A property has annual property taxes of $3,600. The seller paid taxes through December 31, but the sale closes on October 1. How much does the seller owe the buyer as a proration?

Hey there, Alex! How are you doing today?

I can imagine. Let's dive into it. The question states that a property has annual property taxes of $3,600, but the seller paid taxes through December 31st. The sale, however, closes on October 1st. The question asks how much the seller owes the buyer as a proration.

Exactly. The key here is to identify the months the seller has prepaid but won't own the property, which would be October, November, and December. So, we need to calculate the monthly tax amount first.

Simple. Divide the annual taxes by 12. $3,600 divided by 12 is $300 per month.

Multiply the monthly amount by the number of months the seller has prepaid but won't own the property. So, $300 times 3 months equals $900. That's the amount the seller owes the buyer.

That's right! Now, let's talk about why the other options are wrong. Option B calculates the buyer's share, not the seller's credit. Option C suggests no proration is needed, which is incorrect because the seller has indeed prepaid for months they won't own. And option D only accounts for one month, which is not accurate.

Precisely. To help remember this, let's use a memory technique. Think of proration like splitting a pizza. The seller has paid for the whole pizza (annual taxes), but only eats until October 1st. The buyer eats from October 1st through December 31st. The seller should get credit for the slices they paid for but didn't eat (October-December).

You're welcome! And remember, for proration questions, always determine who prepaid and who should receive credit. Calculate the monthly rate first, then multiply by the number of months the prepaid period extends beyond closing. Keep practicing these types of questions, and you'll get the hang of it in no time.

No problem at all, Alex. Good luck with your studies, and remember, preparation is key!