Real Estate Prelicense Course (National Portion)

Here's a rectangle, eight across and five tall, so it covers forty squares. Slice it corner to corner and you get two triangles. Spin one around and it lands exactly on the other, so each triangle is half of forty, which is twenty. But most triangles don't have a right angle. Slide the top point along, and draw the same eight-by-five box around it. Drop the height straight down, and each side becomes its own small rectangle cut by a diagonal. The pieces outside match the pieces inside, so the triangle is still half of base times height.

Picture a medieval field, ploughed by oxen. Its width was one chain, sixty-six feet. The oxen pulled a furrow one furlong long, six hundred sixty feet, before they needed a rest. Now fill that strip with squares sixty-six feet on a side, and exactly ten fit along it. Each square is sixty-six times sixty-six, four thousand three hundred fifty-six square feet, so ten of them make forty-three thousand five hundred sixty. You can squash it into any shape and it's still an acre, but that strip, a furlong by a chain, is where the number comes from.

Say a house sells for $350,000 at six percent, so the commission is $21,000. The seller pays all of it at closing, and it goes first to the listing brokerage, the firm that signed up the seller. That firm then cuts it in half: $10,500 stays on the listing side, and $10,500 goes over to the cooperating broker, the firm whose agent brought in the buyer. That's why it's called the selling side. One commission, cut down the middle, with one half for each brokerage.

Say you're buying a home that's valued at three hundred thousand dollars. Stretch that value out as one bar, and the bar is the whole house. You borrow two hundred forty thousand, so the loan fills most of the bar, and your sixty thousand down is the slice that's left. Loan-to-value just asks how much of the bar is loan, so you divide the loan, two-forty, by the value, three hundred. That gives you zero point eight zero, which is eighty percent. The bank's money covers eighty percent of the house, and the other twenty is yours.

Take a single dollar and cut it into a thousand thin slivers. A mill is just one of those slivers, a tenth of a cent. So a tax rate of one mill means you pay one dollar for every thousand dollars of assessed value. Now say your town levies twenty-five mills. That's twenty-five slivers out of a thousand, which is zero point zero two five, or two and a half percent. On a home assessed at two hundred thousand dollars, that comes to five thousand dollars a year.