Annual property taxes are $4,800, paid in arrears. The closing date is September 1, and the seller is responsible for the closing day. Using a 360-day year and 30-day months, how much does the seller owe the buyer at closing for the seller's portion of taxes?
Correct Answer
B) $3,200
Taxes are paid in arrears, so the seller owes the buyer for the portion of the year the seller owned the property. The seller is responsible through and including September 1 (the closing day). January 1 through September 1 = 8 months × 30 days = 240 days. Daily rate = $4,800 ÷ 360 = $13.33. Seller's share = 240 × $13.33 = $3,200. This appears as a debit to the seller and a credit to the buyer on the closing statement.
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Related Topics & Key Terms
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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.
The capitalization rate (Cap Rate) is the rate of return on a real estate investment based on its expected income.
Commission splits refer to the division of the total real estate commission among the listing and selling brokerages, and then between each broker and their respective agents. Commission rates and splits are always negotiable.
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