At a Delaware real estate closing, property tax proration typically means:
Correct Answer
B) The seller credits the buyer for property taxes accrued through the closing date, since Delaware taxes are paid in arrears
Delaware property taxes are paid in arrears, meaning taxes for a given period are paid after that period has passed. At closing, taxes are prorated based on the number of days each party owned the property during the tax year. Because the seller has occupied the property for a portion of the year but has not yet paid those taxes, the seller typically provides the buyer a credit at closing for the seller's share of the annual tax bill. This credit compensates the buyer, who will ultimately be responsible for paying the full tax bill when it comes due.
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Related Topics & Key Terms
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Related Concepts
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
An assignment of contract transfers one party's rights and obligations under a contract to a third party called the assignee. The original party, known as the assignor, transfers their contractual position to someone who was not originally part of the agreement.
A bilateral contract is an agreement in which both parties exchange promises and are both obligated to perform, while a unilateral contract is one in which only one party makes a promise and the other party is not obligated to act.
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