Tennessee Real Estate Math Practice Problems

# Tennessee Real Estate Math Practice Problems

Real estate math appears throughout the Tennessee PSI exam. The questions test your ability to apply formulas accurately under time pressure. Here are the most important formulas and practice problems.

Core Formulas

Commission Commission = Sale Price x Commission Rate

Loan-to-Value (LTV) LTV = Loan Amount / Purchase Price x 100

Proration (annual to daily) Annual Amount / 365 = Daily Rate Daily Rate x Number of Days = Prorated Amount

Gross Rent Multiplier GRM = Sale Price / Gross Annual Rent

Cap Rate Cap Rate = Net Operating Income / Value

Transfer Tax (Tennessee) Tennessee charges $0.37 per $100 of consideration. Transfer Tax = (Sale Price / 100) x 0.37

Practice Problems with Solutions

Problem 1 — Commission Split: A home in Nashville sells for $485,000. The total commission is 5.5%. The listing brokerage retains 50% of the total commission and pays the listing agent 65% of the brokerage's share. How much does the listing agent earn?

Total commission = 485,000 x 0.055 = $26,675 Listing brokerage share = 26,675 x 0.50 = $13,337.50 Listing agent share = 13,337.50 x 0.65 = $8,669.38

Problem 2 — Tennessee Transfer Tax: A property sells for $320,000. What is the Tennessee transfer tax?

Transfer tax = (320,000 / 100) x 0.37 = 3,200 x 0.37 = $1,184

Problem 3 — Proration: Annual property taxes are $3,650. Closing is set for March 31. The seller is responsible for taxes through the day of closing. Using a 365-day year, how much does the seller owe?

Daily rate = 3,650 / 365 = $10.00/day Days owned Jan 1 through March 31 = 90 days Seller owes = 90 x $10 = $900

Problem 4 — Investment Analysis: A Memphis rental property generates $2,200 per month in gross rent. Operating expenses are $900/month. An investor wants a 7% cap rate. What is the maximum purchase price?

Monthly NOI = 2,200 - 900 = $1,300 Annual NOI = 1,300 x 12 = $15,600 Maximum price = NOI / Cap Rate = 15,600 / 0.07 = $222,857

Problem 5 — LTV and Down Payment: A buyer purchases a home for $275,000 with a 10% down payment. What is the loan amount and LTV ratio?

Down payment = 275,000 x 0.10 = $27,500 Loan amount = 275,000 - 27,500 = $247,500 LTV = 247,500 / 275,000 = 90%

Exam Day Math Tips

PSI provides an on-screen calculator. Write out each step on your scratch paper before entering numbers. Work problems twice if time permits. Math questions have definitive right answers — they are among the most reliable points you can earn on the exam.