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?
Correct Answer
A) $900
The seller has prepaid for Oct-Dec (3 months). Monthly tax: $3,600 ÷ 12 = $300. The seller is owed $300 × 3 = $900 as a credit from the buyer.
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Proration is the process of dividing expenses or income between the buyer and seller at the closing of a real estate transaction. This ensures each party pays or receives only their fair share based on the period of ownership.
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A property owner has been doing car repairs on their driveway in violation of the conditions, covenants and restrictions (CC&Rs) of their subdivision. The homeowners’ association (HOA) files a lawsuit and receives a court order requiring the owner to stop. The court order is called a(n):