ 365 = daily charge; daily × seller's days = seller's debit, buyer's credit.
Worked example: Annual taxes $2,920 close on July 1. Daily = $2,920 ÷ 365 = $8.00. Seller owns January 1 through June 30 = 181 days. 181 × $8.00 = $1,448 debited to the seller and credited to the buyer. If the seller had already paid the full year, the treatment reverses - the buyer reimburses the seller for the remaining days.
Area, rates, and taxes
One acre = 43,560 square feet; a 150 × 200 foot lot is 30,000 sq ft ÷ 43,560 = 0.689 acre. Loan-to-value = loan ÷ price or appraised value, whichever is lower. Points = rate percentage × loan amount. Nevada's real property transfer tax is computed in increments of $500 of consideration at the statutory base rate (counties add their own increments), so verify the local schedule before answering.
Rule of thumb: when a question gives you three numbers, write the formula before you compute; most errors come from multiplying by the wrong base.