Real Estate Math
The division of ongoing property expenses between buyer and seller based on the closing date.
Proration is the process of dividing property expenses, such as property taxes, HOA fees, rent, and utility costs — between the buyer and seller proportionally based on the closing date. The seller is responsible for expenses through the day of closing; the buyer is responsible from the day after closing. For example, if the seller prepaid annual property taxes and the closing is July 1, the buyer would owe the seller for the remaining 6 months. Proration ensures that each party pays only for the period they own the property.
Exam Tip
Proration problems are common on the exam. Use a 360-day year (30 days per month) unless told otherwise. Determine who owes whom based on whether the expense was prepaid or is owed in arrears.
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Real Estate Math
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