Key Concepts of Indiana Real Estate Law
To Help You Pass the Indiana Real Estate Exam
1. Indiana Real Estate Commission (IREC)
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Regulatory Body: Oversees real estate licensing and practice in Indiana.
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Composition: 12 members (including managing brokers, salespersons, and a
consumer member).
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Duties: Administer exams, enforce license law, impose discipline, manage the Real
Estate Recovery Fund.
2. License Types and Requirements
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Broker License: Must be 18+, have a high school diploma or equivalent, and
complete 90-hour pre-licensing course.
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Managing Broker: Additional 24-hour Managing Broker course and must have
experience.
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Renewal: Every 3 years by June 30th; 36 hours of CE (12 per year).
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Post-Licensing Education: 30-hour course required within 2 years of initial
licensure.
3. Agency Relationships
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In-House Agency: Default model in Indiana.
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Designated Agency: Allowed if disclosed and agreed in writing.
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Dual Agency: Legal with written informed consent from both parties.
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Duties to All Parties: Honesty, disclosure, confidentiality, reasonable skill and care.
4. Advertising and Teams
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Broker Company Name: Must appear in all advertising.
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Team Names: Cannot imply they are a separate brokerage.
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Truthful Advertising: Misleading or false ads are a violation.
5. Handling Money
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Earnest Money: Must be deposited within 2 banking days of acceptance.
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Escrow Account: Must be separate from personal/business funds.
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Accounting: Brokers must maintain records for 5 years.
6. Real Estate Recovery Fund
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Purpose: To compensate consumers who win uncollectible judgments against
licensees.
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Max Payouts: $20,000 per judgment; $50,000 per licensee lifetime.
7. Disciplinary Actions
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Grounds: Misrepresentation, fraud, criminal convictions, failure to disclose, etc.
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Penalties: Fines, suspension, revocation, censure, reprimand.
8. Agency Disclosures
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Disclosure of Agency Relationship: Must be made at first substantive contact.
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Seller Disclosure Form: Required in most residential sales (except new
construction, court-ordered sales, etc.).
9. Transaction Requirements
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Purchase Agreements: Must be in writing and include essential terms.
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Listing Contracts: Must have definite expiration date.
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Earnest Money Handling: Must follow brokerage policy and state law.
10. Indiana-Specific Laws
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Property Condition Disclosure: Required unless exempt.
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Psychologically Affected Property: No disclosure required unless asked directly.
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Mechanic's Liens: Must be filed within 60 days (residential) or 90 days
(commercial).
11. License Law Violations
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Examples Include:
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Practicing without a license.
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Offering compensation to unlicensed individuals.
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Commingling funds.
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Failure to present offers in a timely manner.
12. Antitrust Laws
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Illegal Practices: Price fixing, market allocation, group boycotting.
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Penalties: Civil and criminal penalties under state and federal law.
Study Tip: Review the Indiana Real Estate Commission website and current Candidate
Handbook for exam updates and resources.
Here's a comprehensive Key Concepts Guide for Real Estate Math, ideal for prepping for
your Indiana Real Estate Exam (and applicable more broadly as well). This includes
essential definitions, formulas, and examples covering the most tested math topics:
� REAL ESTATE MATH – KEY CONCEPTS
1. Banker's Year vs. Calendar Year
Type
Days in Year
Banker’s Year 360
Days in Each Month
30
Calendar Year 365 (or 366 in leap year) Actual number of days in each month
Use the Banker's Year (360 days) unless otherwise stated on the exam.
2. Commission Calculations
Formula:
Commission = Sale Price × Commission Rate
Split Commission:
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Total Commission ÷ 2 (if 50/50 buyer/seller agent)
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Then: Agent Split = Office Split × Agent’s %
Example:
Sale Price = $250,000
Commission Rate = 6%
Listing broker keeps 3.5%, selling broker gets 2.5%
Total Commission = $250,000 × 6% = $15,000
Selling Broker’s Commission = $250,000 × 2.5% = $6,250
3. Property Tax Calculations
Formula:
Annual Taxes = Assessed Value ÷ 100 × Tax Rate (per $100)
Indiana uses a per $100 rate format.
Example:
Assessed Value = $187,650
Tax Rate = $2.28 per $100
Annual Taxes = ($187,650 ÷ 100) × $2.28 = $4,276.42
4. Tax Proration (Seller pays to day of closing)
Formula (Calendar Year):
Daily Rate = Annual Tax ÷ 365 (or 366)
Proration = Daily Rate × Number of Days Seller Owes
Example:
Taxes = $4,276.42
Closing = August 15 (Calendar Year = 365)
Daily Rate = $4,276.42 ÷ 365 = $11.71
Seller Days (Jan 1 – Aug 15) = 227 days
Proration = $11.71 × 227 = $2,659.17
5. Rent Proration (Buyer gets rest of month)
Formula:
Daily Rent = Monthly Rent ÷ # Days in Month
Proration = Daily Rent × # Days Buyer Receives
Example:
Monthly Rent = $465
Closing = September 18
Buyer gets 12 days (Sept 19–30)
Daily Rent = $465 ÷ 30 = $15.50
Proration = $15.50 × 12 = $186.00 credit to buyer
6. Loan Interest Proration
Formula (Banker’s Year):
Proration = Loan Balance × Interest Rate ÷ 360 × # Days Owed
Example:
Loan Balance = $36,569.20
Interest = 5.5%
Closing = October 18 (interest paid through closing)
Daily Interest = $36,569.20 × 5.5% ÷ 360 = $5.59
Proration = $5.59 × 18 = $100.62
7. Transfer Taxes / Conveyance Fee (if applicable)
Check local/state laws; Indiana does not charge a deed transfer tax.
In states that do:
Transfer Tax = (Sale Price ÷ 500) × Transfer Rate (e.g., $1.10 per $500)
8. Depreciation (For Investment Property)
Formula (Straight-Line):
Annual Depreciation = (Cost – Land Value) ÷ Useful Life
Residential: 27.5 years | Commercial: 39 years
9. Net to Seller
Formula:
Net = Sale Price – (Commissions + Closing Costs + Loan Payoff + Taxes Owed)
10. Break-Even Rent / Monthly PITI
If needed to solve financing:
Monthly Principal & Interest = Loan Amount × Factor (from table)
Monthly PITI = P + I + Taxes + Insurance