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Real Estate Math Glossary

8 Real Estate Math terms the exam expects you to know, in plain English.

A C E L P S
Annual Interest Rate
The yearly cost of borrowing money expressed as a percentage of the loan principal.
Capitalization Rate (Cap Rate)
A rate of return on an income property calculated by dividing net operating income by property value.
Commission
The fee paid to a real estate brokerage for services, typically a percentage of the sale price.
Equity
The difference between a property's market value and the outstanding balance of any loans against it.
Loan-to-Value Ratio (LTV)
The ratio of the loan amount to the property's appraised value or price, whichever is lower.
Principal
The original amount of money borrowed in a loan, excluding interest.
Proration
Dividing ongoing expenses like taxes between buyer and seller based on each party's period of ownership.
Seller Net Sheet
An estimate of the proceeds a seller will receive after subtracting all closing costs and payoffs from the sale price.

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