At closing, property taxes are typically prorated so that:
Correct Answer
B) The seller pays taxes for the portion of the year they owned the property, and the buyer pays for the remainder
At closing, property taxes are prorated based on the number of days each party owns the property during the tax year. The seller is responsible for taxes accrued through the closing date, and the buyer is responsible for taxes from the closing date forward. This ensures each party pays only their fair share of the annual tax obligation.
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Related Topics & Key Terms
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Related Concepts
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
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