Annual property taxes are $3,600. The property closes on July 1 using a 360-day year. Taxes are paid in arrears and the closing day belongs to the buyer. How much does the seller owe the buyer as a tax proration credit at closing?
Correct Answer
B) $1,800
Because taxes are paid in arrears and the closing day belongs to the buyer, the seller is responsible for January 1 through June 30 (180 days). Daily rate: $3,600 ÷ 360 = $10/day. Seller's proration credit to buyer: $10 × 180 = $1,800.
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Related Topics & Key Terms
Related Topics:
Key Terms:
Related Concepts
Area calculation involves determining the square footage or acreage of a property using geometric formulas. Key conversions: 1 acre = 43,560 square feet, 1 mile = 5,280 feet, 1 section = 640 acres.
Daily rate calculation involves determining the cost or income per day by dividing the total amount by the number of days in the period (usually a year or a month). This is a fundamental step in proration.
The capitalization rate (cap rate) is the ratio of a property's net operating income to its sale price, expressed as a percentage. It is used to estimate value and compare profitability of investment properties. Cap Rate = NOI / Value.
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