Section 876 IAC 2-14-10 - Real estate finance and appraisal mathematicsAuthority: IC 25-34.1-2-5
Affected: IC 25-34.1-5
Sec. 10.
(a) The competency and instructional level for real estate finance and appraisal mathematics is Level 2. This section is included only for the purpose of listing in one (1) place the types of applied real estate finance and related mathematics calculations which students should master in this course. As a practical matter, it will be necessary to cover most of these various mathematics calculations at various points during the course. It is not feasible to cover all real estate finance and related mathematics required in the course as a separate subject area, although instructors may wish to have a "review" on real estate finance mathematics near the end of the course.(b) It should be noted that the mathematics listed below is applied real estate finance and related mathematics. This course outline does not provide for instruction in basic mathematics concepts such as addition, subtraction, multiplication, division, decimals, fractions, or percentages. It is presumed that entering students possess these elementary mathematics skills. Should it be necessary to provide students with remedial instruction in basic mathematics, schools must include additional time for such instruction over and above the minimum time required for this course.(c) Instructors will note that competency and instructional levels are not assigned to topics in this section. Since all the topics (types of mathematics calculations) listed should be "mastered" by students, it is considered obvious that a working knowledge of these topics is required. Students are still expected to have a working knowledge of the mathematics associated with such topics.(d) The following are concepts of applied real estate finance and related mathematics calculations: (1) Financial calculations including the following: (A) Simple interest (how to compute monthly interest and amount of interest paid over life of a fixed-rate loan).(B) Debt service/mortgage debt reduction (how to use amortization tables and how to compute principal balance for a point in time, given previous principal balance, monthly payment, and interest rate, without amortization tables).(C) Loan origination fees and discount points.(D) Loan value (applying loan-to-value ratios).(E) Yields on mortgage loans (including loans involving discount points and wraparound mortgages).(2) Appraisal mathematics including the following: (A) Calculations involved with market data approach as follows: (i) Adjustments to sale prices of comparables.(ii) Calculating estimate of value.(B) Calculations involved with cost approach as follows: (i) Determining cost per square foot.(ii) Calculating depreciation by straight-line method.(iii) Calculating estimate of value.(C) Calculations involved with income approach as follows: (i) Determining and applying gross rent multiplier.(ii) Deriving net operating expenses.(iii) Capitalization of income (calculating estimate of value).(iv) Computing present value (discounted cash flow analysis).Indiana Real Estate Commission; 876 IAC 2-14-10; filed Dec 1, 1989, 5:00 p.m.: 13 IR 672; errata filed Jun 2, 1998, 11:33 a.m.: 21 IR 3940; readopted filed Jun 29, 2001, 9:56 a.m.: 24 IR 3824; readopted filed Jul 19, 2007, 12:57 p.m.: 20070808-IR-876070067RFA