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Exam topics · Tennessee

Real estate math and proration on the Tennessee exam

Commission splits, proration, loan-to-value, area, and transfer tax. Not hard math — just a small number of formulas applied under time pressure.

Why this section is hard

The arithmetic is middle-school level. What costs students points is setting up the problem: identifying which number is the base, which is the rate, and who owes what on the day of closing.

The one formula behind most questions

Base × Rate = Part. Commission, interest, tax, and profit questions are all this formula wearing different clothes. Identify the base first — the sale price, the loan amount, the assessed value — and the rest falls out.

  • Commission: sale price × commission rate, then split by the co-op and broker agreements in that order.
  • Interest for a period: loan balance × annual rate × (months ÷ 12).
  • Loan-to-value: loan amount ÷ the lesser of price or appraised value.
  • One discount point equals one percent of the loan amount, not of the price.

Proration, step by step

Decide who owes the item, find the daily rate, count the days each party owns, then credit and debit accordingly. Read the question for whether the seller owns the day of closing — that single day changes the answer.

  • Daily rate = annual amount ÷ 365 (or ÷ 360 on a banker's-year question — the question tells you which).
  • Taxes paid in arrears: the seller owes from January 1 through closing, credited to the buyer.
  • Rent collected in advance: the seller owes the buyer for the unused days.

Area and value

Square footage is length × width; an acre is 43,560 square feet. Assessed value questions in Tennessee apply an assessment ratio to market value before applying the tax rate, so never apply the rate to market value directly.

Traps that cost points

Applying a discount point to the purchase price.

Points are always a percentage of the loan amount.

Computing LTV against the sale price when the appraisal came in lower.

Lenders use the lesser of price or appraised value.

Prorating without checking who owns the closing day.

Read the question. It will say, and it changes the day count by one.

Common questions

How much math is on the Tennessee real estate exam?

Math is a modest share of the questions, but it is concentrated in a few predictable formulas — commission, proration, interest, loan-to-value, points, area, and assessed value. Drilling those formulas is far more efficient than reviewing every chapter again.

Can I use a calculator on the exam?

A basic, non-programmable calculator is generally permitted at the testing center. Confirm the current rules with the testing vendor before your appointment.

What is proration in a real estate closing?

Proration divides a shared expense — property taxes, rent, HOA dues — between buyer and seller according to the number of days each owns the property during the period the expense covers.

Practice it, don't reread it.

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