Section 876 IAC 2-8-17 - Real estate mathematicsAuthority: IC 25-34.1-2-5
Affected: IC 25-34.1-5
Sec. 17.
(a) The competency and instructional level for real estate mathematics is Level 1 or Level 2. This section is included only for the purpose of listing in one (1) place the types of applied real estate 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 mathematics required in the course as a separate subject area, although instructors may wish to have a "review" on real estate mathematics near the end of the course.(b) It should be noted that the mathematics listed below is applied real estate mathematics. This course outline does not provide for instruction in basic mathematics such as addition, subtraction, multiplication, division, decimals, fractions, or percentages. It is presumed that entering students possess these elementary mathematical 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) Types of applied real estate mathematics calculations include the following concepts of brokerage commissions: (e) Estimating net to seller after brokerage fee and other closing expenses are paid (when setting listing price or considering an offer).(f) Concepts of profit/loss on sale of real estate (including percentages); equity (including percentages).(g) The following are concepts of area calculations: (1) Conversion of acreage to square footage and vice versa.(2) Calculations of square footage of variously shaped buildings and parcels of land with straight-line sides, including irregularly shaped parcels and buildings (involves application of formulas for calculating the area of squares, rectangles, trapezoids, and right triangles).(3) Cost and price per square foot, acre, front.(h) The following are concepts of financial calculations: (1) Simple interest (how to compute monthly interest and amount of interest paid over life of a fixed-rate loan).(2) Monthly P and I payment (how to compute monthly P and I payment using "factors", given the loan amount, interest rate, term, and factor).(3) Debt service and mortgage debt reduction (how to compute principal balance after one (1) monthly payment, given previous principal balance, monthly P and I payment and interest rate, without using amortization tables).(4) Loan origination fees and discount points.(5) Loan value (applying loan-to-value rations).(6) Yields (on mortgage loans involving discount points using "rule of thumb").(7) Qualifying a buyer using given maximum expense/income ratios and other relevant data, determining: (A) the maximum PITI payment buyer can qualify for;(B) the maximum loan amount buyer can qualify for;(C) the minimum income required for buyer to qualify for a loan of "X" amount;(D) the maximum expenses buyer can have to qualify for a loan of "X" amount; or(E) whether or not buyer is qualified for a particular loan. Also computing "housing expenses" and "long-term debts" (recurring obligations) using given data.
(i) Prorations at closing. (See section on "Closing Real Estate Transactions" for proration methods and items requiring proration.)(j) Preparation of closing statements. (Note: Although the salesperson license examination does not require candidates to work an entire closing statement (for both seller and buyer), students in this course should nevertheless be taught closing statement preparation. Salesperson license examination candidates may be required to work closing statement "mini" problems where, based on summarized data, they are asked to calculate the "net proceeds due to seller" or the "balance due from buyer".)(k) A concept of appraisal math includes the following calculations involved with market data approach: (1) Adjustments to sale prices of comparables.(2) Calculating estimate of value.(l) The following are concepts of income tax calculations related to home ownership: (1) Calculating "deductions".(2) Calculating "adjusted basis".(3) Calculations related to the determination of "gain/loss realized".(4) Calculations related to the "deferral of gain" in various situations and to the "exclusion of gain" by taxpayers over age fifty-five (55).Indiana Real Estate Commission; 876 IAC 2-8-17; filed Dec 1, 1989, 5:00 p.m.: 13 IR 651; errata filed Jun 2, 1998, 11:33 a.m.: 21 IR 3939; readopted filed Jun 29, 2001, 9:56 a.m.: 24 IR 3824; readopted filed Jul 19, 2007, 12:57 p.m.: 20070808-IR-876070067RFA; readopted filed November 25, 2013, 9:21 a.m.: 20131225-IR-876130283RFA