Module III Real Estate Calcula Lyrics

Module III. Real Estate Calculations module iii:
Real Estate Calculations
Salesperson Forbes quickly scans the room. "Nothing like a formal court room," he ponders... "tacky chairs, an aging boardroom table, and a dehydrated plant. Who would have thought that a math error would come to this?"Forbes and his lawyer are waiting for the plaintiff's lawyer. Discovery begins at 10 a.m. It's all about 0.35 of an acre. What was supposed to be 1.5 acres, turned out to be 1.15. That's a whopping 23.33% less than represented! The buyers have a strong case. Forbes' lawyer had mentioned another case with a relatively minor error (6.541% less than represented) and that was deemed significant by the courts and damages awarded.

The bottom line is that the reduced size isn't driving this legal action as much as the buyer's inability to build their dream home. The $1,100,000 sale was predicated on constructing a stunning 16,000 square foot, two-storey mansion. The buyers, unable to do so due to building coverage restrictions and zoning by-laws, sought action against several parties including the real estate brokerage and salespersons.

Unfortunately, court action is a long and costly process. While everyone acknowledges an error was made, the liability remains unclear. Forbes has already learned an important lesson long before today. Accurate listing information is vital.

Mathematics, Measurements
& Metric Conversions

Measurements are key to real estate negotiations and drafting offers. Raw land prices are often based on value per acre/hectare. In new house construction, lot dimensions and total area are focal to building permit applications and zoning bylaws. Residential living area and commercial rentable/useable area are used in rental/sale negotiations and when comparing properties. Volume measurements come into play with warehousing and other industrial uses.

To compound matters, real estate straddles both metric and imperial worlds. Most discussions still centre on acres, per front foot, and square footage, but metric is gradually expanding, e.g., new home construction. Knowledge of both systems, including conversion formulae, is essential.

Session Guide

These topics are covered in this session:

Basic Math Skills

Fractions, Decimals, and Percentages
Working with Percentages
Using A Calculator

The HP 10BII
Measurements

Area Measurement
Volume Measurements

Building Area Measurements

Guidelines - Residential
Guidelines - Commercial (Office)
Knowledge Integration

LEARNING OUTCOMES

At the conclusion of this session, students will be able to:

Complete calculations involving fractions, decimals, and percentages.
Detail and apply metric/imperial conversions to typical real estate measurement situations.
Complete calculations involving regular and irregular areas and related linear measurements.
Apply living area measurements criteria to residential property.
Discuss briefly the fundamentals of rentable and useable measurements of commercial s___e.
Calculate selected volume measurements.

BASIC MATH SKILLS
Fractions, Decimals, and Percentages

Each represents the same number expressed in a different way.

Conversion Table

View full size in new window.

USING A CALCULATOR
Most calculators use algebraic logic for basic mathematical calculations. While students are free to use any calculator, the HP 10BII is highly recommended.

FUNCTION KEYSTROKES ANSWER
Addition 4 + 8 = 12
Subtraction 8 - 4 = 4
Division 4 ÷ 8 = 0.5
Multiplication 4 x 8 = 32

Sequential

Calculate items within parenthesis first, then perform multiplication and division from left to right. Finally, perform remaining addition and subtraction from left to right.

PROBLEM SOLUTION
(4 - 1) ÷ 3 3 ÷ 3 = 1
6 + (4 x 3) 6 + 12 = 18
(4 x 6) - (12 ÷ 3) 24 - 4 = 20

Percentage

A house was sold for $280,000 and the commission was 4%:

280000 X 4 % = 11,200.00

*Some calculators may not require the "=" key.

Additional Scenarios

Addition: The house was resold for 10% more than its original sale price:

280000 + 10 % = 308,000.00

Subtraction: The house was resold for 10% less than its original sale price:

280000 - 10 % = 252,000.00

Multiplication: The 10% increase/decrease amounted to a change of:

280000 X 10 % = 28,000.00

Division: The house sold for 80% of what it is expected to sell for next year:

280000 ÷ 80 % = 350,000.00

The HP 10BII
Financial calculations in Phases 1, 2, and 3 are illustrated using HP 10BII keystrokes. Students are free to use other calculators, but no a__istance or support will be provided.

A quick reference chart to the owners manual is provided for all key sections that must be reviewed. Topics covered provide the foundation for more advanced study in subsequent Phases.

Reference Chart - HP 10BII Owner's Manual

MEASUREMENTS
Real estate is slowly converting from imperial to metric. Practitioners face the everyday reality of working with both systems, particularly for distance (linear) and area measurements. Exercises are included for metric/imperial and imperial/metric conversions

Area Measurement
Practitioners are involved most frequently with three measurements:

Metric conversions are detailed in the Real Estate Encyclopedia, Appendix. Selected conversion formulae are also included in the workbook for ease of reference.

Imperial to Metric
Feet to Metres: Multiply the number of feet by .3048
Square Feet to Square Metres: Multiply square feet by .0929
Acres to Hectares: Multiply acres by .4047

IMPERIAL CONVERSION METRIC
5 feet = 5 x .3048 1.52 metres
5 feet, 6 inches = 5.5 x .3048 1.68 metres
81/2 feet = 8.5 x .3048 2.59 metres
790 square feet = 790 x .0929 73.39 square metres
1,140.5 square feet = 1140.5 x .0929 105.95 square metres
8 acres = 8 x .4047 3.24 hectares
81/2 acres = 8.5 x .4047 3.44 hectares

Metric to Imperial
Metres to Feet: Multiply the number of metres by 3.281
Square Metres to Square Feet: Multiply square metres by 10.76
Hectares to Acres: Multiply hectares by 2.471

METRIC CONVERSION IMPERIAL
5 metres = 5 x 3.281 16.41 feet
5.5 metres = 5.5 x 3.281 18.05 feet
70 square metres = 70 x 10.76 753.2 square feet
85.5 square metres = 85.5 x 10.76 919.98 square feet
8 hectares = 8 x 2.471 19.77 acres
8.5 hectares = 8.5 x 2.471 21 acres

Selected Imperial/Metric Conversion Factors

Note: Minor variations may occur due to decimal rounding. Exercise answers are rounded to two decimals unless otherwise noted.

Rectangular
Example: Area measurement may involve a single rectangular shape or a combination forming an irregular pattern. For irregular rectangular shapes, calculate total area as if a rectangle and subtract non-building areas. This approach can be used for both buildings and land.

Caution
Describe Lot Size Carefully

More or less standardized lot size descriptions apply when describing vacant land and building lots. Most real estate boards present lot dimensions in a consistent manner.

Non-Rectangular

Building Volume
A flat roof is typically, but not always, measured from 6 inches below the floor surface to roof top. In the case of gable roofs, the measurement is normally from 6 inches below the floor surface to half-way between the eaves and the ridge.

Volume Measurements

Volume measurements frequently encountered in development/construction: e.g., cubic yards/metres of fill required; volume of basement excavation, and concrete driveway requirements.

Cube or Box Shape

Volume = Length (L) x Width (W) x Height (H)
1 cubic foot = 12" x 12" x 12"
1 cubic yard = 3' x 3' x 3'
To convert cubic feet to cubic yards, divide by 27
To convert cubic yards to cubic feet, multiply by 27

Study Links

Encyclopedia

Lot Size - Description
Acre
Hectare
Appendix

Metric/Imperial Conversion Factors

1.
Lot Size-Description

For appraisal purposes, the dimensions of a site consist of the following:

Frontage is that side of a site that abuts a public street or highway. Frontage is basic to value and is an important factor in determining accessibility and prominence.
*

Depth is the distance between the front and rear lot lines.
*

Width is the distance between the side lines of a lot. The depth and width of a lot may be consistent, or they may vary, depending upon its shape.
*

Shape of a site is its form, determined by the frontage, depth, and width.
*

Area is the size of the site, measured in square metres, square feet, hectares, and acres.

As a matter of consistency in real estate documents, when making reference to the frontage and depth of sites, the frontage measurement is always shown first.

In waterfront cottage properties, frontage commonly refers to the side that abuts the body of water given its inherent value. If applicable, practitioners should clearly set out lot size so that prospective buyers are not confused and the appropriate frontage is identified. Typically, a seller can provide an existing survey pending full investigation of the property by the buyer.

Acre

An imperial unit of measure equaling 43,560 square feet or 4,840 square yards, .4 hectares, ten square chains, or 160 square rods. In metric terms, one acre equals .405 hectares and one hectare equals 2.471 acres. Figure A.14 illustrates an acre in comparison to a hectare.

3.
Hectare

A metric area measurement of 100 x 100 metres consisting of 10,000 square metres. The hectare is equivalent to 2.4711 acres. Figure H.2 illustrates a hectare in relation to an acre.

4.
BUILDING AREA MEASUREMENTS
No standardized system of living area measurements is used across Canada for residential properties. Generally, such measurements include the total area of all habitable rooms, but differences exist in how below grade rooms, stairwells, and other unique features are measured. Local practices will vary.

Guidelines - Residential

Measuring a Residential Condominium

Unit ownership must be clearly differentiated from common elements. Measurement methods vary based on procedures detailed in the condominium declaration and description, and the type of condominium (e.g., high-rise, townhouse, semi-detached, or detached).

Typical High-Rise Measurement Criteria

Vertical (Walls) Inner-most unfinished surface of the exterior wall or party wall.
Upper Boundary (Ceiling) Lowest unfinished surface of the ceiling slab.
Lower Boundary (Floor) Highest unfinished surface of the floor slab.
Windows/Doors Inner unfinished surface of window frames and exterior doors.
Excluded Areas Unfinished inner surface of any excluded walls or columns within the unit.

Caution
All external measurements necessitate measuring tape with a hook at the zero end.
If unable to secure outside measurement, use internal, allow for wall thickness, and include appropriate notes.
ACRE measurement guidelines recommended, but not standardized across Canada.
The Front Foot

Measured frontage by the front foot (or front metre) can be key to value, e.g., waterfront property or prime commercial location. For example, Buyer Jones is considering two lakefront lots:

Lot 1 measures 100' x 230' Listed at $149,500
Lot 2 measures 125' x 190' Listed at $169,500

The salesperson advises that lots sell for approximately $1,500 per front foot. While both are roughly equivalent in size (total square footage), Lot 1 is priced at $1,495 per front foot ($149,500 ? 100 feet) and Lot 2 is priced at $1,356 per front foot ($169,500 ? 125 feet). a__uming no other significant differences and that added depth has no significant value (i.e., unusable area), Lot 2 appears as the better priced lot

Guidelines - Commercial (Office)

The rentable area is typically used for calculation of rent. The difference between rentable and useable is often referred to as the add-on factor. Caution is advised, as add-on figures provided by landlords should be scrutinized, as not all represent an accurate mathematical calculation of the two components.

TECHNOLOGY Focus

Laser vs. Tape

Practitioners are reluctant to discard traditional tape measures in favour of laser measurement devices. Presently, high end digital models deliver impressive results, boasting accuracy to within 3 millimetres with measurement range up to 200 metres. Most products are light weight, reliable, and can offer 10,000 or more measurements from a single battery pack.

Critics point to problems with bright light and reduced range (the laser works best at dusk or in darkness), errors or missed readings due to rough or angled surfaces, and problems involving transparent materials (i.e., mirrors). Proponents are quick to emphasize efficiency, arguing that problems are typically user inflicted (not following instructions). Sighting challenges are easily remedied with a target sighting plate. The latest versions boast calculator capabilities for area and volume calculations, metric conversions, etc.

RECO Focus

Wrong Measurements Prove Costly

Two commercial representatives provided an incorrect building size in promotional materials. A subsequent written complaint to RECO by the buyer resulted in fines totalling $4,000 along with $1,500 in costs for breach of Rules 10 and 21 of the RECO Code of Ethics. The building was described as 7,700 square feet, but the structure consisted of approximately 6,300 square feet.

In another RECO Hearing, promotional material for a residential property incorrectly described the lot as 50' x 400', but the true dimension was 50' x 308'. The Hearing Panel found that sufficient materials in existence at time of listing indicated some confusion about the size and as such the buyers should have been notified. Further, the salesperson should have ensured that all advertising materials were not false, misleading or deceptive. This circumstance, along with other issues, resulted in a fine of $7,000 and $2,450 in costs.

Study Links

Encyclopedia

BOMA Standard
Rentable Area
Useable Area
Front Foot
Frontage
Appendix

Measurement Guidelines (Residential)

1.
BOMA Standard

A standard method of measuring office s___e developed by the Building Owners and Managers a__ociation (BOMA) International, an organization of professionals in the office building industry.
Application

BOMA developed the Standard Method of Floor Measurement for Office Buildings to ensure consistency and promote an industry standard. The Standard has undergone successive revisions and the most recent is a building-wide method to ensure that measurement is applied on a consistent floor-by-floor basis and sets out procedures to measure the gross building area, common areas, as well as rentable and useable areas.The Standard is used extensively to measure s___e in both existing and new office buildings.
Reference

For detailed information, contact BOMA Canada, Suite 200, 440 Laurier Avenue West, Ottawa, ON K1R 7X6.

Rentable Area

(see also Rentable/Useable Factor)

Most commonly a__ociated with the measurement of office buildings and more specifically individual tenanted areas. The rentable area is best described as the useable area of the tenanted s___e plus an allocation of floor common areas (e.g., lobby, janitorial areas, washrooms, and electrical room). For example, a leased s___e for a tenant on a multi-tenant floor may have a useable area of 2,795 square feet with a rentable area of 3,035 square feet. The additional 240 square feet represents the proportionate allocation of common areas on that particular floor. The rentable area is normally used as the basis for determining base and additional rents. In the above instance, if the base rent is $7.50 per square foot, then the base annual rent would be $22,762.50 ($7.50 x 3,035 square feet).

Application

In the United States and Canada, three methods of measuring rentable area in office buildings are generally used:

- a__ociation of Building Owners and Managers (BOMA) International;

- General Services Administration; and

- The New York Method.

The BOMA standard is most frequently found in the Canadian marketplace. BOMA describes the total rentable area of a commercial office floor as the gross floor area, less any columns or projections necessary to the building. Such items on an upper floor of a modern office building would include the elevator shafts, stairways, and ventilation shafts. The relationship between rentable and useable areas on a particular floor is often referred to as the R\U Ratio.

3.
Useable Area

(see also Rentable Area)

Most commonly a__ociated with the measurement of office buildings and more specifically individual tenanted areas. Under the BOMA Standard, the useable area of an office is computed by measuring the total area enclosed by the finished surfaces of the office side of corridor walls and other permanent walls, the centre line of partitions separating individual tenanted areas, and the dominant portion of the vertical perimeter wall. No deduction is made for any supporting columns or projections necessary to the overall building structure. BOMA provides precise guidelines regarding such measurements, particularly when considering the perimeter walls that may have unique glass/masonry/steel configurations. The sum of all useable areas on an individual floor represents the total useable area of that floor.
Application

Practitioners should note that, while the BOMA Standard is widely used in Canada, variations exist in the marketplace. Further wordings for useable and rentable areas, are normally provided in commercial lease agreements.
Reference

For complete details regarding the BOMA Standard, contact the Building Owners and Managers Institute of Canada, 885 Don Mills Road, Suite 106, Don Mills, ON M3C 1V9.

4.
Front Foot

A traditional method of expressing value based on the linear distance of a lot along a public road or public waterway, a__uming generally uniform sized lots within the general area under investigation.

Frontage

The extent of a building or of land measured in linear distance along a public road. In recreation waterfront property, frontage may refer to the lot dimension abutting the waterway.

6.
Measurement Guidelines (Residential)

Example 1: One Storey

Example 2: One and One-Half Storey

Example 3: One and One-Half Storey (With Dormers)

Example 4: Bi-Levels

Example 5: Three Level Split

Example 6: Four Level Split

Example 7: Four Level Split With Built-In Garage

Example 8: Basic Two Storey

Example 9: Two-Storey With Built-In Garage

Example 10: Two and One-Half Storey

Example 11: Two-Storey (Open Two-Storey Foyer/Other, From Main)

Example 12: Two-Storey With Vault/Slope

Example 13: Walkout Basement

Example 14: A Frame

Notables

Fractions, decimals, and percentages represent the same number in a different way.
Rounding often affects final answers, particularly with sequential calculations.
Every percentage calculation consists of three parts: the whole, the rate, and the part.
Double check that the correct numerator and denominator are used when calculating percentage increases/ decreases
Required keystrokes vary based on calculator used; HP 10BII used for all workbook illustrations.
Be proactive for subsequent Phases... study the HP 10BII Owner's Manual in detail.
Real estate remains largely focused on imperial measurements, but increasingly metric equivalents are used.
No standardized method exists for living area (residential) measurements. Caution is advised.

Glossary

ACRE
Acre
Area Measurement
BOMA Standard
Front Foot
Frontage Hectare
Living Area Measurement
Lot Size - Description
Rentable Area
Useable Area
Volume Measurement

Web Scans

The Bank of Canada

Hewlett Packard

Building Owners and Managers a__ociation

Alliance for Canadian Real Estate Education

Strategic Thinking

Which types of calculations and measurements will I most frequently encounter in the local marketplace?
What preventative measures should I take to ensure that all mathematical calculations and measurements are accurate to avoid legal or other problems in the future?
How are residential and/or commercial measurements shown on listing information and advertised in the media?
To what extent are metric measurements used in the local marketplace?