Why study basic math? When will we ever use basic mathematics? There are two subjects that anyone should be skilled and you are most likely to use for the rest of your life: carpentry and real estate. And they both use basic math and geometry. So, instead of reading made-up problems in cold pages of books, let’s look at some real-life situations.
Let’s start with Real Estate. Math for Real Estate 1
Real Estate is property that can be owned. This includes land and airspace and below ground space. It is sold or transferred by the owner to another person. If it is sold, the price must be accessed, meaning the exact value needs to be determined. This exact sum, plus some taxes and fees that are paid to the state, that “lien” against the property – which is to say, they lean against the property as a weight of the tax weighs against its value.
There are several math problems, which come as questions and answers you can derive from your knowledge of basic math.
- First we must arrive as an agreement as to the price of the item. This is “asked for” at, for example 300,000 for a home by the seller. They negotiate with regard to how to make an equitable exchange and discover they do not really know the value of the home in the market place. (Remember the “marketplace” is where people sell what they own.)
The figure the value of the home in this way:
So, here is our first math problem: Consider that you determine the value of a property based on these points: Desirability (25%) Utility (25%) Scarcity (25%) and Transferability (25%).
We assume that the total amount must be in a range between 250-350,000 based on market trends from the sale price of other homes in the area and in the neighborhood. The homes are arranged handsomely, the nearby shopping is good, there is a good library and schools and parks.
Your factor of 25% Desirability can be weighed with these kinds of points: What do other people in the area consider makes their home valuable? Does the home have a beautiful garden, a big spacious family room or the view? Just like weighing your apples at the grocery store, put the % Desirability rating on a weight graph or scale that begins at the 250,000 mark and ends at 350,000. You can see whether or not it should be priced toward the lower end of the 250,000-350,000 spectrum or toward the higher end. You can easily resolve this problem in your head to attain a good estimate of a sales price. What sales price do you recommend?
Here is another math problem in Real Estate:
Mr. Genteeil decides to buy the property down the street when his neighbor and longtime friend, Shana, passed away. Her son, who received the title at the time of her death, but he lived in Canada and could not care for the property. It’s a good thing that Mr Genteeil was skilled in real estate. He offered to buy the home from her son. The home was valued at $250,000. Shana’s son was excited and happy because he wanted to buy property in Canada with his family, and Mr Genteeil could give the property to his son and daughter-in-law who want to move to the house so their boy can learn from his grandfather, and his mother and father can work in the town nearby. Now there are many taxes from the state and Federal government at the time a house is sold. Each of these taxes needs to be figured, so your math problem is to figure them out:
5% of the property value determined by Assessment, must be paid for Property taxes each year. These are the taxes from the State and Federal government that you pay for being on the land so that you can be serviced with water, roads and power lines. Federal taxes would pay for such things as water infrastructure and federal lands protection including reservoirs. State taxes may include things like water management as well, because municipalities purify and manage the flow of water into homes. If you sell the home in the middle of the year you split the property taxes between the buyer and the seller.
- What would be the Property Tax?
- If the home was transferred to the new owner on January 1st, what would be the percentage (in dollars) of the Property tax would be paid by the buyer and separately, the seller?
10% of the sale price goes to the Realtors who arranged for the sale of your home (both the Realtor for the Buyer and the Realtor for the Seller receive 5/50% each from the 10% or 50% of the dollar figure. How much did the Buyer pay? How much did the seller pay?
Decide to sell one of the houses on your block. And follow the same procedure
- What do you think would be a good value for this house? Why?
- Considering the fees you will pay, what should you add to your estimated value of the house, these are fees associated with selling the house:
10% Realtor Fee (called “commission”)
5% Property tax (which may be split between buyer and seller)
Answer these questions in an essay where you explain why the buyer and seller should agree on the value and fees and therefore the overall final price including property fees and taxes.
Tara Pelton, B.A. is a graduate student at Northridge University in the field of special education. She is also a tutor. She works in Los Angeles.