Equity, appreciation, gain, and depreciation, without mixing the formulas.
Choose what the question asks for, see the full formula proof, and learn why equity, value change, sale gain, sale cash, and straight-line depreciation are different answers.
The current Pearson VUE Texas sales outline lists equity in property under property valuation and lists return on investment, appreciation, depreciation, and investment tax implications under investment math. The sales math section allocates seven items across application and analysis, so recognizing the requested formula matters as much as the arithmetic.
Measures the owner's financial interest before selling costs.
A positive result is appreciation. A negative result is a market decline.
Use the original purchase price as the denominator unless the question says otherwise.
This is the sale amount before subtracting adjusted basis or debt payoff.
Financing does not enter this formula. Basis adjustments do.
This answers a cash question, not an appreciation or gain question.
Use the depreciable basis, salvage value, and useful life supplied by the problem.
Name the answer first. Then use only the numbers that belong.
The same facts can produce six different correct numbers. Choose the final ask before calculating.
For sale formulas, use the sale price supplied by the question.
Use a payoff amount for sale-cash questions. A current balance may differ from the actual payoff.
Required only for annualized value change.
Enter only items the problem says belong in basis. Actual tax basis can require more facts than this exam-practice worksheet.
Not every closing cost belongs in basis. Use only costs identified by the problem.
Improvements can increase basis. Routine repairs and maintenance are different.
Use only reductions supplied by the problem, such as prior depreciation in a simplified exercise.
These reduce amount realized and sale cash. They do not reduce equity before a sale.
$420,000.00 value - $286,000.00 stated debt = $134,000.00 equity. Selling costs do not enter this formula.
$420,000.00 value - $350,000.00 price = $70,000.00 market change. Debt does not enter this formula.
$372,500.00 before reductions - $0.00 reductions = $372,500.00 practice adjusted basis.
$420,000.00 sale price - $26,000.00 selling costs = $394,000.00 amount realized before debt payoff.
Calculations keep full precision. Displayed money is rounded to cents and rates to two decimal places. Negative values are identified as a decline, loss, shortfall, or negative equity instead of being hidden.
Email the formula proof and your result.
Keep equity, market change, basis, amount realized, gain or loss, and sale cash on separate lines.
Try five value-math traps without the calculator.
A property is worth $420,000 and the stated loan payoff is $286,000. What is the owner's equity?
Depreciation does not always mean the same thing.
The property is worth less
Compare current market value with the earlier price or value. This is a market-change calculation.
A loss in value is identified
Physical deterioration, functional obsolescence, and external obsolescence belong to appraisal and cost-approach analysis.
Basis is allocated over time
Straight-line or tax depreciation concerns cost allocation. It is not a prediction of market value, and tax rules can add conventions and eligibility requirements.
Four patterns worth knowing cold.
$420,000 current value and $286,000 stated debt
Selling costs and improvements do not belong in an equity-only question.
$350,000 original price and $420,000 current value
The loan balance does not change appreciation.
$420,000 sale, $26,000 selling costs, $372,500 adjusted basis
Raw appreciation is $70,000, but that is not the gain after the supplied costs.
$275,000 depreciable basis, no salvage, 27.5-year life
Use this only when the problem calls for the generic straight-line formula with those inputs.
Letting the mortgage change gain
Debt changes equity and cash after sale. It does not change market appreciation or gain measured against adjusted basis.
Adding every closing cost
Some purchase costs can increase basis and others cannot. Use only the items the problem tells you to include.
Treating depreciation as one idea
Market decline, appraisal depreciation, book depreciation, and tax depreciation answer different questions.
Keep building the investment-math picture.
What is the difference between equity and gain?+
Equity is current value minus debt. Gain on a sale is amount realized minus adjusted basis. A mortgage payoff affects equity and sale cash, but it does not reduce gain in that formula.
How do I calculate real estate appreciation percentage?+
Subtract the original purchase price from current value. Divide the change by the original purchase price, then multiply by 100. If the result is negative, it is a percentage decline rather than appreciation.
Why is cash after sale different from gain?+
Cash after sale subtracts the debt payoff. Gain compares amount realized with adjusted basis. Loan principal affects how much cash the owner receives, but financing is not part of the gain formula.
What does depreciation mean on the real estate exam?+
Read the context. It can describe a decline in market value, loss in appraisal value from physical deterioration or obsolescence, or cost recovery over time. The formula must match the meaning used in the question.
Does the straight-line mode calculate IRS depreciation?+
No. It applies the generic formula using the basis, salvage value, useful life, and elapsed time you enter. Actual tax depreciation can require land allocation, property classification, placed-in-service conventions, eligibility rules, basis adjustments, and recapture analysis.
Is the adjusted basis result suitable for a tax return?+
No. The calculator shows the high-level exam formula and lets you enter stated increases and reductions. Actual adjusted basis can depend on facts and records that are outside this study tool. Use current IRS guidance and a qualified tax professional for reporting.